When someone has their long term disability insurance claim denied by their insurance company and decides to fight that decision, the court must use a specific set of criteria to determine whether or not the insurer made the right call. These criteria are called a “standard of review.” Depending on the parties involved and the specific situation, the court may decide to use a standard of review that includes a lot of deference toward the original decision that was made… or one that reviews the information as if that initial decision never occurred.
Insurance claims tend to fall under one of three types of standards: arbitrary and capricious, abuse of discretion, and de novo.
Arbitrary and capricious. This standard of review is very deferential to the original decision. The court will only overturn that decision if they find that it was made without properly considering the circumstances involved or based on unreasonable grounds – basically, that the people who denied your claim did so with no real basis for it.
Abuse of discretion. Sometimes insurance plans provide for “discretionary authority” when deciding whether or not to award benefits. In these types of plans, courts may use an abuse of discretion standard of review. Not as deferential as the arbitrary and capricious standard, this one simply requires the court to find that the decision was made based on an error.
De novo. The de novo standard of review is used in all insurance claims cases except those in which someone has been given discretionary authority. Under the de novo standard, the court pretends like the original decision never happened and that they are examining the information for the first time.
How do you know which standard of review your claim will fall under? Ask an experienced disability lawyer to read your plan closely and see what the language calls for. And learn more about the overall long term disability claims process by checking out our free eBook.