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Court finds STD claim denial arbitrary and capricious under ERISA

At our law firm, we help disabled people with applications, appeals and lawsuits concerning short- and long-term disability insurance claims. Short-term disability insurance, sometimes referred to as STD, provides payments to an employee who finds him or herself unable to work because of a medical condition, disease or injury. 

Short-term disability

STD payments are normally a percentage of usual salary or wages, paid monthly for a short period of time. What is “short” is determined by the policy terms, but usually 26 weeks. 

While it may seem logical that an STD application would be more easily approved than a long-term policy claim, whether the claimant is disabled under an STD policy can be complicated legally and factually, so an STD claimant can benefit greatly from representation by an experienced lawyer. Significant money can be at stake to help the STD claimant make ends meet during a time of inability to work. 

ERISA appeal 

On March 30, the U.S. Court of Appeals for the Sixth Circuit released an opinion called Guest-Marcotte v. Life Insurance Company of North America about an STD claim, finding that an STD insurer’s denial of a claim without first sending the claimant for a medical examination was arbitrary and capricious. (The Sixth Circuit is in Ohio and covers four area states.) 

When disability insurance is obtained through work, the claims process is usually governed by a complicated federal law called ERISA, which requires a claim administrator to process a claim reasonably and fairly. 

The plaintiff in Guest-Marcotte has Ehlers-Danlos Syndrome Type III, called EDS Type III, a genetically inherited disease causing joints to dislocate and connective tissues to loosen. Severe pain and fatigue are common. The insurer denied her STD claim, which was affirmed in two appeals within the insurance company and at the first level of federal court review. 

Arbitrary and capricious 

The Court of Appeals noted: 

  • EDS Type III is an “objectively verifiable disease which is medically known to cause chronic pain.”
  • Claimant’s doctors consistently found her disabled.
  • The record had consistent evidence of pain. 

Under ERISA, a claim denial is arbitrary and capricious if it is: 

  • Not rational
  • Not the result of “deliberate, principled reasoning”
  • Not supported by substantial evidence 

In light of this, the court said Guest-Marcotte’s STD denial without having ordered another physical exam was arbitrary and capricious, so the court sent it back to the insurer for proper consideration.