Arbitratory and Capricious Standard of Review under ERISA

In Te’O v. Morgan Stanley & Co., 2009 U.S. App. LEXIS 2770 (10th Cir. Feb. 11, 2009), the Tenth Circuit Court of Appeals articulated the standard of review for a third-party administrator who, under the plan, has discretion to determine eligibility for benefits.  A decision to deny benefits is reviewed under the arbitrary and capricious standand.  Applying this standard, a court will consider only the arguments and evidence presented to the third-party administrator at the time the decision was made and whether substantial evidence supported that decision.  The decision does not need to be the only logical one or even the best decision.  It need only be sufficiently supported by facts within the third-party administrator's knowledge to counter a claim that the decision was arbitrary and capricious.  The decision will be upheld unless it is not grounded on any reasonable basis. 

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