Professional Documents
Culture Documents
Filed: Patrick Fisher
Filed: Patrick Fisher
PUBLISH
MAY 6 2003
PATRICK FISHER
TENTH CIRCUIT
Clerk
LOUISE GILBERTSON,
Plaintiff-Appellant,
v.
No. 01-2324
KRIEGER , District
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days of receiving a request for review, or 120 days, if LINA specified that special
circumstances required the extra time. LINAs explanation of this timeline
mirrors a provision in the Plan requiring the administrator to make a final
decision within the applicable 60- or 120-day deadline. The Plan provision in
turn follows a Department of Labor ERISA regulation that articulates the
applicable deadline and provides further that claims not decided within the
deadline are deemed denied on review:
(1)(i) A decision by an appropriate named fiduciary shall be made
promptly, and shall not ordinarily be made later than 60 days after
the plans receipt of a request for review, unless special
circumstances . . . require an extension of time for processing, in
which case decision shall be rendered as soon as possible, but not
later than 120 days after receipt of a request for review.
...
(4) . . . If the decision on review is not furnished within such time,
the claim shall be deemed denied on review.
29 C.F.R. 2560.503-1(h) (1999). 3
On January 14, 1999, LINA received Mrs. Gilbertsons request for review.
LINA responded on January 28, assuring Mrs. Gilbertson that she would be
notified of a final decision within 60 days of LINAs receipt of the request. On
February 16, LINA sent a fax to Mrs. Gilbertson extending the deadline for
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did they receive any other communication from LINA or AlliedSignal regarding
the claim.
On June 1, Mrs. Gilbertsons attorney sent a letter to LINA asking the
company to advise whether it would accept or reject the claim. LINA opted to do
neither, deciding instead to refer Mrs. Gilbertson for an independent examination.
LINA, however, neglected to inform Mrs. Gilbertson or her attorney of this
decision, and she therefore had no way of knowing the status of her claim.
Finally, on August 20, Mrs. Gilbertson received a certified letter from
HealthSouth, an institution hired by LINA to perform the independent medical
examination, informing her that she was scheduled for an appointment on
September 9. Mrs. Gilbertson canceled the HealthSouth appointment and,
treating her claim as having been deemed denied by operation of the regulatory
deadline for decision on an appeal, filed suit on August 25.
In federal district court, LINA and AlliedSignal moved for summary
judgment, arguing that LINAs denial of benefits was entitled to judicial
deference under the arbitrary and capricious standard. Mrs. Gilbertson contended
that LINAs failure to meet the ERISA deadline should trigger de novo review.
The district court acknowledged that LINA had failed to meet the deadline, but
nevertheless applied the deferential standard of review. The district court seems
to have determined, based on the cases cited by the parties, that where an
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administrator with discretionary authority renders an initial decision and does not
subsequently change its reasoning, the courts should apply a deferential standard
even if the appeal is deemed denied as a result of delay. The district court also
found it important that Mrs. Gilbertson herself had acted outside the Plans time
limits in that she asked for extensions of the deadline to submit materials,
continued to submit materials past the agreed-upon deadline, and in general
continued to participate in the appeals process. Order Granting Defendants
Motion For Summary Judgment, dated November 11, 2000, at 7, Appellants App.
86.
The district court therefore reviewed LINA s deemed denied decision
under the arbitrary and capricious standard. It found substantial evidence in the
record supporting the denial and granted summary judgment to LINA and
AlliedSignal. Mrs. Gilbertson now appeals the grant of summary judgment,
arguing that the proper standard of review in this case is de novo. We agree.
DISCUSSION
I. Standard of Review
Mrs. Gilbertsons complaint arises under 29 U.S.C. 1132(a), which
provides that a beneficiary may bring suit to recover benefits due to him under
the terms of his plan, to enforce his rights under the terms of the plan, or to
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clarify his rights to future benefits under the terms of the plan. Although ERISA
does not explicitly specify the standard of review that district courts should
employ in reviewing such claims, the Supreme Court has held that a denial of
benefits challenged under 1132(a)(1)(B) is to be reviewed under a de novo
standard unless the benefit plan gives the administrator or fiduciary discretionary
authority to determine eligibility for benefits or to construe the terms of the plan.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Where the Plan
grants such discretionary authority to the administrator, the court reviews the
administrators denial according to an arbitrary and capricious standard.
Chambers v. Family Health Corp., 100 F.3d 818, 825 (10th Cir. 1996).
AlliedSignals Plan expressly vests discretionary authority to determine
benefits eligibility in the Plan Administrator (AlliedSignal), who has delegated its
discretion to LINA. Such delegation is permitted by the Plan. Therefore, because
the Plan, albeit indirectly, grants discretionary authority to LINA, LINAs
decisions on benefit claims should generally be reviewed under the arbitrary and
capricious standard.
Mrs. Gilbertson contends, however, that the arbitrary and capricious
standard is inapplicable when the claim has been automatically deemed denied
by operation of ERISA regulations. She takes the position that if the
administrator fails to issue a decision before the applicable deadline as required
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by ERISA, and the claim is thereby deemed denied, the court must review the
denial de novo.
The parties positions as to when Mrs. Gilbertsons claim could be deemed
denied as provided in ERISA regulations are somewhat unclear. Mrs. Gilbertson
seems to argue that the claim should be deemed denied as of 60 days after LINAs
receipt of the appeal on January 14. This, however, is not necessarily the proper
date.
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The exact date does not really matter in this case because LINA never
issued a decision denying Mrs. Gilbertsons appeal. LINA and AlliedSignal have
conceded their failure to render a decision prior to the deadline (whatever it is)
and do not contest Mrs. Gilbertsons contention that the claim must be deemed
denied pursuant to ERISA regulations. Nevertheless, LINA and AlliedSignal
argue that the deemed denial of an ERISA claim does not affect the deferential
standard of review.
The question presented is therefore whether a plan administrator with
discretionary authority whose delay in deciding a claim results in its being
deemed denied is entitled to judicial deference. The issue is of first impression
in this circuit. We hold that when substantial violations of ERISA deadlines
result in the claims being automatically deemed denied on review, the district
court must review the denial de novo, even if the plan administrator has
discretionary authority to decide claims.
The Supreme Courts ruling in Firestone seems to require this holding.
Firestone establishes de novo review as the default standard for reviewing ERISA
(...continued)
finished submitting additional information. The new, amended regulations
provide that the period for making the benefit determination on review shall be
tolled from the date on which the notification of the extension is sent to the
claimant until the date on which the claimant responds to the request for
additional information. 29 C.F.R. 2560.503-1(h)(4) (2002).
4
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traditionally did not sanction judicial interference with a trustees discretion when
the original parties, by means of the trust instrument, authorized the trustee to
exercise discretionary powers. Id. at 111 (citing Restatement (Second) of Trusts
187 (1959)). The purpose of this principle is evident: trust settlors and trustees
may, for a number of reasons, prefer that the trustee render individualized,
discretionary-type decisions without a court second-guessing the trustees
judgments. The most obvious reason for such an arrangement is that the trustees
or administrators expertise and familiarity with the overall scheme, as well as the
details of each case, make him more likely to get the decision right than a court.
This purpose, however, is not served by judicial deference to automatically
deemed denied decisions. Such decisions are not exercises of discretionary
power vested in the trustee, as intended by the trust instrument, because in these
instances the terms of the plan and its governing regulations require that a
decision be rendered within a specified time. Deference to the administrators
expertise is inapplicable where the administrator has failed to apply his expertise
to a particular decision. Thus, because LINA never used its discretionary
authority to make and issue a final, reasoned decision on Mrs. Gilbertsons
appeal, LINA has provided no actual exercise of discretion or application of
reasoned judgment to which a court can defer.
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novo. In Gritzer v. CBS, Inc., 275 F.3d 291 (3rd Cir. 2002), a plan administrator
with discretionary authority failed to respond to a claim until after it was deemed
denied. The Third Circuit reversed the district courts application of the arbitrary
and capricious standard, holding that, under Firestones application of trust law
principles to ERISA cases, if a trustee fails to act or to exercise his or her
discretion, de novo review is appropriate because the trustee has forfeited the
privilege to apply his or her discretion; it is the trustees analysis, not his or her
right to use discretion or a mere arbitrary denial, to which a court should defer.
Id. at 296. 5
Other circuits, however, have decided the issue differently. The Fifth
Circuit has held that the standard of review is no different whether the claim is
actually denied or deemed denied. Southern Farm Bureau Life Ins. Co. v.
Moore, 993 F.2d 98, 101 (5th Cir. 1993). The court, however, provided no
explanation or authority for this statement. In McGarrah v. Hartford Life, the
Eighth Circuit reviewed a plan administrators denial of benefits for abuse of
discretion, even though the administrator never responded to the claimants
appeal. 234 F.3d 1026, 1030-31 (8th Cir. 2000). The court acknowledged that
the plan administrators failure to respond was a serious procedural irregularity,
We note that the district court did not have the benefit of the decisions in
Jebian or Gritzer, as both were decided after the district court granted summary
judgment in this case.
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but nevertheless held that the mere presence of a procedural irregularity is not
enough to strip a plan administrator of the deferential standard of review. Id. at
1031. Because the plan administrators initial decision thoroughly explained the
basis for the adverse decision and the claimants submissions on appeal contained
no new medical evidence contradicting the initial decision, the court held that
the claimants appeal required no response by [the administrator] to permit
meaningful judicial review. Id.
McGarrah, then, holds that even deemed denied decisions can be
afforded judicial deference if the reviewing court determines that the
administrators initial denial and statement of reasons can effectively be applied
to the claimants appeal. Id. That is, the court should interpret the
administrators silence on the claimants appeal as implicitly affirming the
original denial for the reasons set forth therein. LINA urges us to adopt a similar
interpretation of its non-response to Mrs. Gilbertsons appeal and insists that the
reasons it provided in the initial denial are clearly applicable to and dispositive of
the appeal.
Even if the McGarrah approach is permissible under Firestone, it should be
limited to situations where the claimant does not provide meaningful new
evidence or raise significant new issues in the appeal. In McGarrah, the
administrators initial denial contained overwhelming evidence that McGarrah
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mandated deadlines and the deemed denied provision is to make it clear that,
upon expiration of the deadline, the claimant has fully exhausted her
administrative remedies and may then file suit. LINA thus suggests that the
deemed denied provision serves simply as an admission ticket to court, and not
as a deadline that, if violated, should strip the administrator of his discretion.
Accordingly, depriving the administrator of his discretion for a minor procedural
irregularity that did not substantively harm the claimant would reflect a hyperproceduralism that is inconsistent with the flexibility and discretion contemplated
by the Plan and ERISA regulations.
This argument is not wholly without merit. The Supreme Court has held
that the deemed denied provision allows the claimant to bring a civil action to
have the merits of his application determined, just as he may bring an action to
challenge an outright denial of benefits, but that an administrators delay is not
necessarily a substantive violation giving rise to a private right of action.
Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144 (1985). See also
Heller v. Fortis Benefits Ins. Co., 142 F.3d 487, 492 (D.C. Cir. 1998), cert.
denied, 525 U.S. 930 (1998). Courts have also been willing to overlook
administrators failure to meet certain procedural requirements when the
administrator has substantially complied with the regulations and the process as a
whole fulfills the broader purposes of ERISA and its accompanying regulations.
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See, e.g., Sage v. Automation, Inc. Pension Plan and Trust, 845 F.2d 885, 895
(10th Cir. 1988) ([n]ot every procedural defect will upset the decision of plan
representatives); Halpin v. W.W. Granger, Inc., 962 F.2d 685, 690 (7th Cir.
1992) (In determining whether a plan complies with the applicable regulations,
substantial compliance is sufficient.); Kent v. United of Omaha Life Ins. Co., 96
F.3d 803, 807-08 (6th Cir. 1996) (upholding denial that violated procedural
requirements because, despite violations, claimant was notified of reasons and
was given fair opportunity for review); Donato v. Metro. Life Ins. Co., 19 F.3d
375, 382-83 (7th Cir. 1994) (substantial compliance with regulations is sufficient
when claimant received enough information to allow effective review); Sheppard
& Enoch Pratt Hosp., Inc. v. Travelers Ins. Co., 32 F.3d 120, 127 (4th Cir. 1994)
(plans decision that violated applicable deadlines of 29 C.F.R. 2560.503-1
substantially complied with regulation because the claimant was not prejudiced).
We agree that a substantial compliance approach is appropriate in this
case. Accordingly, our holding does not require that every decision that comes on
the 61 st or 121 st day following the claimants notice of appeal must be subject to
plenary review in federal court. Such a hair-trigger rule could inhibit collection
of useful evidence and create perverse incentives for the parties. Even in cases
where additional medical information is clearly necessary for a proper decision,
administrators would have an incentive to issue a final denial on the inadequate
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record in order to preserve their right to deferential review, rather than to wait for
the information and risk losing deference. On the other side, claimants might be
encouraged to delay a final decision by suggesting that they intend to produce
additional information, only to pull the plug and demand de novo review in
federal court on the 121 st day. This result would be antithetical to the aims of
ERISA. ERISAs procedural regulations are meant to promote accurate,
cooperative, and reasonably speedy decision-making, not to generate an endless
stream of business for employment lawyers. See Varity Corp. v. Howe, 516 U.S.
489, 497 (1996) (congressional purpose in enacting ERISA was not to create a
system that is so complex that administrative costs, or litigation expenses, unduly
discourage employers from offering welfare benefit plans). Thus, in the context
of an ongoing, good faith exchange of information between the administrator and
the claimant, inconsequential violations of the deadlines or other procedural
irregularities would not entitle the claimant to
de novo review.
as our guide). Fortunately, the broader purpose of the relevant ERISA regulation
seems fairly clear. The regulation requires that plan administrators follow certain
procedures within the specified deadlines when they deny claims. Among other
things, the administrator must provide the claimant with a comprehensible
statement of reasons for the denial, including [a] description of any additional
material or information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary and [a]ppropriate
information as to the steps to be taken if the participant or beneficiary wishes to
submit his or her claim for review. 29 C.F.R. 2560.503-1(f)(3), (4) (1999).
The regulation also requires that the decision on review shall include specific
reasons for the decision, written in a manner calculated to be understood by the
claimant, as well as specific references to the pertinent plan provisions on which
the decision is based . . . The decision on review shall be furnished to the
claimant within the appropriate time . . .. 29 C.F.R. 2560.503-1(h)(3), (4)
(1999). In Judge Kozinskis felicitous formulation:
In simple English, what this regulation calls for is a meaningful
dialogue between ERISA plan administrators and their beneficiaries.
If benefits are denied . . . the reason for the denial must be stated in
reasonably clear language, . . . if the plan administrators believe that
more information is needed to make a reasoned decision, they must
ask for it. There is nothing extraordinary about this: its how civilized
people communicate with each other regarding important matters.
Booton v. Lockheed Medical Benefit Plan,
Finally, after more than six months of radio silence from LINA, Mrs.
Gilbertson received a notice of a scheduled appointment from LINAs outside
doctors. There was no explanation of why LINA thought the additional tests were
necessary, nor did LINA offer any reasoned evaluation of the additional
submissions from Mrs. Gilbertsons physician, chiropractor, and co-workers.
LINA had ceased participating in a meaningful dialogue with Mrs. Gilbertson
more than six months previously, and it never got around to exercising its
discretion or applying its administrative expertise to reach a final decision. This
cannot be construed as substantial compliance with ERISAs procedural
requirements.
We therefore REVERSE the district court and REMAND for
reconsideration according to the appropriate standard of review.
We do not hold
The district court need not allow the parties to submit additional
evidence, unless it determines that supplementation of the record is necessary to
conduct an adequate de novo review. See Hall v. UNUM Life Ins. Co. of Am., 300
F.3d 1197, 1202 (10th Cir. 2002).
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See, e.g.,
Mondragon v. Apfel , 3 Fed.Appx. 912, 915 (10th Cir. 2001) (unpublished). This
circuit has not ruled on whether to apply the treating physician rule in the ERISA
context.
The circuits are split on this.
Survivorship Plan , 266 F.3d 1130, 1139 (9th Cir. 2001) (holding that the treating
physician rule applies to ERISA plan decisions);
Disability Plan , 296 F.3d 823 (9th Cir. 2002),
272 F.3d 127, 136 n.4 (2d Cir. 2001) (concluding that the treating physician rule
serves no purpose in
Shield of Ala., Inc. , 890 F.2d 1137, 1140 (11th Cir. 1989) (holding treating
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Salley v.
whether rule applies to ERISA cases). The Supreme Court has recently granted
certiorari on the issue.
123 S. Ct.
817 (2003) .
In light of our disposition of the first issue in this case, it is not necessary
to decide this question. The district court declined to follow a treating physician
rule, in the context of a case in which it granted deference to the plan
administrator. We do not know how the district court will treat the treating
physicians evidence on remand, under the
district court is required to confront that question, it may have received further
guidance from the Supreme Court.
III.
For the foregoing reasons, we REVERSE the district courts grant of
summary judgment to LINA and AlliedSignal and REMAND for a
of Mrs. Gilbertsons eligibility for long-term disability benefits.
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de novo review