The Ninth Circuit has recently joined the majority of federal courts in adopting the rule that if a claimant is able to convince a federal court to rule that an insurer’s review of an ERISA claim is deficient and it remands the matter back to the insurer based on the deficiencies, that constitutes “some success on the merits.”  This is significant because it will support a claimant’s motion for attorneys’ fees.  The United States Supreme Court decided in Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 in 2010, and since then, most federal courts have found that a remand to the claims administrator/insurer is considered “some success on the merits” for purposes of an award of attorneys’ fees under Hardt, but the Ninth Circuit had not spoken on the issue until recently, when it too adopted the rule in its holding of Woolsey v. Aetna Life Ins. Co., No. 20-16885, __ Fed. Appx. __, 2022 WL 1598964 (9th Cir. 2022).

Michael Woolsey filed suit in federal district court after his claim for disability benefits was denied by Aetna.  The district court remanded Woolsey’s claim to Aetna, finding that Aetna did not provide him with a full and fair review because its review process was deficient.  The district court determined that a remand was warranted because Aetna (1) failed to assess the aggregate effect of Woolsey’s medical conditions; (2) gave dismissive treatment to reports from his treating specialists; (3) failed to address specific vocational requirements as required by the plan; (4) failed to inform Woolsey of a deficiency in the record and to consider those missing records; (5) failed to disclose independent reviewers’ reports; (6) failed to adequately explain what was necessary to correct the record; and (7) failed to adequately investigate his physicians’ reports. While the procedural errors and deficiencies did not warrant a de novo review, the district court concluded that their cumulative effect prevented a full development of the record and a “full and fair review,” relying on 29 U.S.C. Section 1133(2).

Woolsey moved for attorneys’ fees.  The district court denied Woolsey’s motion holding that its remand to Aetna did not constitute “some success on the merits” because Woolsey did not prevail on his central claims.  Woolsey appealed to the Ninth Circuit, which reversed the district court’s decision, holding that the district court erred in applying the Hardt standard.  The Ninth Circuit held that in reaching its decision, the district court failed to comply with the ruling in Hardt that district courts should avoid lengthy inquiries into how substantial a party’s success was.  The Ninth Circuit further held that “some success on the merits” does not require a district court to assess the strength of the plaintiff’s claim and noted that while the Supreme Court remained silent on what constitutes the minimum success required to enable a successful motion for attorneys’ fees, it did not suggest that the requisite success was limited to the circumstances of the Hardt remand order.  The Ninth Circuit concluded that the Supreme Court’s characterization of the remand in Hardt was far more than a trivial or purely procedural success, and the Hardt court’s decision not to set the remand as the minimum threshold required for “some success on the merits” makes it clear that less favorable relief can also meet the standard.

The Ninth Circuit denoted in its holding that any remand order on its own is not necessarily sufficient to provide a basis for a claimant to be awarded attorneys’ fees.  The distinction here is that Woolsey’s claim was remanded because Aetna’s review of his claim had been deficient, suggesting that had the court found Aetna’s claim review to be complete and with no violations of ERISA, but rather remanded the claim on some strictly procedural ground, such remand would likely not provide a basis for him to be awarded attorneys’ fees.  Although Aetna argued that the remand did not constitute “some success on the merits” because Woolsey did not expressly seek a remand in his complaint, the Ninth Circuit rejected this argument, holding that a party’s “success” is not required to be in the form of the court granting the relief that was expressly sought in the complaint.

The implication of the Ninth Circuit’s decision in Woolsey is that the door is open for ERISA claimants in the Ninth Circuit to move for attorneys’ fees when there is a remand to the claims administrator/insurer based on a court’s findings that the insurer violated ERISA in a material manner such that a claimant did not receive a full and fair review under ERISA.   As the Hardt standard is somewhat vague, Ninth Circuit in Woolsey provided much needed guidance with regard to under what circumstances warrant a finding of “some success on the merits” that can give rise to a recovery of attorneys’ fees.

Aside from the impact that the Ninth Circuit’s decision has on claimants’ ability to move for attorneys’ fees in situations involving remands, another incidental impact it will likely have is to improve of the quality of insurers’ claim-review processes.  Prior to Woolsey, insurers litigating in the Ninth Circuit knew that they had a chance of defeating claimants’ motions for attorneys’ fees by arguing that remand does not constitute “success on the merits.”  Without any potential liability for attorneys’ fees, insurers are more likely to provide deficient reviews of claims, knowing that a district court may well remand the decision, but that such process would effectively cost the insurer nothing, because there was no risk of being ordered to pay attorneys’ fees based on a remand.  Now, however, those insurers know that the Ninth Circuit courts will apply the Hardt standard consistently with other federal courts.  Therefore, those insurers are more likely to provide better initial claims reviews in efforts to avoid orders to pay attorneys’ fees.

Considering the Ninth Circuit’s holding in Woolsey, claimants facing similar situations as Woolsey did can now operate with the knowledge that an insurer’s deficient claims review can open the door for attorneys’ fees to be awarded to them.

If you believe your insurer has not given your disability, life or accidental death claim a full and fair review, the experienced attorneys at McKennon Law Group PC can assist you to recover your denied insurance benefits and attorneys’ fees, whether a court determines your eligibility for benefits or remands your claim to the insurer for further review.