Second Circuit Holds Arbitrary-and-Capricious Review Applies Where Policy and SPD Confer Discretion and Claims Procedures Are Complied With

In Li v. First Unum Life Ins. Co., No. 25-411-CV, 2026 WL 112655 (2d Cir. Jan. 15, 2026), the Second Circuit affirmed a judgment in favor of the insurer, holding that the district court properly reviewed the denial of long-term disability benefits under the arbitrary-and-capricious standard rather than de novo review.

The plaintiff, a former McKinsey & Company employee, sought benefits under an ERISA-governed group long-term disability policy issued by First Unum. Li was a senior partner at McKinsey & Company earning more than $1.5 million annually and working primarily with clients across China. He claimed that anxiety and depression prevented him from performing the cognitive, judgment-based duties of his position. See Li v. First Unum Life Insurance Co., 2025 WL 326492 (S.D.N.Y. Jan. 29, 2025). First Unum conducted a review of Li’s claim, including assessments by a registered nurse and multiple psychiatric and neuropsychological peer reviewers. Those reviewers consistently concluded that the medical evidence did not demonstrate functional limitations severe enough to preclude Li from performing his occupation throughout the elimination period. They emphasized the limited intensity of treatment, the absence of psychotherapy, and inconsistencies in later neuropsychological testing submitted during the appeal process. See id.

After First Unum denied the claim and upheld that decision on administrative appeal, the plaintiff sued under ERISA § 502(a)(1)(B). Following a bench trial, the district court entered judgment for First Unum. The district court held that arbitrary-and-capricious review applied because the plan documents—including the policy and the summary plan description—granted discretionary authority to First Unum and because the insurer strictly complied with ERISA’s procedural regulations. The court further held that the denial of benefits was supported by substantial evidence. Li, 2025 WL 326492, at *11-18.

On appeal, the only issue was the applicable standard of review. The Second Circuit reiterated that de novo review is the default for ERISA benefit denials, but that arbitrary-and-capricious review applies when the plan grants the administrator discretionary authority and the administrator complies with the Department of Labor’s claims-procedure regulations.

The Court held that both requirements were satisfied. Reading the insurance policy together with the Summary Plan Description—including the certificate of coverage—the Court concluded that the plan documents fairly conferred discretionary authority on First Unum. The Court further agreed that First Unum complied with ERISA’s procedural requirements in denying the claim.

Accordingly, the Second Circuit affirmed, reinforcing that discretionary language contained in an SPD may support deferential review and underscoring the continued importance of claims-procedure compliance for plan administrators seeking to preserve arbitrary-and-capricious review.