Most ERISA long term disability plans contain a clause granting the plan administrator discretionary authority to determine eligibility for benefits and to construe the terms of the plan. This is known as a “discretionary clause.” If a plan contains a discretionary clause, a claimant who was denied benefits cannot go to court and argue that he or she is in fact disabled under the terms of the plan and is therefore entitled to benefits. The administrator has already made that decision. A claimant can only ask the judge to review the administrator’s decision and to find that the denial was an ‘abuse of discretion’ because it was ‘unreasonable,’ or ‘arbitrary and capricious.’
Needless to say, this is a massive advantage for the administrator. A claimant cannot present his or her case to a neutral trier of fact and get a decision on the merits. A claimant has only the much more narrow right to ask a judge to review the administrator’s decision, and the claim file developed in reaching that decision, for any abuse of discretion.