Discovery In ERISA Cases

An insurance company almost always argues that no discovery should be allowed in a long term disability (“LTD”) case because it realizes that allowing a claimant to investigate the decision making process will show that the denial or termination of benefits was unjustified. Continental Casualty Company and Hartford Life Insurance Company of New York (collectively, the “insurance companies”) made that argument this week to federal Magistrate Judge E. Thomas Boyle, who rejected it.

The parties disagree as to the applicable standard of review, and the insurance companies argued that the standard of review must be established prior to discovery. I argued that even if the applicable standard of review were arbitrary and capricious that discovery must be allowed in order to assist the court in evaluating 1) the nature of the information considered in making the decision; 2) whether the decision maker was competent to evaluate the information; 3) how the decision maker reached its decision; 4) whether the decision maker should have sought outside technical assistance in reaching a "fair and full review" of the claim; and 5) to determine whether a conflict of interest existed.

Magistrate Judge Boyle agreed that the claimant should be allowed discovery immediately, including depositions, regardless of the standard of review. Magistrate Judge Boyle followed the reasoning of District Court Judge Hurley in McGann v. Travelers Property Cas. Corp. Welfare Ben. Plan, 2007 WL 2769500 (E.D.N.Y. Sept. 21, 2007).

‘If the court finds that the administrator was in fact influenced by the conflict of interest, the deference otherwise accorded the administrator's decision drops away and the court interprets the plan de novo.’. If the plaintiff cannot carry this burden, any conflict the administrator has is simply one more factor to be considered in determining whether the challenged decision was arbitrary and capricious. Therefore, Plaintiff is entitled to conduct discovery in order to show that good cause exists for considering evidence outside the record.

An LTD claimant should always insist on discovery. If insurance companies did not have so much to hide, then they would not vehemently oppose discovery. I always unearth very helpful information through discovery in LTD cases.