In ERISAworld, the insurance company wins even when its denial of benefits “appears to be incorrect”

Verla Hancock had an ERISA-governed insurance policy, which among other things provided coverage for accidental death. If an accident (as opposed to an illness, say, or a suicide) caused Ms. Hancock’s death, then the insurance company, MetLife, would pay death benefits to her designated beneficiary. Verla had named her daughter, Terri, as her beneficiary.

Terri found Verla’s body on the floor of her bathroom when she checked on her after she had not heard from her for several days. Verla had an Oxycontin prescription, but the medical examiner determined there was “no evidence of excessive amounts of Oxycontin or other intoxicants” in the toxicology results. Nor did the autopsy find any “evidence of natural disease, injury or intoxication sufficient to explain death.” The investigating detective said “it looked like [Verla] slipped, fell, and hit her head.” Terri also submitted an investigative report in support of her claim for death benefits from Verla’s accidental death:

This time she submitted an investigative report prepared by MRA Forensic Sciences. MRA had conducted a slip-meter test on tiles similar to those in Verla Hancock’s bathroom and found that they were slippery when wet. MRA listed factors that made a slip-and-fall accident likely, including Verla Hancock’s medical problems, history of falls, and a potentially wet floor (although it provided no evidence that the tiles were wet at the time of death). The report then stated: “[I]t cannot be concluded that [Verla Hancock] did not die of accidental causes. In fact, based upon the available information, there was sufficient evidence to suggest that she was prone to falling down and that she probably did fall down in the bathroom.”

So how did Verla meet her demise? She slipped and fell in her bathroom. It was an accident.

Duh.

MetLife was, of course, not convinced. It decided the significant evidence supporting a conclusion of accidental death was “conjecture,” and concluded Terri just didn’t prove to its satisfaction that the death was accidental, as opposed to, say, Verla’s taking her own life by slamming her head as hard as she could on her toilet.

MetLife, of course, had granted itself discretion in its accidental death policy, so in order to win in court Terri would have to prove its denial of the claim was not just incorrect but absurd, ridiculous, unintelligible. The United States Tenth Circuit Court of Appeals said as much, in unmistakable language:

To give an insurer discretion is to uphold its decision even at times when it appears to be incorrect.

This goes on, all the time, in courtrooms across the United States. It has been preserved in current health reform proposals.

It is unconscionable.

When insurance companies are right, they should win in court.

When they are wrong, they should lose.

But they don’t.

(Thanks to Carol Cachey for the pointer).