Life Insurance Company of North America (“LINA”), also doing business as Cigna, was the administrator of a group disability policy of Citizens Financial Group for whom Ms. Cristoforo worked for 27 years. In January 2018, Ms. Cristoforo became totally disabled and submitted her claim for benefits. LINA denied her claim for benefits and denied her appeal. Ms. Cristoforo brought a lawsuit against LINA pursuant to ERISA.
Typically, a disability insurance denial of benefits is subject to de novo review unless the Plan documents gives the administrator discretion to “determine qualification for benefits or to construe the terms of the Plan.” Here, LINA argued that the Plan documents for Ms. Cristoforo granted them discretion, therefore the arbitrary and capricious standard applies.
The Court rejects LINA’s argument finding that the Plan documents’ language was not sufficient to grant LINA discretion. The Court further contends that “even if the discretion language were sufficient” Rhode Island has a statute prohibiting discretionary clauses in insurance policies.
The Rhode Island statute states, “no new or existing policy or certificate issued by an insurer or health care entity may contain any provision… purporting to reserve sole discretion to the insurer… to determine eligibility for benefits or interpret the terms of a policy.” 27 R.I. Gen. Laws Ann. § 27-18-79 (West).
Federal regulations such as ERISA, generally preempts state law. However, it is exempted from preemption when there is a state law regulating insurance.
The Court rejected LINA’s argument for an arbitrary and capricious standard and review and found for Ms. Cristoforo’s more favorable de novo standard of review.
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