In an ERISA Case, What Actions Will Reduce the Level of Discretion Afforded the Claims Administrator/Insurer?
This article continues our series of articles answering basic questions about insurance law and the Employee Retirement Income Security Act of 1974 (commonly referred to as “ERISA”). This one addresses: In a lawsuit governed by ERISA, what actions taken by the claims administrator (usually an insurance company such as Blue Cross/Blue Shield or CIGNA) will reduce the level of discretion the court gives the insurance company’s decision when reviewing the decision for an abuse of discretion?
California Governor Jerry Brown recently signed a new law that will provide increased protection to seniors and other consumers who are interested in purchasing an annuity. AB 689, which was sponsored by the California Department of Insurance and authored by Assembly Budget Committee Chair Bob Blumenfield (D-San Fernando Valley), requires that insurers verify that an annuity purchase is suitable and appropriate for the consumer based on an evaluation of his or her age, income, financial objectives and ten other factors. The bill was unanimously passed by both the state Senate and the state Assembly.
When an insurance company denies a claim, that denial decision might not only be incorrect under the terms of the insurance policy, but also might be in “bad faith.” As a matter of law, every insurance contract contains a covenant of good faith and fair dealing. If this covenant is violated, the insurance company is said to have acted in “bad faith.” A tortious breach of this implied covenant involves something beyond breach of the specific contractual duties or mistaken judgment. To establish a bad faith claim in first party cases (such as those involving life insurance, health insurance, disability insurance, property and casualty insurance, auto liability insurance, and homeowner’s insurance), it must be shown that an insurer’s delay or withholding of benefits under the policy was unreasonable or without proper cause. 
