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Third Circuit Requires Courts to More Carefully Scrutinize Disability Claim Denials

In many ERISA cases, courts can only overturn a denial of benefits if the decision of the "plan administrator" (often an insurance company) was arbitrary and capricious. Many of the federal courts, however, require more scrutiny of a decision if the decision maker has a conflict of interest. The federal appeals court in Kosiba v. Merck, however, added a new twist. Even if there is no conflict, a court must engage in a "heightened" review if there is an indication from the claims handling that there is some procedural bias or irregularity.

The significance of the decision in Kosibas is that many disabled individuals who bring lawsuits to challenge their benefit denials in courts in the Third Circuit have a better chance of winning their case. If procedural bias can be shown, the court will have more power to overturn the denial of benefits.