Case Study: Abuse of Discretion Under ERISA
In previous posts, we have discussed how it is oftentimes harder to collect under ERISA policies. One of the primary reasons ERISA claims are more difficult is the fact that in most ERISA cases courts are required to defer to the insurer’s decision unless the insurer “abused its discretion.” Under the abuse of discretion standard, an insurer’s decision is only reversed if the claimant can demonstrate that the insurer’s actions were “arbitrary and capricious.” This is a high standard to meet.
While ERISA claims can be more difficult, particularly under the “abuse of discretion” standard, they are not impossible. Sometimes a court will determine that the insurer did, in fact, abuse its discretion. In this post, we will be looking at the recent court case Jalowiec v. Aetna Life Insurance Company to illustrate some of the things that a court may find to be an abuse of discretion.
In Jalowiec, the claimant suffered from chronic migraine headaches, dizziness, nausea, vertigo, insomnia and fatigue after suffering a blow to the back of his head at a Tae Kwon Do event. After over a year of testing and treatment, the claimant was initially diagnosed with postural orthostatic tachycardia syndrome (“POTS”). Later on, claimant was diagnosed with an “unspecified disorder of autonomic nervous system.”
The insurer, Aetna, initially awarded the claimant short term disability benefits, but subsequently denied claimant’s claim for long term disability benefits. Ultimately, the court determined that Aetna’s denial of long term disability benefits was an abuse of discretion, for the following reasons:
- Aetna improperly classified claimant’s occupation as “sedentary,” which was not supported by substantial evidence.
- Aetna changed the classification of claimant’s occupation multiple times throughout the claims process, from “sedentary” at the short term disability phase, to “light’ at the initial stages of the long term disability claim, and then back to “sedentary” in order to deny the claim.
- Aetna relied on file reviews conducted by reviewers who were relying on incorrect and incomplete information about the claimant’s job classification (i.e. that the job was “sedentary,” not “light”).
- Aetna relied on file reviews conducted by reviewers who did not have the proper expertise to review claimant’s diagnosis of “unspecified disorder of autonomic nervous system.”
- Aetna relied on file reviews that were not based on informed consultation with the claimant’s treating physicians.
These are just a few examples of things that courts have found to be an “abuse of discretion” under ERISA. Remember, the law in each jurisdiction varies, so the courts in your state may not necessarily agree with the court in this case. An experienced disability insurance attorney should be able to give you a sense of whether a court would uphold or reverse your claim denial, under ERISA or otherwise.
 No. CV 14-4332 (DWF/LIB), 2015 WL 9294269, at *1 (D. Minn. Dec. 21, 2015).