LTD Plaintiff Breaks Through ERISA Barrier

Washington, DCLong term denied disability lawsuits against employer-based plans are notoriously hard to win. But the rules may be about to change. Marcin v. Reliance Standard Life Insurance Company and Mitre Corporation Long Term Disability Insurance Program a 2017 decision by the United States Court of Appeals for the District of Columbia, may be the beginning of the end for a judicial precedent that has left LTD claimants without much hope of relief from the courts.

Jill Marcin suffers from kidney cancer, portal vein thrombosis, anemia and a variety of other serious medical conditions. In 2008, she filed a claim for long term disability insurance benefits under her policy with Reliance Standard. Reliance Standard denied her claim and her subsequent administrative appeal. 

She filed one unsuccessful lawsuit in 2010 and a second one in 2013. She litigated her claim for seven years, nine years from the time she filed for LTD, before finally being awarded monthly benefits this past June. This speaks volumes about the challenges long term denied disability lawsuit plaintiffs face. But why does this happen so often?

This is not just about insurance companies’ persistence in bad faith claim denials or the hefty ligation budgets that make a strategy of delay possible. This is about a judicial rule that bars courts from reviewing even highly questionable decisions that deny employees plan benefits.

The Employee Retirement Income Security Act of 1974 (ERISA) is often described as an insurance company-friendly law. As originally drafted, the statute was actually fairly neutral. However, the Supreme Court’s 1989 decision in Firestone Tire & Rubber Co. v. Bruch changed that to tip the scales of justice heavily in favor of employers and the insurance companies that administer their plans. The rule after Firestone is that if a plan allows an administrator to exercise discretion (as all do), courts should not second-guess a decision unless the administrator clearly abused that power. If employers can produce the smallest shred of evidence to justify a denial, that is enough. And that is enough to blow most bad faith insurance lawsuit plaintiffs out of the water.

In Marcin, the DC Circuit found a way to apply a different standard, a standard of de novo review that permits a court to review even the smallest errors of administrative judgment. That is how it found that Jill Marcin had, despite some ambiguous evidence, demonstrated that she was totally disabled.

This new rule could revolutionize ERISA litigation. The issue is also so important to the insurance industry that it is virtually certain to be the subject of a legal challenge. As of now, however, long term denied disability lawsuit plaintiffs may have a better chance for success in court than they have had in nearly 30 years.