Following up on the last post, I expressed doubt about the wisdom of the Tenth Circuit’s comment in Adamson v. UNUM Life Ins. Co. that it is just as likely insurers will pay gray area claims because they don’t want to have angry or disappointed policyholders as they are to deny those claims to enhance their bottom line. However, this unrealistic view of how insurers operate is not the most detached from reality analysis I’ve seen from a federal court in an ERISA case. That honor goes to the Seventh Circuit. You find the problem in a series of case beginning with Perlman v. Swiss Bank Corp, 195 F.3d 975 (7th Cir. 1999) continuing to, most recently, Semien v. Life Ins. Co. Of North America, 436 F.3d 805 (7th Cir. 2006). The analytical deficiency in these cases is the court's view that the conflict of interest an insurer experiences in deciding whether to pay or deny claims is no different than the conflict of interest a federal judge experiences in deciding tax cases. Semien slip opinion, p. 16. There is some financial effect on the decision maker in each case. But it is equally remote and unlikely to have any real impact on the attitude or bias of the decision-maker. So the Seventh Circuit believes that a federal judge has the same objectivity in deciding cases as a claims adjuster at an insurance company. I assume this is simply a lack of understanding of how the real world works as opposed to self-loathing. Either way, this line of thinking from the Seventh Circuit is way out there. Semien has other significant problems in analysis. I blogged about it when it was issued earlier this year. It easily qualifies to be included in the “misses” section of this website library.
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