Blogger's note: In No. 232 (posted September 6, 2017), I discussed the recent case of Collins v. Unum Life relating to the intractable problem of suicide in the context of life insurance. In that post I mentioned Mark D. DeBofsky, a Chicago attorney widely recognized as an expert on the Employee Retirement Income Security Act of 1974 (ERISA). When he saw No. 232, he wrote to me about the Collins case. I requested and obtained his permission to share his comments with my readers. Here are his comments, lightly edited to improve readability. For DeBofsky's more detailed discussion of the subject, see pages 74-75 of the complimentary 85-page PDF I offered to readers in No. 232.
Your post is a tragic story. Part of the tragedy, though, is that Unum included a "discretionary clause" in its policy, which triggered the courts' application of an "abuse of discretion/arbitrary and capricious" standard of judicial review. The result is that the courts were forced to defer to Unum's determination, which the Collins family could overcome only if they could prove the determination was not just wrong, but also unreasonable. Had the "de novo" (anew) standard of review applied, the evidence contrary to suicide could have won the day.
Many states have enacted versions of a model law developed by the National Association of Insurance Commissioners prohibiting inclusion of discretionary clauses in health and disability policies. To the best of my knowledge, only California's law encompasses life insurance as well. Since I started practicing in this area, I have been confounded by the notion that ERISA—a law enacted for the protection of plan participants and their beneficiaries—would permit the administrators of those plans to incorporate self-serving discretionary clauses tilting the playing field in their favor in the event a dispute arises over payment.
Congress should pass legislation that prohibits the inclusion of discretionary clauses in "welfare benefit" plans such as life, health, and disability. I have personally lobbied for such a law, but it is not going to happen because of the unholy alliance among the U.S. Chamber of Commerce, the American Council of Life Insurers, and other insurance lobbying groups, and unions, which also sponsor plans. That is why tragedies such as the Collins case occur, where a national hero who was overwhelmed by mental illness on account of his service was unable to provide the support his family was counting on.
DeBofsky's Thoughts on the Collins Case
Your post is a tragic story. Part of the tragedy, though, is that Unum included a "discretionary clause" in its policy, which triggered the courts' application of an "abuse of discretion/arbitrary and capricious" standard of judicial review. The result is that the courts were forced to defer to Unum's determination, which the Collins family could overcome only if they could prove the determination was not just wrong, but also unreasonable. Had the "de novo" (anew) standard of review applied, the evidence contrary to suicide could have won the day.
Many states have enacted versions of a model law developed by the National Association of Insurance Commissioners prohibiting inclusion of discretionary clauses in health and disability policies. To the best of my knowledge, only California's law encompasses life insurance as well. Since I started practicing in this area, I have been confounded by the notion that ERISA—a law enacted for the protection of plan participants and their beneficiaries—would permit the administrators of those plans to incorporate self-serving discretionary clauses tilting the playing field in their favor in the event a dispute arises over payment.
Congress should pass legislation that prohibits the inclusion of discretionary clauses in "welfare benefit" plans such as life, health, and disability. I have personally lobbied for such a law, but it is not going to happen because of the unholy alliance among the U.S. Chamber of Commerce, the American Council of Life Insurers, and other insurance lobbying groups, and unions, which also sponsor plans. That is why tragedies such as the Collins case occur, where a national hero who was overwhelmed by mental illness on account of his service was unable to provide the support his family was counting on.
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