ERISA – changing the reason for denial not allowed

I came across this interesting ERISA cases.  In both cases, the court held that the claims administrator could just not change the reason for denying the benefits.

In both of these cases, the courts ultimately held that the record and the basis for denying benefits were effectively frozen and could not be changed at a later time.

In Rossi v. Precision Drilling Oilfield Servs. Corp. Employee Benefits Plan, 11-50861 (5th Cir. 2013), the Fifth Circuit Court of Appeals held that the claims administrator was not allowed to change the basis for a denial of benefits during the internal appeal.

Initially, the claims administrator denied the benefits because Rossi was not receiving sufficient medical care to be incurring medical expenses.  During the administrative appeal, however, the claims administrator changed his rationale.  The claims administrator denied the benefits because the plan had an exclusion for inpatient care.  The 5th Circuit Court of Appeals reversed summary judgment and remanded the case.

In Sun Life Health Ins., SACV 11-01516, the District Court for the Central District of California held that the claims administrator was not allowed to deny benefits based on factual investigation during the litigation.

In this case, Sun Life granted short-term disability benefits, but denied the plaintiff long-term disability (LTD) benefits.  Sun Life denied the LTD benefits because plaintiff had failed to satisfy the 180 elimination period, and because plaintiff was not employed at the time the medical evidence supported the disability.

During the litigation, Sun Life identified other facts to support its allegation that the claims should be denied.  As a side note, none of the facts raised during the litigation (which never came up during the investigation or appeal) were reviewed by any doctors.

  • First, Sun Life stated that the denial was supported by the fact that plaintiff “did not seek or receive any treatment” prior to the mental-breakdown event.  Sun Life explained that the treatment that plaintiff received after the mental-breakdown event was not his choice.
  • Second, Sun Life stated that plaintiff was unlikely to be disabled because prior to the mental-breakdown, he had gone on a gambling spree.
  • Third, Sun Life stated that after the mental-breakdown but before the hospitalization of plaintiff, plaintiff “appeared to have lived with his family…without incident.”

The district court did two things.  First, it stated that those rationales were inapplicable because they were not raised before and never reviewed by medical professionals.  Second, the court went through the factual rationales and explained why they were unsupported based on the facts.

 

via Don’t Look Back, Something Might Be Gaining On You: Whether a Plan Administrator Can Raise New Bases For Denying a Claim Beyond Those Raised in the Initial Denial of Benefits : Boston ERISA Law Blog.

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