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Plan Administrators May Not Adopt Rationales for Benefit Denials Not Raised During the Claims Review Process

by | Dec 1, 2022 |

The Ninth Circuit Court of Appeals, in Collier v. Lincoln Life Assurance Co. of Boston, has held that when a district court engages in a de novo review of an ERISA plan administrator’s denial of long-term disability (“LTD”) benefits, it must examine the administrative record without deference to the administrator’s conclusions. In deciding Collier, the Ninth Circuit confirmed that a district court must decide whether the plan administrator’s decision to deny LTD benefits is supported by the record and cannot engage in a new determination of whether the claimant is disabled.

Law. In general, a district court’s review of a plan administrator’s decision to deny an LTD benefit claim is limited to the reasoning for denying benefits that it provided during the internal administrative review process. In particular, a district court may not consider newly presented rationales advanced by the plan administrator for the first time during litigation, because the claimant did not have a chance during the administrative process to address the reasons now being advanced.

Background. In Collier, while working as an insurance sales agent, the claimant experienced persistent pain in her neck, shoulders, upper extremities and lower back, which limited her ability to sit and type for long periods of time. The claimant underwent surgery, received a variety of treatments and was provided with accommodations to help lessen the pain, but ultimately had to quit her job due to the persistent pain.

The claimant subsequently applied for LTD benefits under her employer’s disability plan, and the plan administrator denied her claim, concluding she could work full time without restrictions and did not provide sufficient proof showing that she met the definition of “disability” under the LTD plan. The claimant appealed this decision internally, but the plan administrator maintained its decision to deny benefits, stating that the rationale for its decision had not changed and “ergonomic equipment” was available to accommodate the claimant’s limitations. In response, the claimant sued the plan administrator in federal district court under ERISA, seeking an award of LTD benefits.

District Court. At trial, for the first time the plan administrator argued that the claimant was not credible and that because her doctors primarily relied on her subjective reports of pain, their conclusions were not supported by objective evidence of disability. The plan administrator also argued that even if the claimant was disabled, her typing restrictions could be accommodated with ergonomic equipment.

In response, the claimant asserted that the district court should reject the plan administrator’s objective evidence and credibility arguments because it did not raise those arguments in its denial letters. However, the district court concluded that because “a court must ‘evaluate the persuasiveness of conflicting testimony and decide which is more likely true’” on de novo review, credibility determinations were part of its review.

Ultimately, the district court “determined that [the claimant] was not disabled for three intertwined reasons: (1) [she] was not credible in her reporting of pain symptoms; (2) [her] medical providers relied on her pain symptom reports, so their opinions were less credible […]; and (3) […] her typing restrictions could be readily accommodated with ergonomic equipment, such as voice-activated software.” The claimant appealed the district court’s decision to the Ninth Circuit.

Ninth Circuit. Upon review, the Ninth Circuit reversed and remanded the district court’s decision in the matter. On remand, the Ninth Circuit said the district court must review the administrative record anew to determine whether the plan administrator correctly denied the claimant’s LTD benefits claim.

In particular, the Ninth Circuit noted that a plan administrator undermines ERISA and its regulations when it presents a new rationale to a district court that was not part of its specific reasoning for denying benefits during the administrative process. To support this position, the Ninth Circuit cited its past decisions, along with decisions from other circuit courts, which have expressed disapproval for post hoc arguments advanced by plan administrators for the first time during litigation.

In the instant case, the Ninth Circuit concluded that the district court erred by issuing a decision which relied on rationales that the plan administrator did not raise as grounds for denying the claimant’s LTD benefits claim. The Ninth Circuit explained: “Although we have held that a plan administrator may not hold in reserve a new rationale to present in litigation, we have not clarified whether the district court clearly errs by adopting a newly presented rationale when applying de novo review. We do so now.”

Employer Takeaway. In light of the Ninth Circuit’s decision in Collier, when denying benefit claims plan administrators should be sure to include all reasonably applicable rationales for their decision in their benefit denial letters.