Recent court decisions remind plan administrators of the importance of meticulously following the Department of Labor (“DOL”) regulations regarding determination of benefit claims and appeals under a plan’s internal administrative procedures. Where plan administrators have failed to follow the DOL’s claims regulations or the plan’s internal claims and appeals procedures, their benefit claims decisions may lose the advantages of a deferential review by a federal district court and be subject to the more searching, de novo standard of review. See Robert Schwartz’s article The Limits of Jebian — Not Every Technical Breach Means De Novo Review, in our July 2005 edition. Other times, although a plan administrator’s failure to follow the DOL regulations and the plan’s own procedures may not affect the standard of review, it may give a reviewing court a reason, even under the deferential abuse of discretion standard of review, to overturn the plan administrator’s decision and to even find that the plan administrator violated ERISA. A case decided earlier this year by the U.S. Court of Appeals for the Fifth Circuit illustrates this latter point. See Robinson v. Aetna Life Ins. Co., Case No. 05–50567 (5th Cir. March 14, 2006). The Fifth Circuit held that the administrator of a disability plan wrongly terminated a participant’s disability benefits and violated ERISA’s requirement that plans afford claimants a meaningful review of an adverse benefit decision because the plan administrator failed both to provide the participant with a full and fair review and to reach a decision that was supported by the evidence in the administrative record.
Facts of the Robinson Case
Alton Robinson, a participant in a disability plan administered by Aetna, worked as a sales representative for Glazer, a wholesale beverage distributor. In March 2002, his vision became impaired after he suffered a stroke; his doctors advised that it was dangerous for him to drive with impaired vision. Robinson applied for long-term disability (“LTD”) benefits from Aetna. Under Glazer’s plan, participants were eligible for LTD benefits if they were unable to perform the material duties of their own occupation. Aetna concluded that Robinson could not perform the material duties of a field sales rep because that job required him to drive more than 25% of the time and approved his claim for benefits. A year and a half later, Robinson’s treating physician sent Aetna a report stating that the physician had not placed any restrictions on Robinson’s activities and had not, in particular, placed any restrictions due to Robinson’s vision. Aetna interpreted the physician’s report as a statement that Robinson’s condition had improved, and thereupon terminated benefits. Robinson appealed this determination through the plan’s internal administrative procedures.
Challenging Aetna’s denial of benefits, Robinson submitted a new letter from his treating physician which constituted a complete reversal of the physician’s previous statements. According to this new letter, Robinson’s physician believed that driving was hazardous for Robinson. Robinson also submitted a letter from another treating physician who opined that it was unsafe for Robinson to drive any vehicle. In light of the discrepancy between the two statements made by Robinson’s first treating physician, Aetna had its own physician review Robinson’s file. Aetna’s physician agreed with Robinson’s treating physicians, concluding that Robinson was incapacitated from any occupation which required the operation of a motor vehicle.
Despite this new evidence, Aetna upheld its termination of LTD benefits, but based its decision on reasons that were different from the reasons it gave when terminating Robinson’s benefits. Aetna’s appeal determination letter explained to Robinson that it had spoken to a vocational consultant and determined that driving was not a material duty of a sales rep in the general economy. Aetna’s letter also stated that Robinson had exhausted his administrative remedies. Robinson sued Aetna and alleged that Aetna did not provide review of its specific basis for rejecting his claim and failed to identify the vocational expert with whom Aetna consulted. The federal district court found in favor of Aetna, and Robinson appealed that decision to the Fifth Circuit.
The Fifth Circuit vacated the district court’s decision and remanded the case to the district court to enter judgment in favor of Robinson. The court rebuked Aetna for violating ERISA section 503¹ by failing to provide the required review of the specific ground on which it had originally denied benefits to Robinson.
Lessons for Plan Administrators
The Fifth Circuit found Aetna’s decision fraught with errors. The court’s opinion conveys several lessons to plan administrators about the proper handling of claims and review of adverse benefit determinations:
1. If Participant Appeals Denial of Claim, Plan Administrator Must Review the Specific Grounds Upon Which Its Initial Denial Rested.
The Fifth Circuit admonished Aetna for abandoning its original justification for denying benefits to Robinson and justifying its denial of Robinson’s appeal with other reasons that had not previously been raised. The court held that ERISA section 503 requires a plan administrator to review, on appeal, the specific grounds upon which it initially denied benefits. When reviewing Robinson’s appeal, Aetna failed to address the reason for the initial denial (Robinson’s inability to drive because of his impaired vision) and instead determined that Robinson’s occupation did not require driving. The court found Aetna at fault because Aetna did not provide Robinson with the opportunity to seek administrative review of this “new” basis for denying his claim.
In light of the Robinson decision, plan administrators should make every effort to set forth all viable grounds for denying the claim in the initial denial, thereby giving notice to the claimant of the issues involved in his claim and the issues that would be reviewed if he were to seek an appeal of the initial denial. By not including a ground for denying the claim in the initial denial letter, a plan administrator risks not being able to use that ground as a basis for upholding the denial on appeal. Moreover, where an additional basis for denying a claim is revealed on appeal, a plan administrator must be sure to address its original basis for denying the claim and should check whether there is adequate support in the administrative record for denying the claim on the new, additional basis. Plan administrators should be wary of announcing a new basis for denying a claim, but if the plan administrator does rely on a reason for denying the claim that was not previously raised, the plan administrator should consider providing the claimant with an opportunity to seek further review of the plan administrator’s decision.
2. The Specific Grounds Upon Which a Denial of Claim and a Denial of Appeal Rest Need to be Supported by Evidence in the Administrative Record.
Aetna’s misstep was exacerbated by the lack of support for its determination in the administrative record. There was no evidence in the administrative record that Aetna consulted a vocational expert or researched the appropriate job classification for Robinson in the DOL’s Dictionary of Occupational Titles, but these were the evidentiary grounds Aetna relied upon in denying Robinson’s appeal. The Fifth Circuit emphasized that plan administrator must develop the administrative record so that it includes all evidence relevant to the plan administrator’s decision to deny benefits. Thus, the take-away lessons here are that plan administrators should fully develop the administrative record, and it is better to be over inclusive rather than under inclusive with regard to the content of the administrative record.
3. Plan Administrator Must Not Take Contradictory Positions In the Course of Approving Benefits, Terminating or Denying Benefits, and Upholding the Termination or Denial On Appeal.
Contributing to Aetna’s problems was the fact that it had approved LTD benefits to Robinson based on its initial determination that his job required him to drive 25% of the time and that he could not drive due to his impaired vision. On appeal, Aetna took the contrary position that driving was not a material duty of Robinson’s occupation. The Fifth Circuit held that the administrative record contained evidence that Aetna had determined that Robinson’s job required driving more than 25% of the workday and thus, the administrative record failed to support Aetna’s determination that driving was not a material duty for Robinson’s occupation.
Plan administrators that are reviewing claims denials should be mindful of the stated grounds for the initial approval of the claim (in the situation where benefits were paid and subsequently terminated) and initial denial of claims, because those become part of the administrative record. As Robinson demonstrates, courts are more likely to uphold a plan administrator’s determination where the plan administrator has taken consistent positions throughout the handling of a claim than where it has not.
4. Plan Administrators Must Disclose the Vocational Experts Whose Advice Was Obtained In Connection with a Denial of Claim.
Aetna also failed to identify the vocational expert who had determined, on appeal, that driving was not a material duty of Robinson’s occupation. Under the DOL regulations, plans that offer group health benefits or disability benefits must disclose to claimants the vocational experts it consults where the plan has denied a claim for benefits, regardless of whether the plan relied on the expert’s advice. See 29 C.F.R. 2560.503–1(h)(3)(iv). The court rejected Aetna’s argument that its failure to name its vocational expert was a technical or de minimis violation. The court held that Aetna’s failure to identify the vocational consultant, when coupled with Aetna’s change in justification for its denial of Robinson’s benefits claim, amounted to more than a mere technical violation; Aetna did not substantially comply with ERISA section 503.
A failure to disclose the identity of vocational consultant, when the plan administrator consults with one in determining a benefits claim, deprives the claimant of a reasonable opportunity for a full and fair review of a claim and adverse benefit determination. As the Robinson case demonstrates, the failure to disclose may be exacerbated by a plan administrator’s failure to include any evidence of consultation with the vocational expert in the administrative record.
In deciding in favor of Robinson, the Fifth Circuit sought to achieve a fair result for Robinson, who the court determined had not been given a reasonable opportunity for a full and fair review of Aetna’s termination of benefits as required by ERISA and DOL regulations. Perhaps the overall lesson of Robinson is that plan administrators should ensure that they thoroughly develop the administrative record for their benefit claims decisions and fully explain all the reasons for their decisions while keeping in mind how their decisions will be understood and perceived by the plan participants and beneficiaries.
¹ ERISA section 503 is the provision of ERISA that requires plans to follow certain procedures when handling benefit claims and reviewing adverse benefit determinations from which a claimant appeals. The court’s decision focused on ERISA section 503’s requirement that a plan “(1) provide adequate notice in writing . . . setting forth the specific reasons for [a] denial [of benefits] . . . and (2) afford a reasonable opportunity . . . for a full and fair review . . . of the decision denying the claim.”