The latest addition to the website’s “miss” library is Brigham v. Sun Life of Canada, 317 F.3d 72 (1st Cir. 2003). You can find it here. It’s not so much that the decision tells a paraplegic that he can go out and get a job. Or that the court effectively ignores uncontested affidavits from friends and family that Bradley Brigham couldn’t work in a full time position despite heroic efforts to overcome his physical limitations. It isn’t even so much that the court ignores the determination of the Social Security Administration that Brigham was disabled using a more stringent definition of disability than Sun Life’s insurance policy contained. It’s not even that the decision allows Sun Life to bootstrap itself into a deferential standard of review by boilerplate language requiring Brigham to prove his disability in a way “satisfactory” to Sun Life. All that is bad enough. The really terrible thing about this decision is the U.S Court of Appeals for the First Circuit’s refusal to provide any meaningful scrutiny to Sun Life’s denial in light of the insurer’s significant, inherent conflict of interest. Brigham concludes that if the insurer can provide any rationale explanation whatsoever to support its actions, the denial must be upheld. For a better analytical model for an insurer’s claim denials, take a look at Fought v. UNUM, 379 F.3d 997 (10th Cir. 2004). Fought is not alone in stating that an insurer’s conflict of interest requires courts to take a harder look at claim denials than they might in dealing with a truly impartial decision-maker. Indeed, the First Circuit is in the minority on this issue. If the judicial standard for reviewing an insurer’s claim denials is, for all practical purposes, nothing more than a rubber stamp, we’re all pretty much at the mercy of the whims of claims adjusters at a few of the largest corporations in the world when misfortune strikes. I’d like to think we can expect more protection than that from the judicial branch.
Brian: I agree with you that the a&c definition tilts too far in favor of the insurer. In addition to cutting costs, the a&c standard needs to also be viewed in the light of protecting plan participants' interests. I have seen several definitions of the a&c standard from various courts. They tend to focus on the idea of a reasonable decision, and not necesarily the most reasonable. I guess this can be equated to, what, one out of 5 people thinking it is reasonable; 1 out of 10, 1 out of 100? Basically, the opposing side needs to prove fraud, which, as you know, is very difficult to do. Don Levit
by Don Levit November 17, 2008 at 01:47 PM
No doubt, an A&C standard of review controls costs. But if it does so while allowing insurers to get out of paying meritorious claims, that's a problem. If controlling costs is the only goal, we should just allow insurers to deny every claim. But that would defeat the purpose of insurance. We both understand there must be a proper balance between giving the insurer the ability to weed out non-meritorious claims while at the same time not allowing its profit making orientation to override its obligation to pay claims that should be paid. I believe that an indiluted A&C standard of review tips the balance too far in favor or the insurer.
by Brian S. King November 17, 2008 at 01:47 PM
Brian: I read over those 2 cases. While I agree that the arbitrary and capricious standard gives the benefit of the doubt to the insurer, it does help control claims costs. One of those cases was over a disability policy that paid out "own occupation" benefits for 5 years. That is a very lenient provision, in that most disability policies I have seen pay out "own occ" benefits for only 2 years. At least in the court cases I have read, the judges seem to go in quite a bit of depth befire rendering a decision. This contrasts markedly with the state regulators I have talked to who don't seem too concerned about any conflicts between state and federal regulation of insurance. They think the savings clause somehow has priority over the deemer clause, as if the deemer clause didn't exist. Don Levit
by Don Levit November 17, 2008 at 01:47 PM
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