Plaintiff Bettye Whitaker, an account executive with a communications company, resigned her position in 2001 and applied for disability benefits based on a claim that anxiety and depression prevented her from working.

Defendant Hartford Life and Accident Insurance Co., which insured her company's employees for disability benefits, did not believe Whitaker's claim was severe enough to qualify her to receive benefits and denied the claim. Whitaker then asked Hartford to reconsider, but when that effort resulted in affirmance of the denial, Whitaker filed suit.

Because Whitaker's claim was based on disability insurance provided as a benefit, the Employee Retirement Income Security Act, 29 U.S.C. §1001, et seq., governed her claim. Moreover, because the Hartford policy contained a provision declaring that the insurer had the discretion to determine eligibility to receive benefits, in adjudicating the dispute, the court applied the highly deferential arbitrary and capricious standard of judicial review based on Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), which held that courts are to apply a deferential standard of review if the benefit plan contains a clause stating that the plan administrator has discretion to determine claims. Bruch also pointed out that if the plan administrator is acting under a conflict of interest, such conflict would be a factor to consider.

In the case here, since Hartford had an inherent conflict in its dual role as plan administrator and payor of benefits, the 6th U.S. Circuit Court of Appeals stated it would consider the conflict in applying the arbitrary and capricious standard of review. Whitaker v. Hartford Life and Accident Insurance Co., 2005 U.S. App. LEXIS 3492 (6th Cir., decided Jan. 24, released for publication March 2).

The main issue presented had to do with the weight Hartford was required to give to a successful Social Security disability claim. Under the Social Security law, the term ''disabled'' means the claimant is incapable of engaging in ''any substantial gainful activity'' (42 U.S.C. §423(d)(1)(A)), meaning the claimant is entirely precluded from working on a regular basis.

Under the administrative scheme that governs Social Security disability determinations, a claim is initially determined by an adjudicator who reviews the written claim submissions.

A second level of review, known as reconsideration, is also decided by an adjudicator based on review of written documentation; however, a claimant who remains dissatisfied with the claim determination following reconsideration has the right to request a hearing before an administrative law judge.

Such hearings are not adversarial and inquisitorial in nature; however, to preserve the claimant's rights to a full and fair consideration of the claim, the claimant is allowed to submit testimony, to cross-examine the maker of adverse reports, and to ultimately have the case decided by a neutral, objective decision-maker who has no stake in the outcome of the claim. See Richardson v. Perales, 402 U.S. 389 (1971), the seminal Supreme Court decision on due process in Social Security claim adjudications.

Administrative law judges are independent of the Social Security Administration and are expected to render objective decisions within the guidelines of the Social Security statute and governing regulations.

In contrast, disability insurance claims are decided by insurance companies, many of which are publicly listed stock companies. Under the ERISA law and regulations, a claimant dissatisfied with the claim decision is entitled to a full and fair review of the benefit claim denial pursuant to 29 U.S.C. §1133 and 29 C.F.R. §2560.503-1. Although the regulations afford various procedural safeguards, unlike Social Security cases, there is no right to cross-examination and the ultimate decision is made by the inherently conflicted insurance company.

Despite such marked differences between Social Security and ERISA disability claims, the federal courts treat them similarly, notwithstanding warnings against the misuse of administrative law to decide ERISA cases issued by jurists such as Judge Richard A. Posner of the 7th Circuit, who, in Herzberger v. Standard Insurance Co., 205 F.3d 327, 332 (7th Cir. 2000), explained:

''What may have misled courts in some cases is the analogy between judicial review of an ERISA plan administrator's decision to deny disability benefits and judicial review of the denial of such benefits by the Social Security Administration. Judicial review of the latter sort of denial is of course deferential, and it is natural to suppose that it should be deferential in the former case as well.

''But the analogy is imperfect, quite apart from its having been implicitly rejected by the Supreme Court in Firestone Tire & Rubber Co. v. Bruch when it determined that the default standard of review in ERISA cases is plenary review, and quite apart from the fact that the Social Security statute specifies deferential ('substantial evidence') review. 42 U.S.C. §405(g). The Social Security Administration is a public agency that denies benefits only after giving the applicant an opportunity for a full adjudicative hearing before a judicial officer, the administrative law judge. The procedural safeguards thus accorded, designed to ensure a full and fair hearing, are missing from determinations by plan administrators.''

Despite such thoughtful observations, as well as other criticism of the use of the administrative law paradigm in ERISA cases such as that made by this author in an article entitled ''The Paradox of the Misuse of Administrative Law in ERISA Benefit Claims,'' 37 J.Marshall L.Rev. 727 (2004), courts persist in according the same discretion to insurers' conclusions in ERISA cases that they give to the neutral and objective determinations made by administrative law judges in Social Security cases, as is the case in Whitaker v. Hartford.

The 6th Circuit concluded in Whitaker that a disability insurer need not give the Social Security determination binding weight since ''a claim for benefits under an ERISA plan often turns on the interpretation of plan terms that differ from SSA criteria.''

Distinguishing a prior 6th Circuit ruling, the court held that Darland v. Fortis Benefits Insurance Co., 317 F.3d 516 (6th Cir. 2003), differed because it involved ''a unique situation where it would be inconsistent for a plan administrator to ignore the SSA's favorable determination, after the administrator had expressly requested the claimant to apply for SSA benefits. Nothing similar occurred in this case.''

[Also see, Ladd v. ITT Corp., 148 F.3d 753 (7th Cir. 1998), where the 7th Circuit ruled that an insurer that had retained counsel to represent the claimant in Social Security proceeding was barred from disregarding the results of that adjudication.]

Because the 6th Circuit determined that Hartford's findings were based on reviews by an independent neurologist and psychiatrist, the court held the insurer's decision could not be ''arbitrary and capricious when a reasoned explanation, based on the evidence, supports that determination.''

Although this decision appears facially correct, it is troubling in a number of respects. First, the criteria utilized by insurers are almost universally less restrictive than the Social Security requirements for an award of disability benefits. In most situations, disability insurance policies will pay benefits for at least a limited period based on the insured's inability to fulfill job duties.

Even if the insurer pays benefits only when the insured is incapable of engaging in any occupation, as Ladd v. ITT Corp., 148 F.3d 753, 754 (7th Cir. 1998) recognized, the policy language ''is different from that of the statute governing Social Security disability benefits, which defines disability (so far as relevant here) as an 'inability to engage in any substantial gainful activity.' 42 U.S.C. §423(d)(1)(A). But MetLife was unable to articulate any difference in actual meaning until the oral argument of the appeal, when its lawyer said that the reference to 'any and every duty' means that an ITT employee is not disabled unless he or she can't even do part-time work, whereas (he thought) under the Social Security Act a worker who cannot work full time is deemed totally disabled. That is not what the act says.

''As long as the worker can engage in 'substantial gainful activity,' he is not disabled even if the only work that he is capable of doing is only part time. E.g., Brewer v. Chater, 103 F.3d 1384, 1391-92 (7th Cir. 1997); 20 C.F.R. §404.1572(a). Of course, the work must not be so meager as not to be substantial and gainful. See 20 C.F.R. §§404.1573(e), 404.1574(a), (b). But the same, it turns out, is true under ITT's disability plan. For MetLife's lawyer quickly retreated from his effort to distinguish the plan from the Social Security disability law when asked whether a worker who could work 10 minutes a day was thereby disentitled to total-disability benefits under the plan; he said no.''

Thus, there is hardly any functional distinction between the Social Security definition of disability and the requirements of most insurance policies. Indeed, even under a general standard of disability, which usually contains a requirement that the insured demonstrate the inability to engage in any occupation for which he or she is fit based on education, experience and education, is still far less restrictive than the Social Security definition since the insurance policy definition is usually interpreted to require that the insured be capable of earning an income commensurate with earnings before the disability. See, e.g., Mossa v. Provident Life and Casualty Insurance Co., 36 F.Supp.2d 524, 531 (E.D. N.Y. 1999). Under Social Security, the capability of earning less than $1,000 per month would disqualify an applicant from receiving benefits.

Admittedly, a recent ruling of the U.S. Supreme Court does raise a distinction between Social Security and insurance. Pursuant to a Social Security regulation developed after the courts had initially formulated the concept, in determining eligibility to receive Social Security disability benefits, deference must be given to the opinions rendered by the treating physician who also satisfies other requirements.

The regulations found at 20 C.F.R. §404.1527(d) enumerate those criteria, which include the length of the treatment relationship, consistency between the treating doctor's opinion and the clinical and laboratory diagnostic techniques, specialization by the treating doctor, detail in explanation provided in support of an opinion, consistency with the record as a whole, and a demonstrated understanding of the evidentiary requirements necessary to prove disability.

In Black & Decker v. Nord, 538 U.S. 822 (2003), the court rejected giving deference to a treating doctor's opinion.

Nonetheless, a decision issued by the 7th Circuit just a few weeks prior to Nord suggests that while there is no need in ERISA for a rule giving deference to the treating doctor, when that doctor's opinion is weighed against that of a consultant hired by a disability benefit plan, who may ''have a financial incentive to be hard-nosed in his claims evaluation in order to protect the financial integrity of the plan and of the employer that funds it,'' the superior knowledge possessed by the treating doctor, particularly when the plan's consultant has not examined the patient, may favor the treating doctor's opinion. Hawkins v. First Union, 326 F.3d 914, 917 (7th Cir. 2003).

However, based on Nord, if the insurer can articulate the Social Security decision was based on deference given to the treating physician, that would constitute grounds for not giving significant weight to the Social Security finding.

In other cases, though, decisions rendered by the Social Security Administration, particularly if they utilize the same evidence as that submitted to the insurer, should be given substantial weight, especially given the fact that the determination is being made by a neutral, objective government body. That proposition was obviously recognized by the world's largest disability insurer, UnumProvident Corp., which recently reached a settlement agreement with all 50 state insurance commissioners, the U.S. Department of Labor and the N.Y. attorney general's office in which it bound itself to give substantial weight to Social Security findings.

Therefore, Whitaker should not be read to convey that Social Security decisions may be ignored, since such decisions are carefully rendered by objective fact-finders who conduct evidentiary proceedings; and the determination is, for the most part, made under criteria that are functionally identical to those used by disability insurers. Particularly in view of the fact that the insurance system affords no opportunity for a hearing, denies cross-examination and involves a decision made by a financially biased tribunal, a careful examination of the Social Security decision as a check against unwarranted abuse of the claimant by the insurer is consistent with ERISA's goal of protecting promised benefits by insuring that meaningful rights and remedies are available to claimants. See 29 U.S.C. §1001(b).

Further, all group disability insurance coordinates benefits with Social Security and reduces the monthly benefit by the amount of Social Security benefits received by the claimant. Consequently, most insurers make it a requirement of continued receipt of benefits that the insured apply for disability benefits. If the insurer demands the insured apply for benefits and wishes to benefit from the reduction, the insured should be able to gain credit for the Social Security award, a point made in Ladd.

Whitaker 's comment about the independent claim reviewers is also disturbing since there is no evidence that the claimant was examined — and, as pointed out in the quote from Hawkins set forth above, so-called independent reviewers may be anything but. Even the Supreme Court cautioned in Nord that physicians repeatedly retained by benefits plans may have an '''incentive to make a finding of 'not disabled' in order to save their employers money and to preserve their own consulting arrangements.'' 123 S.Ct. at 1971. Thus, courts need to be more wary of the potential for mischief when the same party who determines claim eligibility and who is also responsible for paying claims blindly defers to its reviewing doctors.

That said, there is no doubt that insurance fraud is a serious problem and insurers must be vigilant against deceitful claimants. Thus, many of the doctors hired by insurers to review claims perform an important gatekeeper function in identifying fraudulent claims. No doubt, there are also treating doctors who go out of their way to assist their patients — that is why the Social Security system has placed so many restrictions on when a treating doctor's opinion will be given deference.

Nonetheless, for a court to simply conclude that utilization of a reviewing doctor is sufficient to show that the decision was not arbitrary and capricious points to a fundamental problem with the entire notion of applying ERISA concepts to disability benefit claims. What has happened is that disability insurers are allowed to stand in a privileged position that no other insurers enjoy just by declaring in policies that they themselves draft that the insurer has discretion to determine a claimant's eligibility to receive benefits.

Although the Supreme Court ruled in Firestone that such language is sufficient to require a deferential standard of review under which a claimant must prove the insurer is not only wrong but has made an irrational decision, it is hard to fathom a rational policy basis for such a conclusion. Can there really be a valuable societal purpose or policy behind granting broad-based discretion to insurers that owe a greater duty to their shareholders than to their insureds?