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.