Discovery and a jury trial are appropriate in an ERISA disability insurance benefits case indicates the United States Court of Appeals for the Seventh Circuit in Krolnik v. Prudential Insurance Company, 570 F.3d 841 (7th Cir. 2009)(slip opinion available here). The procedures are applicable where the disability insurance policy does not endow the insurance company (or its administrator) with discretion and thus render applicable the "arbitrary and capricious" standard of review by the district court.
The case represents a routine termination of disability benefits, followed by the claimant's, Krolnik, exhausting his administrative appeals. The parties agreed that the policy contained no language granting interpretive discretion to the insurer. Krolnik proposed to take discovery and present evidence regarding his "medical and mental conditions, and the extent (if any) to which his mental condition affects his ability to work." The district court judge barred all discovery and struck from the record doctors' affidavits that Krolnik submitted. After the district court affirmed the termination of his benefits, Krolnik appealed and the Seventh Circuit reversed.
Judge Easterbrook writing for the court first criticized the standard of "de novo review" as misleading, explaining as follows:
Cases such as this show that
“de novo review” is a misleading phrase. The law Latin
could be replaced by an English word, such as “independent.”
And the word “review” simply has to go. For what
Firestone requires is not “review” of any kind; it is an
independent decision rather than “review” that Firestone contemplates.
The Court repeatedly wrote that litigation
under ERISA by plan participants seeking benefits
should be conducted just like contract litigation, for the
plan and any insurance policy are contracts.
Cases requiring such independent review under ERISA are no different than any other type of breach of contract litigation or insurance litigation, and
A judge would not dream of forbidding
the parties to take discovery, let alone of rejecting
affidavits that did not depend on discovery. Evidence
is essential if the court is to fulfill its fact-finding function.
Just so in ERISA litigation.
The court remanded the case for discovery and trial, if necessary, admonishing that
All in all, it would be best for judges and lawyers to
stop thinking about “de novo review”—with the implication
that the judge is “reviewing” someone else’s action—
and start thinking about independent decision,
which is what Firestone requires.
