What Does De Novo Review Mean Under ERISA?
My name is Brandon Osterbind. I’m an injury and disability attorney in Central Virginia. And I help people whose long-term disability claims have been denied.
The question is, “What is a ‘de novo’ review under the Employee Retirement Income Security Act?” And bear with me because we’re going to get a little technical here. Because there’s a very distinct difference between a “de novo” review and an “abuse of discretion” review. Let’s start from the beginning.
Let’s say you have become disabled because you have a medical condition or you’ve been in an accident that has rendered you completely unable to work. Your doctor sided with you and you’ve been determined to be disabled. So you filed the claim for long-term disability benefits with your employer, and your claim has been denied.
You appeal that denial within the 180-day window that your insurance company gave you. And they, again, denied your appeal and said that they will not provide you disability benefits. Some policies will require that you file a second appeal and others don’t.
Next steps after the denial
If there is no second appeal, your only option is to file a lawsuit in federal district court. If the policy requires that you file your second appeal, make sure that you file it. If you don’t, then your case will get kicked out of federal court.
Make sure that you follow the internal appeal process within the insurance company. But once that is done and once the insurance company has made a final adverse decision, then you can sue the insurance company and the benefit plan in federal district court. You sue them for violating the terms of the plan and not giving you benefits when you are entitled to them.
De novo or abuse of discretion?
At that point the question becomes, “Is the review that the federal district court does brand new? Is it what we call de novo? Or is it an abuse of discretion review?” These are two very different standards.
And initially the courts will look at the insurance policy and presume that it’s a de novo review. That means that the court is reviewing it as if it were brand new. The court can look at everything as if it has never been looked at it before.
However, if the insurance policy grants the insurance company discretion to interpret the terms of the insurance policy, then you do not get a de novo review. You get what is called an abuse of discretion review because the insurance contract is giving the insurance company discretion in granting or denying those benefits.
Then the court will review that decision for what is called an abuse of discretion, which is a much lower standard for the insurance company and a much higher standard for you to overcome.
What the court can and cannot do
When the court is looking at the case de novo, then the court can substitute its discretion for the discretion of the claims administrator for your insurance policy. But if the review is for an abusive discretion, then the court cannot substitute its discretion for the discretion of the claims administrator.
The court can only review the claims administrator’s decision for an abuse of discretion, which means that there’s no substantial evidence to support the claims administrator’s claim. It can also mean that the claims administrator did not go through a reasoned, principled decision-making process in coming to the conclusion it did when it was denying your claim.
Two different standards of review
There are two very different standards of review that the court could use to look at your claim. Obviously, the most beneficial to you is to get a de novo review because now the trial judge can look at all of the evidence in the case and decide, “I think this guy is disabled” or “I think this gal is disabled.” And the judge can continue, “And therefore I’m going to award benefits under this policy.”
But if the court is reviewing under the abuse of discretion policy, it can look at it and say, “I think this guy or this gal is disabled. Unfortunately though, the insurance policy engaged in a reasoned, principled review of the materials that have been submitted and there is substantial evidence to support its opinion denying the claim and it did not abuse its discretion.”
Even though the trial judge thinks that you’re disabled, he can still sustain the insurance company’s denial because of a lack of abuse of discretion. That’s really the main difference between those two different standards of review.
If you have questions…
Maybe you have a policy and you’re not sure which one would apply in this particular case. Or you don’t know whether discretion was given to the insurance company to make that decision. You also might not know whether a de novo review would be appropriate or an abuse of discretion review would be appropriate. In either of these scenarios, reach out to us, send us an email or give us a call.
Hopefully, at this point, you’ve obtained legal counsel to help you work through these issues and present your case in the light most favorable to you in federal district court. If so, your attorney can explain these details a little bit further. And if we’re your attorneys, we’ll be happy to explain that in more detail.
If we’re not your attorneys and you want us to be your attorneys, give us a call. We’d be happy to sit down with you and talk about what has happened in your case to date and how we might be able to help you win your disability benefits.