Claimants often ask why ERISA lawsuits are so difficult. Among other reasons, the biggest obstacle for claimants in ERISA lawsuits is often the standard of review employed by the court reviewing the claim denial.
The core of every ERISA lawsuit involving the recovery of disability benefits essentially comes down to whether the court will give the claims administrator the benefit of the doubt. In most cases, where the plan gives the administrator discretionary decision making authority, the court reviews the claim denial merely for an abuse of discretion. In other words, the administrator gets the benefit of the doubt.
Under an abuse of discretion standard the court would review only the administrative record—or the evidence available to the plan administrator at the time of its decision. New evidence about the disability could not be introduced once the final decision is made by the plan administrator.
The general rule against introducing new evidence, however, is relaxed when evidence is admitted for the limited purpose of determining the standard of review.
In Waldoch v. Medtronic, the claimant, the plaintiff in the ERISA lawsuit, attempted to avoid the deferential standard of review. From the start, plaintiff admitted that his employer, Medtronic, had discretion under the terms of the plan, but contended that Hartford, which did NOT have discretionary authority, effectively made the final claim decision and that Medtronic merely rubber stamped Hartford’s decision. Plaintiff therefore argued that no entity with discretionary authority actually made a decision and so the deferential standard of review should not apply.
In support of his position, Waldoch put forth two arguments. First, he argued that Hartford effectively made the final decision on the claim although Hartford was not granted any authority to make final benefit determinations, therefore its denial decision should not be reviewed for abuse of discretion—in other words, Hartford should not get the benefit of the doubt.
Second, Waldoch argued that Medtronic failed to conduct a meaningful review of his claim by merely “rubber-stamping” Hartford’s decision and thus failing to comply with the “full and fair review” required by ERISA. In other words, Waldoch conceded that the Plan granted Medtronic complete discretionary authority to make final benefit determinations, however, Medtronic never exercised that authority.
The Court disagreed with both arguments.
According to the Court, Medtronic was “permitted to delegate claims processing functions to Hartford and rely on Hartford’s reasoning without compromising its obligation to provide a ‘full and fair review.'”
The Court then proceeded to evaluate the substance of Waldoch’s disability claim under the deferential standard of review. The plan administrator of course got the benefit of the doubt and the Court held that the plan did not abuse its discretion in denying Waldoch’s claim.
This case was not handled by Dell & Schaefer.