To many policyholders, ERISA is a government program that simply backfired (sort of like Prohibition). That’s because ERISA considers an insurance company to be a “fiduciary.” Back in 1974, when ERISA was passed by Congress, the lawmakers figured that since the insurance company is a “fiduciary,” it must have the best interests of the injured policyholder in mind, right? Therefore, an insurance company’s claims decision under ERISA is to be upheld unless it’s “arbitrary and capricious.”  

The “arbitrary and capricious” standard is, I’m sad to say, the source of much abuse.  To justify claim denials, insurance companies retain doctors whose focus is most definitely not on the best interests of the patient, but rather on the best economic interests of the carrier.  

Fortunately, not all courts tolerate such abuse.  One such instance was our recent win in Simon v. Prudential.   

The facts of the case were pretty simple.  Our client, John Simon, was a very successful environmental trial attorney at a major New Jersey firm, with a national practice.  He was tragically involved in a horrific traffic accident, when a drunk crossed the center line and hit him head-on.  After a lengthy and arduous rehabilitation, he tried to return to work, and did so for a few years, until the byproducts of the accident (primarily debilitating pain and post-traumatic stress disorder) made working as a lawyer impossible. 

John had disability coverage through a Prudential policy provided by his firm (and thus governed by ERISA). Prudential paid disability benefits for a year, and then abruptly stopped.  Pru’s main basis for the termination of benefits was that John’s pain was “subjective,” and therefore couldn’t be verified.  (By the way, Pru has used that argument in a number of cases around the country, without a whole lot of success, at least in the reported decisions I’ve found.)

But Pru’s big problem was that one of its own doctors had stated in writing that more testing was necessary before benefits could legitimately be withdrawn.

Given the doctor’s opinion, the Court held as follows:  “On this record, no reasonable person could conclude that, when Prudential ignored the opinion and recommendation of its pain medicine expert, it acted solely in the interest of the beneficiary, Plaintiff.  To the contrary, it is clear that Prudential breached its fiduciary duty of loyalty to the beneficiary.  Prudential’s decision to ignore Dr. Kaplan’s opinion and recommendation certainly was not a decision made solely in the interest of Plaintiff – it was a decision against the interest of Plaintiff.  This Court finds that Prudential’s decision to terminate Plaintiff’s benefits was arbitrary and capricious.”

Naturally, Pru is appealing.  Why pay out a legitimate claim when you can try to stall things further through the appeal process?  I’m not much for politics, but when insurance industry representatives complain about ObamaCare, they seem to forget that in many ways they brought it on themselves.