If your long-term disability (LTD) insurance carrier has denied or terminated your claim for LTD benefits, and you’ve exhausted your administrative appeals, your next step is to file a lawsuit against the carrier. In most circumstances, the lawsuit will be filed in federal court and will be governed by the Employee Retirement Income Security Act of 1974 (ERISA). Among its many implications for litigants, ERISA claims are generally subject to a standard of review known as “arbitrary and capricious.” This standard significantly influences how courts evaluate decisions made by plan administrators and has far-reaching implications for individuals seeking a rightful benefit award. In this blog post, we will explore ERISA, shed light on the arbitrary and capricious standard, and understand why it can present a formidable challenge for claimants.

What is a Standard of Review?

The “standard of review” in a legal case refers to the level of scrutiny or deference that a court gives to decisions made by plan administrators or insurance companies. Applying the correct standard of review is crucial as it can significantly impact the outcome of a case, particularly in situations involving the interpretation of the LTD plan or factual determinations as to a claimant’s medical conditions.

In ERISA cases, there are two possible standards of review: “de novo” or “arbitrary and capricious.” De novo review is far more favorable to individual claimants as it allows the court to review the evidence with a fresh set of eyes and does not require any deference to the insurance company’s decision to deny the claim. De novo review governs claims for ERISA benefits unless the plan at issue gives the administrator discretion to interpret plan provisions and/or to determine eligibility for benefits. For example, a plan may state:

The Plan Administrator has authority to determine all questions arising in connection with the policy, including its interpretation, and that when making a benefit determination under the policy, the administrator has the discretionary authority to determine eligibility for benefits and to interpret the terms and provisions of the policy.

If this “discretionary clause” is present (as is the case for the vast majority of LTD plans, then the arbitrary and capricious standard of review will apply unless you reside in one of a handful of states that have banned discretionary clauses.

Defining the Arbitrary and Capricious Review

The arbitrary and capricious standard of review is a legal doctrine that dictates how courts assess decisions made by plan administrators, including LTD insurance carriers. Under this standard, courts are generally required to give deference to the decisions of plan administrators unless they are found to be arbitrary, capricious, or “downright unreasonable.” Consequently, courts are hesitant to overturn decisions made by plan administrators unless there is clear evidence of an abuse of discretion.

As the Seventh Circuit Court of Appeals has explained in Hess v. Hartford Life & Accident Ins. Co:

Under the arbitrary and capricious standard, a plan administrator’s decision should not be overturned as long as (1) “it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome,” (2) the decision “is based on a reasonable explanation of relevant plan documents,” or (3) the administrator “has based its decision on a consideration of the relevant factors that encompass the important aspects of the problem.”

Beyond giving deference to the insurance company’s decision, ERISA creates an uphill battle for individual litigants in at least four other ways.

1. Reliance on Administrative Record

In cases involving the arbitrary and capricious standard, a court’s review is generally limited to the administrative record, which consists of all “relevant information” that was available to the plan administrator when it made its final decision. Though ERISA broadly defines the term “relevant,” litigants are still limited to only the information that was presented during the initial claim and administrative appeal processes. Any additional evidence or arguments may not be considered, even if they are crucial to the case.

2. Burden of Proof on Claimant

To successfully challenge a decision under the arbitrary and capricious standard, the claimant bears the burden of demonstrating that the administrator’s decision was not just incorrect, but also arbitrary, capricious, and downright unreasonable. This is a high threshold to meet, requiring a showing that the decision lacked a reasonable basis or was made without a rational connection to the plan’s terms and conditions.

3. No Right to a Jury Trial

ERISA cases are decided by judges, not juries. This means that claimants do not have the opportunity to present their case to a jury of their peers. Instead, the judge makes the final determination based on the legal arguments and evidence presented.

4. Limited Remedies for Claimants

Even if a claimant is able to demonstrate that the insurer’s decision was arbitrary or capricious, ERISA limits the remedies a plaintiff can recover in these cases. In many ERISA cases, if a court determines that a plan administrator’s decision was arbitrary and capricious, the typical remedy is to remand the case back to the plan administrator for further consideration. This means the case is sent back to the same entity that initially denied the benefits, potentially leading to further delays and uncertainty for the claimant.

Furthermore, unlike other types of lawsuits, ERISA generally does not allow claimants to seek compensatory or punitive damages. Even if a claimant can demonstrate that they suffered financial or emotional harm due to a wrongful denial of benefits, ERISA’s remedies are typically limited to the recovery of the denied benefits themselves.


ERISA’s arbitrary and capricious standard of review undoubtedly creates a uniquely challenging landscape for individuals seeking rightful benefits. It places a significant burden on claimants to demonstrate not only that a decision was incorrect, but that it was made in an unreasonable or arbitrary manner. Understanding the complexities of ERISA and its standard of review is crucial for navigating the legal process effectively.

If you find yourself facing an ERISA dispute, seeking the guidance of experienced legal professionals who specialize in employee benefits law can be instrumental in navigating this complex terrain. Remember, you are not alone in this journey, and there are resources available to help you assert your rights under ERISA. Contact our firm today to discuss your options.


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Jessa Victor