{3:30 minutes to read} Discretionary authority can have, and has had, a devastating impact on the ability of people to get paid by their insurance companies.Â
Long-term disability policies, health insurance policies, and other types of coverage obtained through a private employer are typically governed by a federal law called ERISA—the Employee Retirement Security Act of 1974.Â
When you have an ERISA-governed claim, your policy or plan often contains a discretionary authority provision. Discretionary authority is basically where your group insurance plan or policy has language in it, written by the insurance company, giving the insurance company the full and sole authority and power to decide whether you get paid.Â
The impact of this is that, if your claim is denied by the insurance company and you sue them, the judge assigned to your case can’t just simply look at your case and decide whether you are right and the insurance company is wrong. Even if the judge thinks the insurance company is wrong, a judge can’t overturn the insurance company’s decision to deny or terminate your benefits unless the judges finds that the insurance company abused its discretion in interpreting the policy or making the decision as to whether you get your benefits.Â
That means if the insurance company had a reasonable basis to make their decision, even if the judge thinks what they did was wrong and believes you should have received your benefits, the judge has to uphold the decision of the insurance company and deny your claim. It’s a situation where many, many people who deserve to get their benefits don’t get them because of this language in their policy.Â
Strategies and techniques exist to defeat that language and prevent the court from relying on it, but these techniques are very challenging and difficult. They often depend on multiple facts and legal principles. You need an aggressive and experienced lawyer to challenge and defeat discretionary authority clauses. I specifically tell anyone who is having problems dealing with an insurance company on an ERISA-governed claim to consult with a qualified attorney as soon as possible. Often, the best way to counter the discretionary authority provision is to take action before filing a lawsuit. Â
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack
800-745-1755
ESS@schwartzlawpc.com