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Exhaustion of Administrative Remedies Under ERISA Not Required If Exhaustion Would Have Been Futile

Terrance Burnett was eligible for short-term disability (“STD”) benefits and long-term disability (“LTD”) benefits through employee welfare benefit plans funded by his employer, The Raytheon Company, and administered by Metropolitan Life Insurance Company (“MetLife”). After his doctors stated that Burnett’s psychiatric condition prevented him from performing his job duties, he filed a claim for STD benefits. While, MetLife denied his claim for STD benefits, in Burnett v. Raytheon Co. Short Term Disability Basic Benefit Plan, 2011 U.S. Dist. LEXIS 40725 (C.D. Cal. Apr. 14, 2011), Judge Dolly Gee ruled that MetLife abused its discretion when it denied Burnett’s claim, and awarded him the STD benefits he sought. In addition, the court held that Burnett was eligible for some LTD benefits, even though he had yet to file an LTD claim.

In ruling that the medical records supported Burnett’s claim, the court Gee criticized the findings of MetLife’s so-called “independent” expert Dr. Mark Schroeder, a psychiatrist. Specifically, the court determined that “Dr. Schroeder arbitrarily discounted the opinion of Dr. Friedman, the treating physician whom Burnett saw weekly, and distorted the importance of the progress reports submitted by Dr. Anderson. Further, the court held that Dr. Schroeder “overemphasized the significance of Dr. Anderson’s February 20 and March 19 progress reports to the exclusion of the overwhelming weight of the evidence in the record, including the characteristics of the job that Burnett previously occupied and the corroborating results of the MMPI-2.”

Overall, the court classified Dr. Schroeder’s findings as “unreasonable” and awarded Burnett “STD benefits for the maximum 10-week period—from February 15 through April 25—because the evidence clearly shows that Burnett qualified as fully disabled during that time period.”

In addition, the court held that Burnett was entitled to LTD benefits, despite the fact that because he had yet to file a claim for LTD benefits, he could not have met ERISA’s requirement that a claimant exhaust his administrative remedies. The court ruled that requiring Burnett to exhaust his administrative remedies with respect to his LTD claim would have been futile:

17. The general exhaustion rule covering ERISA claims requires a claimant to “avail himself or herself of a plan’s own internal review procedures before bringing suit in federal court.” Diaz v. United Agr. Employee Welfare Benefit Plan & Trust, 50 F.3d 1478, 1483 (9th Cir. 1995) (citing Amato v. Bernard, 618 F.2d 559, 566-68 (9th Cir. 1980)). The general rule of exhaustion, however, is not a statutory requirement, and a court “may waive the exhaustion requirement, and should do so when exhaustion would be futile.” Horan v. Kaiser Steel Ret. Plan, 947 F.2d 1412, 1416 (9th Cir. 1991) (citing Amato, 618 F.2d at 568).

18. The Court finds that, under the facts of this case, Burnett’s exhaustion of the LTD administrative remedies would have been futile for the following reasons. First, the definitions for “fully disabled” for purposes of STD benefits and LTD benefits are substantially the same. (A.R. 7, 39.) Second, the STD and LTD plans are integrated, such that they rely on and refer to each other. (A.R. 40.) MetLife’s termination of Burnett’s STD Plan benefits essentially doomed any claim he might have to LTD Plan benefits. Finally, because MetLife is the designated Claim Administrator under both the STD and LTD plans (A.R. 6, 38.), the plans are administered by the same entity. In light of the foregoing—considered together with MetLife’s unwavering denial of Burnett’s post-March 13 STD benefits—MetLife likely would have denied any LTD benefits claim Burnett submitted for the same reasons it terminated his STD benefits claim.

19. Finally, the Court considers the policy implications of the exhaustion doctrine, which include “the reduction of frivolous litigation, the promotion of consistent treatment of claims, the provision of a nonadversarial method of claims settlement, the minimization of costs of claim settlements and a proper reliance on administrative expertise.” Diaz, 50 F.3d at 1483. None of these policy considerations preclude the Court from applying the futility exception to the facts of this case. To require Burnett to submit a written claim for LTD benefits—which would be subject to a denial similar to that of his STD benefits claim—only then to require him to exhaust his administrative appeals and then possibly return to this Court, would exalt form over substance and defeat the fair and efficient administration of justice.

The court therefore awarded Burnett LTD benefits through July 1, 2008, the date of the more recent medical record in the Administrative Record.

Finally, the court’s ruling in also interesting for its analysis of MetLife’s conflict of interest. Previously, courts generally held that if a plan was self-funded – that is, benefits were paid by the employer, not the insurer/claims administrator – then there was little danger that the administrator’s claim decision was improperly impacted by an interest in reducing the amount of claims it paid out. Here, however, the Court noted that:

Although no structural conflict of interest exists, MetLife does maintain a contract with Raytheon to provide claim administration services under Raytheon’s disability benefit plans. Thus, MetLife has an incentive to maintain that contract by keeping the cost of Raytheon’s disability benefit program low. This is but one factor the Court weighs in determining whether MetLife abused its discretion in terminating Burnett’s STD benefits beyond March 13. See Abatie, 458 F.3d. at 967 (noting that the Court’s abuse of discretion review is to be informed by the nature, extent, and effect on the decision-making process of any conflicts of interest).

Thus, claimants must always be aware that a claims administrator’s decision could be improperly influenced, not only by a desire to pay our less in claims, but also to keep the employers as a customer.

Fighting An Insurance Claim Denial Will Often Pay Off

It will not be surprising to many readers of this blog that insurance companies often deny life insurance, health insurance and disability insurance claims. Many times, insurance companies are wrong in their decisions. And, sometimes they acknowledge their mistakes. The question becomes: what are the odds of an insurance company changing its mind and reversing the decision? Our firm knows firsthand that the odds are extremely good when a reputable and respected law firm is involved in representing the policyholder’s interests. But that is just our experience. What is the overall experience when a health insurance claim is denied and a subsequent appeal is filed? We now have our answer.

In his article entitled “Don’t take a health insurer’s rejection as the final word on your medical claim,” Tom Murphy of the Associated Press cites a recent report from the Government Accountability Office which found that overall, appeals have an approximately 50% success rate. The article lists a number of actions policyholders can take to increase the likelihood of success on appeal. Murphy mentions obtaining and submitting copies of the entire medical file, enlisting a treating doctor to write letters explaining the policyholder’s relevant medical history, understanding policy language, writing a detailed letter with supporting records and information and complying with all deadlines.

The article does not mention that the Employee Retirement Income Security Act (“ERISA”) covers most health insurance appeals. ERISA requires that a plan participant meet certain deadlines in order to qualify for benefits, and also requires that a plan participant appeal a claim denial before he or she may sue. Often times, a plan participant will want to “pad” the administrative record with records and information in support of the appeal and which will be helpful in a later lawsuit, should one be filed. It is often critical that a plan participant hire an attorney to help with this process, as knowing and citing to pertinent federal ERISA law can be the difference between winning and losing an appeal.

Here is Murphy’s article verbatim:

FIGHTING AN INSURANCE CLAIM DENIAL CAN PAY OFF

By Tom Murphy, The Associated Press
Published Friday, April 8, 2011

INDIANAPOLIS — Don’t take a health insurer’s rejection as the final word on your medical claim.

Appeals can have a surprising success rate if patients shape a good argument with help from their doctor, some research and a healthy dose of persistence. Insurers always offer at least one chance to appeal when they deny a claim. Here’s how to make your case.

For starters, what are the odds of success?

A recent report from the Government Accountability Office found a 50 percent success rate of appeals to insurers in some states.

Insurance companies often make the initial decision to deny a claim based limited information like a diagnosis or procedure code from a claim form the doctor submits. They rarely see a patient’s file for that first decision, said Jennifer Jaff, executive director of Advocacy for Patients with Chronic Illness Inc., a non-profit that helps patients with claim denials.

“When you provide them with additional clinical information … it may turn out to be a very easy decision for them,” she said.

What are the first steps to take after receiving a rejection?

Learn as much as you can about the reason. Get the policy language and any information the insurer used to make its decision. Patients are entitled to this, so persist if the insurer moves slowly.

It’s also important to know the insurer’s appeal process. This should be laid out in the letter you receive telling you about the rejection. Understand the deadlines for appealing.

“These deadlines are serious,” Jaff said. “I’ve never seen an insurance company grant an extension.”

How do you build your case?

Write a detailed argument with records backing up your claims. Enlist your doctor’s help.

If the insurer says it doesn’t have to pay because your condition existed before your coverage began, a doctor may be able to argue otherwise.

The insurer may say the treatment isn’t medically necessary. Your doctor can illustrate how all alternatives were exhausted before you started receiving the treatment in question.

Rely on more than just a doctor’s statement.

“Insurance companies do not assume everything a doctor says in a letter is 100 percent true and accurate,” Jaff said. “What they really want to see are the medical records.”

Patients should be prepared to send their insurer any of those confidential records that would support their case.

If the insurer deems a treatment experimental, some additional research may be needed, and your doctor can help there as well. Medical journal articles can show an insurer that your treatment is a widely accepted practice.

If the doctor is unwilling or unavailable for help, Jaff recommends for research the National Institutes of Health website www.pubmed.gov . Patients can use it to search medical journals around the world for articles on their treatment.

Abstracts, summaries and some articles are free. Those that are not can be pricey, costing between $30 and $50 to buy online. But patients also can check with a medical library near them for copies.

Asking for a compassionate allowance can be another strategy for patients. Some insurance policies will make exceptions to cover something if it could be lifesaving.

An employer that offers a self-funded plan also might be persuaded to overrule the insurer and permit coverage, but Jaff said this is rare. Self-funded plans are generally used by big employers. In those cases, they provide the actual insurance and the managed care company just administers the plan.

Ask your human resources department if your company plan is self-funded.

What are the keys to a successful appeal?

Keep your emotions out of the argument and give the insurer something new to consider. Avoid rehashing information the company already has.

“It’s a business decision, it’s not personal on the insurer’s side,” said Pat Jolley of the Patient Advocate Foundation, another non-profit that helps people handle payment problems.

Know your insurer’s appeal process. Some may offer a couple rounds of internal reviews and provide a specialist to examine your claim. That means you can have an oncologist review your claim for cancer treatment.

Keep detailed notes of your contact with the insurer, including which representative you spoke to and when.

Send appeals by certified mail to document when an insurer receives them in case the company later claims you missed a deadline.

Communicate in writing whenever possible. This keeps you from having multiple phone conversations with different insurance representatives who provide different answers.

What is Insurance Bad Faith?

This article will be the first in a series of articles addressing and answering basic questions concerning insurance law. “Bad faith” will be the first concept addressed.

When an insurance company denies a claim, that denial decision might not only be incorrect under the terms of the insurance policy, but also might be in “bad faith.” As a matter of law, every insurance contract contains a covenant of good faith and fair dealing. If this covenant is violated, the insurance company is said to have acted in “bad faith.” A tortious breach of this implied covenant involves something beyond breach of the specific contractual duties or mistaken judgment. To establish a bad faith claim in first party cases (such as those involving life insurance, health insurance, disability insurance, property and casualty insurance, auto liability insurance, and homeowner’s insurance), it must be shown that an insurer’s delay or withholding of benefits under the policy was unreasonable or without proper cause.

In general, policies involving health insurance, life insurance, or disability insurance that are paid for and provided by an employer are governed by the Employee Retirement Income Security Act of 1974 (ERISA), which precludes recovery for insurance bad faith.

When an insurance company acts in bad faith (that is, when an insurance company violates the covenant of good faith and fair dealing), the policyholder or insured can sue the insurance company for both breach of contract and the tort claim of bad faith. In addition to contract damages, damages available under a tort claim for bad faith can include foreseeable financial losses, emotional distress, and attorney’s fees incurred by the insured to force the insurance company to pay the policy benefits (Brandt fees). If the insurance company acted with malice, oppression or fraud, the insured may also recover punitive damages. Punitive damages are meant to punish the insurer, and are not available in a breach of contract lawsuit.

When determining whether or not an insurer acted in bad faith, a court will use the “reasonable” standard. This means the court will evaluate the actions of the insurers and determine if they were reasonable under the circumstances. If the insurer did not act reasonably, then the insurer has acted in bad faith in dealing with the insured.

Some examples of bad faith are:

interpreting the language of the policy in an unreasonable manner;
unreasonably failing to reimburse the insured for the entire amount of the loss;
unreasonably failing to settle the lawsuit;
unreasonable refusal to defend a lawsuit;
unreasonable delay in paying benefits; and
unreasonable delay in investigating the claim or improper valuation of the claim.

If an insurer does not act reasonably in complying with the terms of the insurance policy, then they have breached the covenant of good faith and fair dealing (a.k.a. bad faith) and will be held accountable by the court. For additional information on this and other insurance matters you can visit the FAQ section of our website: www.mslawllp.com.

If you need to consult with an attorney about a possible insurance bad faith or ERISA matter, please contact our office.

Ninth Circuit Clarifies ERISA’s Full and Fair Review Standard by Imposing New Requirements on Plan Administrators in Salomaa Case

ERISA requires that an administrator provide a claimant with a “full and fair” review of a denial decision. In a recent ruling entitled Salomaa v. Honda Long Term Disability Plan, __ F.3d __, 2011 U.S. App. LEXIS 4386 (9th Cir. Cal. Mar. 7, 2011) the Ninth Circuit Court of Appeals imposed a new requirement that an insurer must meet in order to conduct a full and fair review. Specifically, an administrator must provide a claimant with copies of the internal medical reports it generated and relied upon when making the decision when it denies a claim. The Ninth Circuit held that the failure to provide the claimant with copies of the medical reports, and also to sufficiently explain what additional information might be needed to support the claimant’s claim for benefits, constituted a violation of ERISA’s full and fair review requirement.

Samuel Salomaa was an employee of the American Honda Motor Company, Inc. for more than twenty years. His supervisor described him as “the best employee to have worked for me” and Salomaa never called in sick, never left work early and never came in late. Unfortunately, in October 2003 Salomaa developed what he thought was the stomach flu. However, this “flu” was followed by grossly excessive fatigue, headaches, insomnia and excessive sensitivity to stimuli.

Before his illness, Salomaa used to jog the two miles to and from work. However, because getting up and getting dressed for work often left Salomaa too exhausted to even drive to work, he began to stay home. When he did make it to work, his severe fatigue rendered him only able to “do paperwork for a few minutes.” Salomaa underwent a battery of tests and examinations at Kaiser Permanente and was eventually diagnosed with Chronic Fatigue Syndrome (“CFS”).

Because he was no longer able to perform his job duties, Salomaa filed a claim for disability benefits with Life Insurance Company of North America, which is a wholly owned subsidiary of CIGNA. Salomaa made his claim though the ERISA-governed disability insurance plan offered by his employer. However, his claim for benefits was denied after CIGNA concluded that because his “thyroid, calcium, albumin, serum electrolytes, and CBC results were normal,” his medical records contained “no positive objective physical findings” supporting disability.

With their decision, CIGNA ignored the explanation by Salomaa’s physicians that for those suffering from CFS “laboratory tests are always normal and there is no test that is available at the present time for chronic fatigue syndrome.” CIGNA’s decision to ignore this explanation was especially egregious given that both the Center for Disease Control and CIGNA’s own health care guidelines explain that there are no specific diagnostic studies specific to the diagnosis of CFS and that chronic fatigue syndrome is diagnosed by excluding other underlying diseases.

After CIGNA denied his claim for disability benefits, Salomaa filed a lawsuit. In reviewing CIGNA’s decision, the Ninth Circuit noted that because CIGNA both administers the insurance plan and pays benefits out of its own pocket it is operating under a conflict of interest and “has a financial incentive to cheat” Salomaa and other claimants.

While the district court upheld the CIGNA’s claim decision, the Ninth Circuit ruled that CIGNA’s decision was “illogical, implausible and without support.” In holding that CIGNA abused its discretion, the Ninth Circuit noted that every doctor who personally examined Salomaa determined that he was disabled and that CIGNA unreasonably demanded objective tests to prove the existence of a condition for which there are no objective tests.

The Ninth Circuit also determined that CIGNA failed to provide Salomaa with a full and fair review of his claim. Specifically, while CIGNA’s internal physicians concluded (without examining Salomaa) that he was not disabled, CIGNA did not “give Salomaa and his attorney and physician access to the two medical reports of its own physician upon which it relied.” The Court also criticized CIGNA for telling Salomaa that he should provide “x-rays, CT, MRI reports, etc. that support your physician’s assessment,” but failing to tell him exactly what tests it wanted. Indeed, the Ninth Circuit classified this request as “absurd” since CIGNA was well aware that x-rays, computerized tomography and magnetic resonance imaging are not used to diagnose CFS. The court explained:

The plan evidently based its denial in large part on review of Salomaa’s file by two physicians, one for the first denial, another for the final denial. They both wrote their appraisals for the plan administrator. Yet the plan failed to furnish their letters to Salomaa or his lawyer. The regulation, quoted above, requires an ERISA plan to furnish “all documents, records, and other information relevant for benefits to the claimant.” A physician’s evaluation provided to the plan administrator falls squarely within this disclosure requirement. The disclosure requirement serves the purpose of facilitating what the regulation also requires, providing claimants “the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits.” Had the plan met its duty of providing copies of its physicians’ evaluations, then Salomaa’s treating physicians could have provided such comments and performed such additional examinations and tests as might be appropriate. By denying Salomaa the disclosure and fair opportunity for comment, the plan denied him the statutory obligation of a fair review procedure.

As stated by the Salomaa court, in order to “conform to the claim procedure required by statute and regulation,” a plan administrator is required to “explain, upon denial, any additional ‘information needed’” to support a claim for benefits. The Salomaa court concluded:

The administrator’s procedural violations are similar to those in Saffon v. Wells Fargo & Company Long Term Disability Plan and Boonton v. Lockheed Medical Benefit Plan. There, as here, the administrator did not provide material sufficient to meet the requirement of “meaningful dialogue.” We held in those cases, where the denials were based on absence of some sort of medical evidence or explanation, that the administrator was obligated to say in plain language what additional evidence it needed and what questions it needed answered in time so that the additional material could be provided. An administrator does not do its duty under the statute and regulations by saying merely “we are not persuaded” or “your evidence is insufficient.” Nor does it do its duty by elaborating upon its negative answer with meaningless medical mumbo jumbo. In this case, the skeptical look required by us in a case of a conflicted administrator requires us to conclude that the administrator acted arbitrarily and capriciously, both procedurally and substantively, thereby abusing its discretion in the denial of Salomaa’s claim.

Finally, the Ninth Circuit criticized CIGNA for failing to consider Salomaa’s Social Security disability award and for shifting the reason for its denial decision after Salomaa and his physician’s refuted CIGNA’s initial denial decision.

After concluding that CIGNA abused its discretion, the Ninth Circuit remanded the case to the district court with instructions that Salomaa be awarded the disability benefits he initially sought.

Plan participants will certainly want to use this decision as a key component of their arguments that plan administrators/insurers did not give them a full and fair review.

Ninth Circuit Holds Tight to ERISA Interpretation Rule That Courts Will “Not Artificially Create Ambiguity Where None Exist”

In 1987 Robert Fier started working for the Boyd Group (“Boyd”) as a casino slot repairman. After a promotion to management, Fier subsequently enrolled into Boyd’s two benefits programs: a Long Term Disability (“LTD”) Policy and an Accidental Death and Dismemberment Insurance (“AD&D”) Policy. Both policies are maintained pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.

In 1992, as a result of a shooting, Fier became permanently quadriplegic (i.e. the loss of both arms and legs). In 1993, Fier returned to work in a new job specifically tailored to his physical limitations where he earned the same salary as he had prior to the accident. In 1997, Fier’s salary was reduced by $20,000 when he was assigned to a new position at Boyd. In early 1997, Fier submitted a claim for benefits under the LTD policy, and received benefit payments from UNUM. Between 1997 and late 2004, UNUM paid Fier $152,069.02.

In late 2004, UNUM informed Fier that regarding his 1997 LTD claim, it should have ceased payments in 1998 because Fier left Boyd to take another job. At the new job, Fier was earning approximately the same salary he had earned before the accident. The rationale for UNUM’s decision was based upon the LTD policy which stated:

Disability benefits will cease on the earliest of:

The date the insured is no longer disabled;

The date the insured dies;

The end of the maximum benefit period;

The date the insured’s current earnings exceed 80% of his pre-disability earnings.

Fier filed suit against UNUM in the District Court of Nevada for both a declaratory judgment entitling him to continued payment of benefits, and for four years of benefits from 1993 until 1997. The Nevada district court found Fier was not eligible for benefits between 1993 and 1997 because he was working at his full salary and that he was not entitled to benefits after 1998 when he began his new job with a salary at the pre-disability level. The district court also held Fier was no longer covered under the LTD policy because he no longer was employed by Boyd. Lastly, the district court rejected Fier’s claim for benefits under the AD&D policy because his feet and hands had not been severed from his body.

On appeal with the United States Court of Appeals for the Ninth Circuit the lower court correctly determined Fier’s ineligibility for benefits from 1993 to 1997 and from 1998 forward under the LTD policy. The policy was not ambiguous as to when benefits would terminate. In addition, the Ninth Circuit court also held the district court correctly determined that Fier’s LTD benefits terminated in 1998 when Fier left his employment with the Boyd.

With respect to the AD&D policy, Fier appealed the district court’s determination that to be eligible for any AD&D benefits; he had to have suffered dismemberment by “severance.” The Ninth Circuit, not having had to construe this term before, relied upon Cunninghame v. Equitable Life Insurance Society of the Untied States, 652 F.2d 306 (2d Cir. 1981). In Cunninghame, the Second Circuit held the policy’s definition of ‘loss’ was not ambiguous, and interpreted the terms ‘dismemberment by severance’ by stating:

The word ‘dismemberment’ itself implies actual separation; the noun derives from the transitive verb ‘dismember’, defined as meaning ‘to cut or tear off into pieces; take apart roughly or divide (a whole) into sections or separate units’ or, obsoletely, to ‘lop’ or ‘sever’. “Dismemberment” as a noun, therefore, refers to “the act of dismembering or the state of being dismembered: division into separate parts or units.”

Therefore, the Ninth Circuit concluded that Fier was not owed any benefits under the AD&D policy because he “did not suffer the physical detachment of his limbs.”

The Court applied long-standing law in the Ninth Circuit that if there is no ambiguity to the interpretation of a policy provision, courts will not create one, and will “interpret terms in ERISA insurance policies in an ordinary and popular sense as would a [person] of average intelligence and experience.” Evans v. Safeco Life Ins. Co., 916 F.2d 1437 (9th Cir. 1990).

ERISA Claimant Retains Burden of Proof For Establishing Disability Under a De Novo Standard of Review

The question of who has the burden of proof can often decide the outcome of litigation. Given its importance, it is common to see litigants attempt to shift that burden to the opposing side in order to secure a tactical advantage. Recently, in Muniz v. Amec Construction Management Inc., __ F.3d __, 2010 WL 4227877 (Decided October 27, 2010), the Ninth Circuit Court of Appeals addressed the question of whether the burden of proof can be shifted in an ERISA disability case. In Muniz, a claimant diagnosed with HIV applied for benefits through his employer’s long-term disability plan (the “Plan”). Benefits were approved and paid for the first 24 months. However, as is common with many benefit plans, after 24 months the definition of disability changed. In order to qualify under the Plan, the claimant must be unable to perform all the essential duties of any occupation. As a result, the Plan terminated his benefits.

At trial, the parties agreed that the standard of review was de novo since the Plan did not grant discretion to the claims administrator. Accordingly, the district court placed the initial burden upon Muniz as the claimant to show that he was entitled to benefits under the terms of the plan. Muniz submitted evidence to the court from his primary physician, Dr. Towner, who concluded that Muniz was totally disabled from performing any occupation. This, argued Muniz, was sufficient to shift the burden of proof to the Plan to demonstrate that its claim decision was justified. However, the Ninth Circuit disagreed. Drawing from decisions in the Eleventh and Eighth Circuits, the Appellate Court concluded that the claimant retained the burden of proving that he was entitled to benefit even in light of the proffered evidence.

As concluded by other circuit courts which have addressed the question, when the court reviews a plan administrator’s decision under the de novo standard of review, the burden of proof is placed on the claimant. See, e.g., Horton v. Reliance Standard Life Ins. Co., 141 F.3d 1038, 1040 (11th SCir. 1998) (“A plaintiff suing under [29 U.S.C. § 1132(a) (1)(B)] bears the burden of proving his entitlement to contractual benefits.”); Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 658 (8th Cir. 1992) (“[W]e agree that it was [the claimant’s] burden to show that he was entitled to the ‘benefits . . . under the terms of his plan.’ ”) (omission in original) (quoting 29 U.S.C. § 1332(a)(1)(B)).”

In addition, the Ninth Circuit recognized that Muniz could cite to no precedent where a court conducting a de novo review shifted the burden of proof to the claim administrator. The case law cited by Muniz in support of his argument all dealt with cases where the standard of review was abuse of discretion. In those situations, the court focused on whether the Plan abused its discretion in denying benefits. However, under a de novo review, that analysis is irrelevant to the issue of whether the claimant was entitled to benefits. Similarly, case law that supports burden shifting under an abuse of discretion framework would be irrelevant where the standard of review is de novo. Since Muniz could not provide any precedent in support, he retained the burden of proof. The court did note that if the standard of review was abuse of discretion, the burden would shift to the insurer to prove that its actions were not tainted by the structural conflict of interest that results when it review and decides entitlement to benefits and also is the funding source.

Further, the court addressed Muniz’s argument that once a claimant proves he or she is totally disabled, the burden shifts to the insurer to show an change in condition:

Muniz argues that the district court committed clear error in its analysis because his medical records did not show a change in his condition over the years he was covered by the CGLIC plan. As noted above, the fact that the claimant was initially found disabled under the terms of the plan may be considered evidence of the claimant’s disability, but as the Eighth Circuit stated in McOsker v. Paul Revere Life Insurance Co., “[w]e are not suggesting that paying benefits operates forever as an estoppel so that an insurer can never change its mind.” 279 F.3d 586, 589 (8th Cir.2002). Muniz did not provide sufficient evidence to demonstrate that the district court committed clear error in its analysis of the record

After all of the evidence for and against Muniz’s position was balanced against each other, the end result as determined by the district court was that Muniz failed to prove that he was entitled to benefits. Ultimately, it is not clear whether Muniz would have won his case even if he did not have the burden of proof. However, this holding creates an additional obstacle for all future claimants and confirms that in the Ninth Circuit, claimants retains the burden of proof for establishing entitlement to benefits under a de novo standard of review.

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