Insurance industry loses lawsuit challenging the abolishment of discretionary clauses in ERISA long-term disability policies

In 1989, The US Supreme Court declared that if ERISA plans contain language giving plan fiduciaries discretion to interpret the terms of the plans and to make benefit determinations, courts will generally yield to that discretion. As a result of this discretion, insurance companies were able to deny claims and there was very little that courts could do to reverse the decision of an insurance company. Throughout the past several years, many states have passed laws to ban discretionary clauses and the insurance industry has been fighting to keep the discretionary clauses.

On March 18, 2009, the Sixth Circuit Court of Appeals affirmed a Michigan Statute promulgated in June 2007, which prohibited any insurance company or other entity from “issuing, advertising, or delivering to any person in the state of Michigan, including an employee benefit plan subject to ERISA, an underwritten policy or certificate that includes a discretionary clause.” See American Council of Life Insurers v. Ross, 558 F.3d 600( 6th Cir. 2009). Under the law in Michigan, disability insurance companies can no longer invest the plan administrator with unfettered discretionary authority to determine eligibility or to construe ambiguous terms of a plan.

The elimination of the discretionary clause will entitle all disability claimants a De Novo review of their claim in Federal Court if their claim is denied by the disability insurance company. The elimination of discretionary clauses is a heavily litigated issue throughout the country and there are eight states (CA, CO, IL, ME, MI, MO, NJ, SD) that have either ruled or have drafted laws that discretionary clauses are invalid. Utah has sought to significantly limit the impact of discretionary language. Attorneys Dell & Schaefer are involved on a daily basis with challenging the validity of discretionary clauses in long-term disability policies. We are continually lobbying Congress for a bill that will eliminate discretionary clauses in all employee benefit disability plans.

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Since we represent disability insurance claimants at different stages of a disability insurance claim we offer a variety of different fee options. We understand that claimants living on disability insurance benefits have a limited source of income; therefore we always try to work with the claimant to make our attorney fees as affordable as possible.

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No. For purposes of efficiency and to reduce expenses for our clients we have found that 99% of our clients prefer to communicate via telephone, e-mail, fax, sessions, or Skype. If you prefer an initial in-person meeting please let us know. A disability company will never require you to come to their office and similarly we are set up so that we handle your entire claim without the need for you to come to our office.

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When you call us during normal business hours you will immediately speak with a disability attorney. We can be reached at 800-682-8331 or by email. Lawyer and staff must return all client calls same day. Client emails are usually replied to within the same business day and seem to be the preferred and most efficient method of communication for most clients.

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