6th Circuit Affirms Limits on Disability Policy Language

In a tremendously important decision, the 6th Ciruit court of appeals affirmed today a decision limiting the language that disability insurance carriers can include in their policies to protect themselves from making payments. In American Council Of Life Insurers v. Ross, No. 08-1406 , the panel agreed that the Michigan Insurance Commissioner could restrict an ERISA plan from including language giving itself discretion to interpret the plan language and determine the participant’s eligibility for those benefits.

This is critically important because up to this point in time Court’s were forced to review these cases using the very deferential “arbitrary and capricious” standard of review. In non lawyer speak, the court did not review the evidence to determine if the insurance company made the correct decision. Instead, the court was forced to determine whether there was any reasonable basis for the decision. The practical effect of this limited standard of review was to make it exceedingly difficult for a claimant to win. After all, if the insurance company hires a qualified doctor to review the claim and that doctor says the claimant is not disabled then there is a reasonable basis for the claims decision. (And oh by the way, never mind that we use that same doctor over and over and over and pay him and the reviewing company that he works for hundreds of thousands of dollars a year. they can be fair an impartial. yeah right.)

Now, the courts will review these claims de novo. In other words, the Court will be empowered to determine whether or not the correct decision was made-Whether or not the claimant meets the policies definition of disability. This is really huge.