The 5th Circuit has articulated for us all the difficulty with ERISA cases. If the plan document reserves to the decision maker, which is usually an insurance company, the right to interpret the plan and to make factual determinations, then deference will be given to that decision. Under this deferential standard, a plan’s fiduciary’s determination is upheld as long as it is “supported by substantial evidence and is not arbitrary and capricious”. See, Forte v. Liberty Life Assurance Company of Boston, 499 F.3d 389, 397-398 (5th Cir. 2007). In the 5th Circuit, substantial evidence is simply “more than a scintilla (a tiny trace or spark), less than a preponderance (over 50%) and is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” See, Ellis v. Liberty Life Assurance Company of Boston, 394 F.3d 273 (5th Cir. 2004).
Under this standard, the proof has to be sufficient to show that a decision is arbitrary and capricious which means that there is no “…rational connection between the known facts and the decision or between the found facts and the evidence”. See, Meditrust Financial Services Corp. v. Sterling Chemicals Inc., 168 F.3d 211, 214 (5th Cir. 1999). When a court reviews the decision maker’s decision under this deferential standard, the court only needs to be assured that the decision falls “somewhere on the continuum of reasonableness-even if on the low end”. See, Cory v. Liberty Life Assurance Company of Boston, 499 F.3d 389, 398 (5th Cir. 2007).
Often an insurance company has a conflict of interest in making a decision that will increase its profit margin, but that conflict of interest does not change the standard of review despite the suspicion of self interest. Rather the conflict is merely a factor that is taken into an account. A conflict is given more weight if the claim process reflects “procedural unreasonableness”. See, Schexnayder v. Hartford Life & Accident Insurance Company, 600 F.3d 465, 469 (5th Cir. 2010).
So there you have it. One reason ERISA is so challenging is that you are not merely proving that you are right and the insurance company is wrong. Rather, you are proving that the decision is wrong and there is no rational and reasonable basis to the wrong decision. Under such a difficult standard, it is critical to obtain experienced ERISA counsel during the claim process and well before it is concluded.