INSURANCE COMPANIES COMMONLY, AND IMPROPERLY, CHANGE THE REASONS FOR THEIR DENIAL DECISION IN AN ERISA DISABILITY CLAIM

Insurance companies act unreasonably when they terminate benefits for one reason, only to offer an entirely different reason for terminating the same benefits on appeal. See Wenner v. Sun Life Assurance Company of Canada, 482 F.3d 878 (6th Cir. 2007) (reinstating benefits where benefits terminated for one reason, then a different reason was offered on appeal). Additionally, it is not unusual for an insurance company to use one argument in denying an ERISA disability claim after its administrative review and to use another argument during the litigation of the claim. Again, this is highly improper. An insurance company must be consistent in its reasons for denying an ERISA disability claim. “Whether a claim decision is arbitrary and capricious requires a determination whether there was a reasonable basis for [the insurer’s] decision, based upon the facts as known to the administrator at the time the decision was made.” Levinson v. Reliance Standard Life Insurance Company, 245 F.3d 1321, 1326 (11th Cir. 2001). The corollary to that rule is that the administrator’s decision may be upheld, if at all, only based upon the administrators stated rationale in the administrative record, without resort to post hoc rationalizations. See University Hospitals of Cleveland v. Emerson Electric Co., 202 F.3d 839, 849 (6th Cir. 2000) (“it strikes us as problematic to, on one hand, recognize the standard of review, yet, on the other hand, allow the administrator to ‘shore up’ a decision after-the-fact by testifying as to the ‘true’ basis for the decision after the matter is in litigation”). See also Shelden v. Barre Belt Granite, 25 F.3d 74 (2nd Cir. 1994) (district court cannot affirm a denial of benefits by ascribing to the plan a reason for denial other than the one proffered to the claimant); Short v. Central States, Southeast & Southwest Areas Pension Fund, 729 F.2d 567, 575 (8th Cir. 1984) (“[a] post hoc attempt to furnish a rationale for a denial of pension benefits in order to avoid reversal on appeal . . . diminishes the integrity of the Fund and its administrators.”); Dishman v. UNUM Life Ins. Co. of Am., 250 F.3d 1272, 1283 (9th Cir. 2001) (in regards to new rationale offered first in court: “the fact that UNUM may be able, post-hoc, to offer a legally plausible justification for its termination of Dishman’s benefits is irrelevant”); Doe v. Group Hospitalization, 3 F.3d 80 (4th Cir. 1993) (refusing to consider reasons not given to the participant). Fortunately, because insurance companies do this often during claim review and litigation, their improper behavior can be used to obtain a judgment in favor of a Plaintiff with reinstatement of benefits.