Life after MetLife
TPAs rely heavily on ERISA’s requirements that claimants must exhaust their administrative remedies before going to court, and when they do sue, assuming that the Plan documents grant the claim administrator the appropriate discretionary authority, they must show that the claim administrator abused its discretion when denying their claim, before any court will get to the merits of their allegations.
Few plaintiffs are able to meet these burdens, and so either don’t sue or often get their lawsuits quickly dismissed. Until recently most courts were not very sympathetic to plaintiffs’ arguments of procedural violations, but things are changing, the most significant development being the Supreme Court’s decision this summer in MetLife v. Glenn.
In O’Connell v. Northland Lutheran Retirement Community Employee Health Plan, Northland Lutheran Retirement Community, Inc. and Professional Benefit Administrators, Inc., 2008 WL 2782897 (E.D. Wisc.), the Plan refused to pay $22,000 in claims related to a car accident.
The claims were filed on the patient’s behalf by the hospital where she was treated. The issue before the Court was Northland’s motion for summary judgment on the basis that O’Connell had failed to exhaust her administrative remedies.
In adjudicating O’Connell’s claims, PBA sent an EOB that stated “Accident information requested under separate cover has not been received. Until this information is received in our office, no further action may be taken.” NLRC contends that the EOB refers to an earlier letter PBA had sent to O’Connell requesting additional information about the accident, and it was her failure to respond to that letter that led to the nonpayment of her claims.
Northland argued that the EOB was an adverse benefit determination and O’Connell’s failure to either provide this additional information or appeal her claim denial meant that she had failed to exhaust her administrative remedies under the Plan.
O’Connell denied she had ever received the EOB from PBA seeking more information, and she contends that the information that PBA was allegedly seeking had already been provided months earlier. O’Connell also contended that she had talked to the Director of Human Resources, whom she claims told her contradictory information.
O’Connell claimed she was entitled to de novo review of her claim by the Court. O’Connell argued that the EOBs failed to inform her that her claim had been denied, failed to provide specific reasons for the denial, failed to reference a specific Plan provision, and failed to describe what additional information was necessary to perfect her claim. More importantly, O’Connell argued that since the EOB did not deny her claim, it did not represent an “adverse benefit determination,” and so did not trigger the 180-day clock for her to file an appeal. The Court held that EOBs merely requested additional information, and that “taking no action is not the same as denial.” Because there had never been a formal denial of her claim, Northland could not then contend that O’Connell’s failure to file an appeal must defeat her claim.
The Court went on to note that this result is re-enforced by another letter from PBA that said that if it did not get the information if would suspend the file and if the information received within 12 months, it would reopen the file and decide the claim. While O’Connell denies ever receiving this letter, the face that PBS would reopen the file had it received the requested information is inconsistent with Northland’s contention that she failed to exhaust her remedies.
The Court said that it was “unconvinced” that O’Connell had been provided with notification of an adverse benefit determination in a manner calculated to be understood by the claimant. The Court held that the communications with the claimant had failed to meet ERISA’s requirements, and for that reason, O’Connell did not have to exhaust her administrative remedies and it denied Northland’s motion for summary judgment.
In Tinker v. Versata Group Disability and Continental Casualty Company, 2008 WL 2774698 (E.D. Calif.), the Court held that because the insurer failed to comply with ERISA’s notice requirements and claim review procedures, it would grant no deference to the insurer’s decision and review the matter de novo. Under de novo review, it reversed the insurer’s denial of benefits.
Sandra Tinker had to quit working for Versata due to depression and an inner ear disease that causes, among other things, severe vertigo attacks. She was approved for short term disability and then long term disability benefits. Almost two years later, Continental stopped Tinker’s LTD benefits because she was no longer “disabled” under the terms of the Plan. It based its decision on her treating physician allegedly stating that Tinker was capable of returning to work without restrictions.
Continental’s letter terminating her benefits informed Tinker that she had the right to appeal and that if she had any additional medical evidence, she should submit it. The letter said that upon receipt of any additional evidence, Continental would reconsider its decision, and if this evidence did not change the decision, her claim would be submitted for a formal appeals review. Continental’s letter also misinformed Tinker that she had 60 days to make her appeal, when in fact she had 180 days. Tinker submitted additional medical evidence, mostly copies of her medical records with her physician’s margin notes, but Continental upheld the termination of her LTD benefits. In response, Tinker asked for reconsideration and had her treating physician send another letter indicating the severity of her condition. This letter clearly indicated that her doctor did not think she could return to work. Continental responded that she had exhausted her appeal rights and her only course of action was to sue.
The Court held that Continental had failed to comply with ERISA’s notice requirements. While it noted that the termination letter referenced the relevant Plan provision on which the denial was based and set forth the reason for the denial, the letter did not describe any additional material that might be required to perfect the claim, nor did it explain why such material was necessary.
The Court found that the misinformation about her time to appeal had undermined Tinker’s right to a “full and fair review.” The Court found that had she known that she had 180 days to appeal, Tinker likely would not have appealed until she had her doctor’s amended letter that presented the medical facts more clearly and more forcefully than the shorthand notes in her medical records. Thus, the inadequacy of Continental’s letter both denied Tinker proper notice and violated her appeal rights.
Applying the de novo standard of review to the record before it, the Court found that while Tinker’s doctor did say she was capable of performing some of the duties described in the Functional Assessment Tool, there was no evidence in the record that she could “continuously perform the material and substantial duties of her job as required by the Plan.” At the time of her doctor’s response, the record indicated that she severe vertigo attacks once every 3-4 weeks and moderate ones 1-2 times a week, and that a few months later when her doctor submitted the more complete letter response, her condition had worsened. Thus, the Court held that Continental’s response was arbitrary and ordered her benefits reinstated.
Whether the Court would have reached the same result under deferential standard of review, continental’s failure to provide the ERISA-required information in its claim denial letter allowed the Court to ignore the insurer’s decision and review the administrative record for itself. Put mildly, this is not usually the situation one prefers to be in when defending an ERISA claim and it is one which Continental could easily have avoided with a proper notice of its adverse benefit determination.
well said, finally a good report on this stuff