In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment & disability claim, from navigating a claim, to handling a claim denial, through preparing a case for litigation.  In Part Thirteen of this series, we discuss the administrative record and attempts to augment an administrative record after an appeal has been closed and administrative remedies have been exhausted.  Under the Employee Retirement Income Security Act of 1974 (“ERISA”), judicial review of an insurer’s denial of benefits is typically limited to the administrative record that existed at the time when the appeal was denied.  Therefore, it is crucial to determine if there are any documents or records that were not considered by the claims administrator during the appeal process that a court must review in order to make an accurate judgment.

When it comes to disability claims denials, some of our clients decide to handle the appeal of the claim denial on their own.  After the appeal is denied, if the policy does not allow for additional appeals, a disability claimant’s only available recourse is filing a lawsuit in federal court.  This puts claimants in a difficult position should the insurance company deny their appeal.  There may be important medical records, expert reports, personal statements or certification letters that the disability claimant failed to send to the insurance company that could be necessary for a district court to review in order to reverse an insurer’s decision to deny benefits.

For example, we often see that our clients are awarded Social Security Disability Insurance (“SSDI”) benefits after their disability insurance company has denied their claim and appeal.  Evidence of an SSDI award could be very persuasive for a judge to consider in a de novo review of a benefits decision.  SSDI awards have a similar, possibly more stringent, disability standard than most group disability policies.  Therefore, it can be very important for a district court to view this persuasive evidence in order to make a properly informed de novo review.  Making sure that a court views these important records that were not originally presented to the insurance company may be accomplished through a motion to augment the administrative record or a stipulation between the parties to augment the administrative record.

Under de novo review in an ERISA action, the key issue that a district court must decide is whether the insurer’s decision to deny benefits was correct.  See Opeta v. Northwest Airlines Pension Plan, 484 F.3d 1211, 1217 (9th Cir. 2007).  A district court has discretion to consider evidence extrinsic to the insurer’s administrative record when “circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.”  Mongeluzo v. Baxter Travenol Long Term Disability Ben. Plan, 46 F.3d 938, 944 (9th Cir. 1995).  Indeed, it can be reversible error for a district court to fail to admit extrinsic medical evidence that is not part of the administrative record.  Id.  .

There are two standards that courts consider when deciding whether to augment the administrative record: the Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006) and Opeta, 484 F.3d 1211 standards.  The Abatie standard involves a situation when a plan administrator has failed to follow a procedural requirement of ERISA, in which case a court may consider evidence outside of the administrative record.  Abatie, 458 F.3d at 971.  An example of this may be an insurance company’s denial letter not clearly setting for the information needed to perfect the claim or why that information is needed regarding the next steps in the appeal process.  In addition, courts have found that insurance companies have committed procedural ERISA violations by failing to provide a copy of a reviewing physician’s report to the disability claimant.  Notably, until recent amendments to the ERISA regulations, the disability claimant had to first ask for a copy of new reports in order for a court to find that a procedural ERISA violation had been committed.  See Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 678 (9th Cir. 2011); Yancy v. United of Omaha Life Ins. Co., 2015 WL 5132086, at *4 (C.D. Cal. Aug. 25, 2015).

The Opeta standard involves a non-exhaustive list of situations in which admission of evidence beyond the administrative record could be considered “necessary” by a district court to conduct an adequate de novo review.  The situations include:

(1) Claims that require consideration of complex medical questions or issues regarding the credibility of medical reports.

(2) The availability of very limited administrative review procedures with little or no evidentiary record.

(3) The necessity of evidence regarding interpretation of the terms of the plan rather than specific historical facts.

(4) Instances in which the payor and the administrator are the same entity and the court is concerned about impartiality.

(5) Claims that would have been insurance contract claims prior to ERISA.

(6) The existence of additional evidence that the claimant could not have presented in the administrative process.  Id.

Not all of these six factors need be present.  Williams, 2009 WL 604942, at *3-4 (admitting extrinsic evidence that is not in the administrative record in an ERISA disability benefits action in which only two factors were present).  In fact, courts routinely admit extrinsic evidence with only one Opeta factor present.  See Langlois v. MetLife, 2012 WL 1910020, at *10 (N.D. Cal. May 24, 2012) (only one factor being present: the credibility of medical reports); Duncanson v. Royal, 2011 WL 5974805, at *4 (N.D. Cal. Nov. 29, 2011) (same).  The list was intended merely as a guide to district courts faced with a motion to augment the administrative record.  Quesinberry v. LINA, 987 F.2d 1017, 1027 (4th Cir. 1993).

When faced with one or more of these six factors, or faced with an ERISA procedural violation, a court may deem it necessary to view extrinsic documents such as evidence of an SSDI award, more recent medical records, personal statements or clarifying statements.  In fact, in Schramm v. CNA Fin. Corp. Insured Grp. Ben. Program, 718 F.Supp.2d 1151, 1165, fn. 4 (N.D. Cal. 2010), the court held that evidence of an award of Social Security disability benefits was necessary for an adequate de novo review of the plan administrator’s determination, where the Social Security decision was rendered six months after the denial of the claimant’s final administrative appeal in the ERISA matter.

However, if a court decides against augmenting an administrative record, a disability claimant may be faced with an uphill battle to win their benefit claim in court.  For this reason, it is important to contact a skilled ERISA attorney at the appeal stage before a final determination on appeal is rendered.  When McKennon Law Group PC is hired, we make sure that insurers have all necessary evidence prior to the exhaustion of the administrative remedies.  While it is possible to augment the record after a lawsuit is filed, the easiest remedy is to hire competent ERISA attorneys at the claims or appeal stage of your disability claim.  However, there are some types of evidence (like SSDI awards) that often cannot be submitted prior to the final appeal denial.  In these cases, a motion to augment the administrative record could be the only recourse for a claimant.  In addition, it is always worth meeting and conferring with opposing counsel about stipulating to augment the record before filing a motion, in order to avoid costly motions and the uncertainty of a court ruling.

McKennon Law Group has significant experience in handling ERISA and non-ERISA disability insurance cases in which an insurer denied a claim.  If your insurer or plan administrator has denied your disability claim, please contact us for a free consultation so that we may assess your matter.