Take for example the claim file on which Judge Karlton was obligated to base his decision. Because they like to pretend they are federal courts or administrative agencies, insurance companies never call a claim file a claim file. Instead, they like to call it the “administrative record,” because calling it a claim file makes it sound so insurance-y. Judge Karlton would have none of that:
The facts described herein derive from the lodged insurance company’s record (“ICR”). The court uses the phrase Insurance Companies’ Record, rather than Administrative Record, although Administrative Record has become customary in the field, because it suggests an independent record, which is false characterization of both the documents and their review.
So, Judge Kartlon saw through the “administrative record” scam. Later, in describing the procedural facts of the case, he mentioned how Reliance Standard had sent Ms. Duvall a letter describing the requirements for her to undertake an “administrative appeal,” another bogus phrase the insurance companies use to make themselves sound like something they’re not. Again Judge Karlton called them on it:
Once again, the use of appeal suggests an independent body reviewing the file, while in truth, of course, all that plaintiff would get was a reconsideration by the insurance company as to whether it should continue to pay benefits, and thus reduce its profits.
Next Judge Karlton turned to the question of whether Reliance Standard’s denial of benefits should be evaluated under a de novo standard, or “arbitrary and capricious” standard. Remember the de novo standard is the one which is supposed to be the usual one, and the "arbitrary and capricious" standard is to be used only in those exceptional cases where the plan sponsor really wanted the plan administrator to have discretion to use its own judgment in approving or denying claims. Lo and behold Reliance Standard had granted itself “discretion” in its insurance policy, so Judge Karlton had to go with the “arbitrary and capricious” non-standard, commenting courts “have not been stingy in our determinations that discretion is conferred upon plan administrators,” and adding:
Whether stingy or not, because it is in the plan’s interest to limit the scope of review, it is the court’s experience that the plan inevitably confers discretion on the administrator.
Finally, Judge Karlton turned to an examination of Reliance Standard’s approach to Ms. Duvall’s claim. He remarked:
The court does so with some distaste. Applying legal standards to what is clearly a stacked deck brings discredit to the legal process.
"Applying legal standards to what is clearly a stacked deck" -- with these words Judge Karlton has summed up ERISAworld about as well as can be done in ten words. But what's a little discredit to the legal process as long as it's efficient?
The case again is Duvall v. Reliance Standard Life Insurance Company, and the citation is – F.Supp.2d –, 2009 WL 2488179 (E.D.Cal.).