Evidence of an Insurer’s Arbitrary and Capricious Decision in Disability Insurance Cases


In disability insurance cases that are governed by the Employee Retirement Income Security Act (“ERISA”), courts have found that a disability insurance company’s failure to consider an important aspect of a claimant’s disability is evidence of an arbitrary and capricious decision.

For example, the court in Powers v. Nat’l Rural Letter Carriers’ Ass’n Long-Term Disability Income Plan found that it was arbitrary and capricious for the disability plan to ignore completely the Plaintiff’s contemporaneous statement that she had one or two bad days a week where she could not leave the couch. 2009 WL 1259378 (S.D. Ind. May 5, 2009).

In Powers, the Plaintiff’s treating physician recommended that a functional capacity evaluation be performed to assess the Plaintiff’s physical restrictions and limitations. However, the disability plan opted to make a denial without a functional capacity evaluation and instead relied upon surveillance video of the Plaintiff.

Another factor considered in determining the insurer’s arbitrary and capricious decisionmaking was the disability plan’s failure to show that there were jobs in Indiana that the Plaintiff could perform. Although the disability plan found jobs that are “prevalent in the national economy”, the disability plan did not provide actual numbers and locations of jobs that the Plaintiff could perform. Id. at 5. Moreover, the jobs provided by the disability plan did not meet the accommodations that the Plaintiff requires as a result of her physical restrictions and limitations. Specifically, the disability plan did not find any jobs that would allow the Plaintiff to miss more than one day of work per month because of her health condition. As a result, the court in Powers determined that the Plaintiff met the requirements to continue to receive long term disability benefits and the disability plan was arbitrary and capricious in terminating her benefits.

Similarly, the Seventh Circuit concluded in Leger v. Tribune Co. Long Term Disability Ben. Plan that the disability plan must explain why it found that the plaintiff’s complaints of pain were unreliable when findings of a Functional Capacity Examination showed that the plaintiff’s pain was completely debilitating. 557 F.3d 823, 835 (7th Cir. 2009). The disability plan’s failure to explain and address its reason for rejecting the results of the Functional Capacity Examination was evidence of an arbitrary and capricious decision to deny the plaintiff’s disability benefits. Id.

The Seventh Circuit’s opinion is consistent with the Supreme Court of the United States. In Pokratz v. Jones Dairy Farm, the Seventh Circuit held that a decision is arbitrary or capricious when the decisionmaker “entirely failed to consider an important aspect of the problem…” 771 F.2d 206, 209 (7th Cir. 1985) citing Motor Vehicle Manufacturers Ass’n v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983).

The case law in Indiana, the Seventh Circuit, and the Supreme Court of the United States reveals that an insurance company cannot ignore important evidence of a disability. When an insurance company is failing to address an important fact in their denial or termination of disability benefits, they are engaging in arbitrary and capricious decisionmaking.

If your disability insurance benefits have been denied or terminated, contact the O’Ryan Law Firm today.