The Importance of the "Administrative Record" in ERISA Benefit  Cases

If You Don't Know the Process, You'll Forfeit Valuable Rights
By: Michael A. McKuin

The Administrative Process in General


It’s sounds officious, maybe even a little intimidating, but the administrative record is at the very core of ERISA practice. Like so much of the language of this field, it’s just another fancy name for a simple thing.  But before you can appreciate how ERISA impacts benefit claims, you first have to understand what it is, how it works and why it's so important. 


If we take a look at the claims procedure itself, you can see why it is so central to the process.  ERISA and the federal ERISA claims regulations clearly spell out procedures for how claims are submitted, reviewed, investigated, decided and if necessary appealed. [1]   State law also applies to a limited extent because laws that “regulate insurance” are saved from federal preemption under ERISA’s “Savings Clause”. [2]  Once a claim is submitted, the insurer has a duty to accept or deny it immediately, but not later than 40 days after receiving a proof of claim, [3] which is defined by California state law as “any evidence or documentation in the possession of the insurer, whether submitted by the claimant or obtained by the insurer in the course of its investigation, showing any evidence of the claim and that reasonably supports the magnitude or the amount of the claimed loss.”  [4]   


The insurer has a duty to conduct a prompt and thorough investigation as soon as it is on notice as to the nature of a claim. [5]    Once it completes that investigation, it has to make a timely decision whether to pay or deny it.  In fact, the former federal regulations used to provide for what was called a “notice of decision”. [6]   That language has been long since changed to “benefit determination”. [7]    Any claim denial, reduction or termination of benefits is now called an “adverse benefit determination”. [8]   (In an effort to keep things simple, I’ll just use the generic term "denial".)  If an insurance company denies a claim, ERISA and the regulations provide that it must clearly state its reasons and afford the claimant a reasonable opportunity to administratively appeal.   [9]   


In order to comply with ERISA’s “full and fair review” requirement, the regulations require that all benefit plans have an internal appeal process by which a claimant may request that a denial be further reviewed by someone not involved in the original decision. [10]   That’s known as the administrative appeal process. It sounds like a good thing on the surface, but it really isn't. Such reviews are seldom full or fair.  Nevertheless, as a general rule, a claimant must first exhaust a plan’s internal appeal procedure before a lawsuit can be filed.  The insurer must then issue its final decision on the appeal, now known as a “benefit determination on review”.  [11]  If you come from the school of thought, where words have actual meaning (and legal terms of art have a lot of meaning), that change in the regulatory language is significant.  The standard dictionary definition of the word “determination”, is in pertinent part as follows:  “(a) law: a judicial decision settling and ending a controversy .  .  . (b) the resolving of a question by argument or reasoning.” [12]  Those words: “settling, ending, resolving” share a common characteristic, they all carry a clear indication of finality. So it sounds pretty straightforward and simple, right?  If only it were.  For insurers, there’s no such thing as finality until you force their hand.


It is during the initial claim review, as well as the internal appeal process that the “administrative record” is assembled, which is basically anything that an insurer looks at in reviewing a claim and reaching a final decision as to whether or not to pay it. [13]    It starts out as the insurance company’s claim file but it expands to become much more than that.  It includes everything accumulated by the insurer during its investigation of the claim, as well as documents and information initially submitted by the claimant in support of the claim, as well as additional documentation later submitted in support of an administrative appeal.  It typically includes medical records, reports, or other documents, correspondence, internal memoranda, reports of the insurer’s reviewing or examining physicians, vocational consultants, private investigators, along with any surveillance video. It also includes the insurance policy and any other plan documents.  It can be anywhere from a few hundred to a few thousand pages in length. 


Why Is It So Important?


In an  ERISA benefit  case, the claimant  bears the burden  of proving that  he meets the  plan definition  of  “disability”. [14]   If a case is litigated, there is no right to a jury trial.   It is decided by a federal judge.  The reason why the administrative record is so important is because in all probability it will be the only thing a judge will look at in deciding the case in court. Unlike other types of civil litigation, you are generally not permitted to call witnesses to testify or introduce exhibits in court that were not first submitted to the insurer during the administrative appeal process. And if a lawsuit is filed the door to that record usually slams shut. Seldom will evidence outside the scope the record be permitted.  In fact, in the Ninth Circuit, if the standard of review is the deferential or abuse of discretion standard, a judge is not even allowed to consider evidence  outside the  record.  Even  under a de novo  standard, admitting  such evidence is disfavored and seldom done. [15]    So any evidence in support of the claim must be provided to the insurer before a lawsuit is filed.  There is only a limited amount of time allowed to build the administrative record, normally within 180 days, [16]    which sounds like a long time but it really isn’t.  But given these constraints, how do you know if the evidence you submitted is enough to prove your case in court?  You probably won’t. You have the burden of proving your case, but you don’t know exactly what you have to do to prove it.  How’s that for bit of a quandary?


Now think about that for a second. In general civil litigation you have two sides of a dispute.  Prior to a trial each side gets to do what’s known as “discovery”, which means learning what the other side’s contentions are and what the evidence in support of them is.  That can be accomplished in several ways, such as by taking depositions, propounding interrogatories, etc. But in ERISA litigation the insurance company gets to see every aspect and nuance of your case by default.  But you don’t have the same ability to see theirs, unless you affirmatively and aggressively exercise your right to do so. Insurance companies are well aware of this and they’re not about to educate you in that regard.   They rarely tip their hand and they’re very savvy in ways to manipulate the record in their favor to defeat legitimate claims.  So if you don’t control the administrative record you lose. But if you don’t even know about it, how can you possibly control it?  


Behind the Scenes it’s a Whole Different World


In a Long Term Disability (LTD) case, this internal record continues to grow even after an insurer has agreed to pay a claim.  As long as a person is receiving benefits, it effectively never stops.  This enables an insurer to slowly and methodically build a record and then terminate payment of benefits in any case at any time, once it has accumulated enough evidence to prop up a denial, rendering promised future benefits a virtual nullity.  That’s because ERISA “welfare benefits”, unlike pension benefits, never vest, at least not in the Ninth Circuit. [17]  But what about all that finality language in the regulations that I mentioned earlier?  You can toss that out the window. In the ERISA field words tend to lose meaning.


This is a part of the process that throws many claimants for a loop.  The problem is they don’t know such a thing as an administrative record even exists, so they never ask for it.  And under the law, except for limited circumstances, if you don’t ask, you don’t get and if you don’t get, you can’t see. And if you can’t see, you don’t know anything about what’s in it and therefore, you can’t do anything to respond to it.  While you’re left dancing in the dark, the insurance company has been actively working out of sight, building a record that you were completely unaware of.  And you may learn nothing about it until after an attorney is hired and sometimes even after a lawsuit is filed. This comes as a complete shock to many folks because the friendly claims representative was so professional and nice over the phone every step of the way, projecting a pleasant aura of candor, concern and perhaps even sympathy for the poor, unfortunate disabled claimant.  No sinister motive was ever apparent. That’s exactly what they’re trained to do, keep the confidence of the claimant intact.  It is a con game after all and since most people don’t understand the game, they have no idea what’s really going on behind the scenes.  The inexperienced claimant is caught completely off guard.


To Identify the Culprits You Need a Program


Insurers commonly load up their claim files with such things as reports of “independent medical examiners”, “peer reviewers”, vocational “experts” and private investigators, as well as perhaps surveillance video. This is done so as to create their own internal, self-serving record.  Suffice it to say that so-called “independent medical exams” are seldom independent and peer review reports are nothing more than hastily concocted, denial-friendly reviews of the medical records by doctors, who have never once seen the claimant and who are under the direct or indirect control of the insurance company.  They are nothing more than paper reviewers.   When it comes to the so-called expert vocational reports, these are done by in-house “consultants” (i.e. employees of the insurer).  As far as surveillance is concerned, I have read more private investigator reports and viewed more hours of surveillance video than I can count.  All of it shares a common quality.  It’s generally useless.  These folks know very well which side their bread is buttered on.  So you can bet that an insurance company claim file will be less than favorable to the claimant. 


Insurers frequently use third-party vendors to arrange medical reviews or exams, giving them an appearance of independence and objectivity.  But the fact is the same insurers use the same vendors over and over again; and those same vendors use the same doctors time after time. These companies are well known to plaintiffs' lawyers throughout the United States.  With regard to one vendor in particular, I can’t recall a single instance, where any reviewer it selected ever once opined that any client I ever had was disabled.  One of the more disreputable of its doctors always found “no objective basis for any limitations and/or restrictions”, despite the fact that on one occasion, both the treating physician and the insurer’s own chosen IME doctor had previously concluded that my client was incapable of doing any substantial work.  In his report, the reviewing doctor stated that the results of an electro-diagnostics evaluation were “significantly overstated”.  He called into question the value of an MRI and a discogram to the diagnosis.  In another case, although all of my client’s treating physicians found him incapable of working due to a herniated disc and lumbar radiculopathy, which was clearly demonstrated by an EMG, the paper reviewer concluded that practically all of his treating doctors were wrong and that their treatment plans were all inappropriate.  He then went on to say that my client was fully capable of “unrestricted sitting”; that his pain was possibly due to “psychologic  or psychiatric” factors; and that his treating physicians, were “enabling his pain” by keeping him out of work. 


Hired Gun Doctors Locked in an Echo Chamber of Greed


In one of the most egregious cases I’ve ever seen, it was the opinion of practically every doctor who had ever examined my client that he couldn’t reliably and consistently perform any of the material duties of any occupation because of a severe headache disorder.  This was diagnosed by a doctor, considered to be one of the world’s leading headache experts and researchers. All of the doctors for the Department of Social Services, who examined him in connection with his Social Security disability claim found him totally disabled.  The insurance company’s own examining physician said that he suffered an impairment that would not allow him to return to work. Two examining neuropsychologists found him to be severely cognitively impaired.  The only doctors, who said he wasn’t disabled were four (out of four) reviewing doctors, not one of whom had ever seen him.  After conducting their separate file reviews, these four doctors spoke on the phone and, according to one of those doctors, “reached consensus .  .  . that there was no evidence to support that the claimant has functional impairment, restrictions or limitations.”  [18]


Two of the doctors then wrote reports, which quoted remarks made to them by the other doctors over the telephone.  The insurer then upheld its initial denial, based on the unanimous opinions of those reviewers.  The presiding judge aptly described the farce this way:  “(T)he review process was tainted with doctors in an echo chamber seeking objective  indicia of  disability despite the inherently subjective nature of Collins’ chronic pain and headache complaints.” [19]  This is the kind of crap you have to overcome in practically any disputed ERISA benefit case.


How Do You Know What You Don’t Know?


As I mentioned, even under a de novo standard of review, the claimant bears the burden of proving disability. [20] One thing is certain, overcoming a claim denial requires in part disproving the insurer’s one-sided, self-generated evidence, as well as the conclusions drawn from it.  Since the claimant bears the burden of proving disability (and because that can be such a high burden to meet), thorough preparation of the administrative record is critical to winning a case in court.  That means practically all of your evidence-gathering and analysis must be done during the administrative appeal process.  If there is any deficiency in the record, you have to shore it up in that appeal.  You have to attack and essentially try to destroy the observations and conclusions of the insurer’s reviewing or examining physicians, as well as any private investigation reports relied upon.  A great deal of work, usually an enormous amount of work, goes into preparing an administrative appeal, if it is to be done properly. And there’s little hope of getting an insurer to back down and reverse a denial, unless it believes that there’s a good chance it will lose in court.  If a claimant hopes to have any chance of getting the insurer to reverse a denial or win in court if necessary, it is crucial that a record be assembled during the administrative review stage that is highly favorable to the claim. That means not only submitting all relevant information in the claimant’s possession, but also finding out and responding to any evidence in the insurer’s possession. 


But that can be challenging.  ERISA practice and litigation are rife with perpetual gamesmanship and insurance companies aren’t always forthcoming with information and they’re masters of a game called “hiding the ball”.  The claim submission form, which kicks off the process, will likely pose a series of questions directed at what, when and why, while inviting the claimant to submit any documents or other information he believes will be supportive, such as medical records, reports, etc.  But how do you prove entitlement to benefits?  How do you know what type or amount of documentation you need to satisfy the insurer?  You don’t.  And guess what, they’re not going to tell you, except in the vaguest of terms, such as “you may wish to submit X” or “you might want to submit Y”.  But even if you submit both “X” and “Y”, the insurer will likely come back with, “you failed to submit Z” or “the Y you submitted was not sufficient to prove you cannot work”.  In denial letters, they often recite indecipherable boilerplate gobbledygook as their reasons, because they know the clearer they state them, the easier it would be for a claimant to overcome them. 


So the first thing that must be done is to request, obtain and carefully scrutinize the insurer’s claim file, which includes all of the information it gathered during its investigation and upon which it based its denial. At that point in the process, the regulations and the case law lay out a roadmap for what we do next and provide guidance in dealing with any evasive tactics we might encounter along the way.


Communication Is Not a One-Way Street


The first obstacle any claimant encounters is understanding why the insurer denied his claim to begin with.  So how do we deal with that problem?  The regulations and the case law help us in several ways.  The regulations provide that an initial notification of benefit determination “shall set forth, in a manner calculated to be understood by the claimant -- (i) The specific reason or reasons for the adverse determination; (ii) Reference to the specific plan provisions on which the determination is based;  (iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary.  .  .  .”   [21]  In that regard, the law requires that insurers engage in a “meaningful dialogue” with claimants. [22]  ERISA, the federal regulations and the case law require that insurers communicate effectively with claimants, by providing them with the most essential information they need.  The regulations provide, among other things, that if a claim is denied the insurer must explain the specific reasons for the denial, provide reference to the plan provisions on which the denial is based and provide a description of any materials or information necessary to “perfect” the claim. [23]   Once again, those pesky little words have meaning and in law the word per-fectꜘꜘ has a very special meaning.  It means: “Complete; finished; executed; enforceable; without defect; merchantable; marketable.”   "To take all legal steps needed to complete, secure or record (a claim, right or interest) .  .  ." [24] 


Assume that we obtain and submit to the insurer all of the information needed to reasonably support a claim.  The insurer investigates it, denies it and provides us with a detailed written explanation of all the wonderful reasons why. We then have the right to administratively appeal that denial, which gives us an opportunity to assemble and provide to the insurer whatever information it says it needs to get past the denial and perfect the claim.  But since we’re not clairvoyant, before we can even begin to undertake that task, we have to understand why the insurer denied the claim to begin with. We have to find out what documents and information the insurer has already obtained as a result of its investigation.  Then we can better understand not only why it said it denied the claim, but also how it reached that conclusion in the first place. What process did it undertake?  Whose opinions did it rely on? What information did it consider? 


If an insurer finds a claim to be insufficient for any reason, it’s must explain exactly what the reason is.  As one court so eloquently put it, the insurer “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.” [25] Otherwise, how could a claimant effectively appeal if he doesn’t know precisely why the claim was denied in the first place?  If the insurer purports to need more documents or information from the claimant to make a decision, in the words of former Ninth Circuit judge, Alex Kozinski, “it must ask for it.  There is nothing extraordinary about this; it's how civilized people communicate with each other regarding important matters. .  .  . If the plan is unable to make a rational decision on the basis of the materials submitted by the claimant, it must explain what else it needs.”  [26]


In pursuit of our appeal, we’re entitled to obtain, free of charge, all documents and information that the insurer has in its possession that relate to the claim. The regulations clearly state that “full and fair review” requires that “a claimant shall be provided, upon request .  .  . copies of all documents, records, and other information relevant to the claimant's claim for benefits.” [27] The obvious reason the regulations require this is so that we’re not flying blind and we know exactly what steps we need to take to satisfy the insurer. So the first step is we have to ask.  But exactly what kind of information is “relevant” to the claim?   The regulations explain that as well.   Among other things, it’s any “document, record or other information” that was “submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination.” [28]  As the courts have said:


“Meaningful participation in this internal review process . . . requires that the claimant have an opportunity to review the relevant documents in the claim file so the claimant may submit any additional documents, correct any errors in the record, point to any favorable evidence that would tend to support the claim, fully understand the reasons for the decision that is being appealed, and to otherwise prepare an informed response to that decision.”    [29]


“(I)n order to afford a plan participant whose claim has been denied a reasonable opportunity for full and fair review, the fiduciary must inform the participant of what evidence he relied upon and provide him with an opportunity to examine the evidence and to submit written comments or rebuttal documentary evidence.” [30]


“The persistent core requirements of review intended to be full and fair include knowing what evidence the decision-maker relied upon, having an opportunity to address the accuracy and reliability of that evidence, and having the decision-maker consider the evidence presented by both parties prior to reaching and rendering his decision. .  .  . These requirements enable  the claimant  to prepare adequately  for any further administrative review, as well as appeal to the federal courts.” [31]


Step Right Up, Hit the Moving Target and Win a Prize


OK, so we follow the map, obtain all of the relevant information bearing on the claim, submit a timely administrative appeal of a claim denial, supported by overwhelming evidence to prove entitlement to the benefits. We include any additional documents the insurer said it needed.  We address every inaccuracy of the evidence the insurer relied upon.  We provide rebuttal evidence and correct any errors we find in the record.  We effectively lay waste to the initial denial of the claim.  If our appeal is sufficient to overcome the insurer’s reasons for denial, is that the end of  the story?  Hardly. Reminiscent of the Gatlin Brothers’ arrival in California, we’re now about to play a brand new game. [32]


Back in my days as a Juvenile Officer in St. Louis I had to frequently drive into some rather dangerous parts of the city. At that time St. Louis enjoyed the distinction of being the number one city in the nation with the highest murder rate, an honor it has since relinquished to the city of East St. Louis, Ill., which lies just across the Mississippi river. (Today St. Louis only has the fourth highest murder rate in the country, so things are looking up.)   It didn’t take long for me to develop a driving tactic by which I would slow the car down well before an upcoming intersection red light in hopes that it would turn green by the time I got to it, because the way I saw it a moving target is a lot harder to hit.


Fast forward a few years and I would find myself on the receiving end of my own tactic. Forcing claimants to hit a moving target is a game insurers and their defense counsel play all the time, but in a different sense.  They’re notorious for constantly shifting rationales for their decisions, so that they can’t be pinned down to any particular position for too long.  Because they know that if they do, they’re vulnerable.  If a claimant submits an appeal of a claim denial, shooting down the insurer’s stated grounds for it, at that point in the review process the insurer simply changes reasons for upholding the denial by inventing new ones, often by changing or manipulating the evidence.  And then, no sooner will the new reasons be shot down than even more emerge. It’s the insurance company derivative of whack-a-mole. Knock down one reason and another pops up to take its place. It’s like dealing with an unethical car salesman, where you thought you had a deal only to find out that the negotiations were just getting started. 


While an insurer is required by law to state its position up front, they seldom get it right the first time and are forever striving for the classic “do over”, which is a bit ironic to say the least, since they require utter perfection from claimants’ submissions.  During the administrative appeal review insurers constantly try to clean up the record and eliminate errors made during the initial claim review, which is often less than thorough if not downright sloppy. But that seldom means reconsidering a previously-stated position and correcting it for the sake of the claimant. It means conducting more extensive evidence-gathering in a frantic effort to counter the appeal.  Rather than limiting their final review to an appeal and the evidence offered in support of it, insurance companies invariably try to inflate the administrative record so as to shore up an ill-grounded initial claim denial and overcome the appeal, while putting distance between the final stated position and the original conclusions that were stated in the initial denial letter.


This is done in several possible ways.  The insurer may conduct more surveillance, in hopes of finding something supportive of the denial.  It may send the (now expanded) claim file out for yet even more peer review reports.  Another such device is the post-denial Independent Medical Exam (IME).  For example, although every LTD policy gives an insurer the “right to exam” the claimant, insurers seldom waste the money, until such time as the claimant challenges a denial.  Then faced with the prospect of overcoming the appeal, the post-denial IME often appears on the scene. Consistent with ERISA and the regulations, insurers should obtain whatever medical examinations or record reviews they need, before a claim is denied, not after.  There is a substantial amout of case law, specifically addressing post-denial  IME’s in  the context  of ERISA-mandated  claims reviews and  they are generally  disfavored by the courts.  [33] Insurers should disclose any reports generated as a result of such examinations or reviews and at least give the claimant the right to respond to it before a claim is finally denied.  


After the administrative record is augmented with additional evidence supportive of an initial denial, the insurer will often issue its final decision on the appeal, based on entirely different evidence that the claimant has never before seen and likely will not see until after the final appeal decision is made.  The insurer may take the position that no further evidence will be considered and inform the claimant that if he disagrees with the decision, he can file a lawsuit under ERISA.  In other words, no rebuttal evidence will be allowed. Of course this is nothing more than a transparent attempt to take the last bite at the proverbial apple and try to “get it right” the final time around (i.e. right for insurer).  But if the administrative record can be manipulated in this manner, it results in an “end run” around the entire administrative review process.  


It certainly goes without saying that an insurance company may investigate a claim and in fact, it has a duty under ERISA to do that.  But that should not equate to a right to conduct post-denial medical reviews for the purpose of generating new reports and thus constructing what is essentially a new administrative record in the shadows to shore up a faulty initial denial. When a claimant submits an appeal, that appeal by necessity must be specifically directed at the grounds stated in the initial denial letter.  (Indeed, how could it be aimed at anything else?).  Therefore, the insurer’s review of that appeal should likewise be limited to the record before it at the time the appeal was submitted.  It should not be based on some other record that it wants to construct after the fact. Otherwise, it circumvents  the entire  ERISA review  process, which  contemplates an administrative review based on a closed record.  [34] Going beyond that record clearly demonstrates conflicted decision-making and self-dealing.  [35] If a claimant is denied access to the entire record until after that record has terminated, then he’s deprived of the opportunity to examine, comment on or rebut important evidence in the record --the very record that will be the basis for a court’s assessment of the case. It’s a violation of simple due process.


The excuse insurers sometimes offer for this practice is the regulatory requirement that if deciding an appeal requires a medical judgment, the insurer has a responsibility under the regulations, to consult with an independent health care professional with appropriate training and experience in the field of medicine involved. [36] But that creates a tremendous problem for the claimant, if such evidence is not disclosed to the claimant before a final decision is made. Even if (for the sake of argument) an insurance company had the right to supplement the administrative record with additional reports or other information, it certainly shouldn’t do so without first disclosing any adverse evidence and giving the claimant a fair opportunity to review and respond to it.  The post hoc rounding up of additional medical evidence, with no opportunity afforded a participant to review and respond to it prior to any final decision on the claim, is not indicative of a “full and fair” review, required by the federal regulations.   Simple logic commands this.   And so does the case law of the Ninth Circuit, as well as Third, Fifth and Seventh Circuits. [37] But unfortunately, the Eight, Tenth and Eleventh Circuits have allowed insurers to get away with this tactic. [38]


If the record can be internally manipulated by the insurer in this manner, it will obviously be to the claimant’s disadvantage.  But that’s the way the game is played.  It’s for that very reason that many ERISA claims are either won or lost during the administrative review phase.  Even if access is obtained in a timely manner, very few claimants have any idea as to how to build an administrative record sufficient to support their claim in court.  They find themselves completely outgunned by the more knowledgeable insurance companies, who do it every day.  Therefore, like so many other aspects of ERISA, the so-called “full and fair” review requirement may work to the detriment, rather than to the benefit, of the claimant. 


No Attorney Fee Recovery Where It Counts


Since a lay person would have little chance of successfully completing an ERISA administrative appeal, an attorney must be hired.  But not just any attorney.  The kind of lawyer you need for an ERISA case ain’t exactly like the one you’d go to for a drunk driving or divorce case. ERISA is a complicated, technical area of law and in order to have any chance of prevailing on appeal or litigation, you would need a highly experienced lawyer, who specializes in the field.  


Also, even for the most skilled lawyer to do the job correctly, it requires an enormous amount of time be spent assembling an administrative record that might survive the review process and prevail in court if need be. Creating and controlling the record is the most important part of ERISA practice.  It requires that the attorney not only review what the insurer has concocted, but scrutinize it, page by page, line by line and then determine what additional evidence is needed to win.  It’s tedious and time-consuming work.  But it’s necessary work that cannot be rushed.  Until a lawyer literally knows everything in the record, he really knows nothing.   The administrative appeal phase is where most of the heavy lifting is done.  In fact, many claims denials are reversed at that stage in the process when the claimant is represented by competent counsel. 


Ironically, even if a reversal on appeal is obtained, it still creates an additional problem for the claimant.  ERISA does not provide any award of attorney fees for the time devoted to the appeal process.  [39] The only way to recover fees under the statute is to prevail on a significant issue in litigation (which generally means winning the case in court). Then the attorney must apply to the court for a discretionary award of fees -- but even then, the claimant can only recover attorney fees incurred during the litigation.  And that is true, no matter how frivolous or wrongful the claim denial was in the first place. 


Thus, ERISA imposes upon the innocent claimant the burden of not only establishing that the claim denial was wrongful, but also the burden of paying a substantial part of the legal costs in doing so.  Unless that person has amassed considerable financial resources this poses a problem.  All clients have the hypothetical option of paying an attorney by the hour, but given the customary hourly rates that attorneys charge, that’s a phenomenally expensive proposition and a risky one, since the client is out of work, disabled and has no income. As a result, if that option is pursued it will likely be at the expense of a client’s precious savings or retirement funds. If the case isn’t reversed on administrative appeal, then how will he continue to pay to the attorney to litigate the claim?  Fees through an ERISA trial can be upwards of $100,000 or more.  Sometimes much more if the case is complicated, hotly contested, or goes beyond trial and onto the court of appeals, with no guaranteed result at the end.


Some attorneys will agree to handle the administrative appeal for a flat fee, but even that can be expensive and chancy.  Flat fees can exceed $20,000 and if the appeal is unsuccessful the claimant is right back where he started, with less money and facing the same dilemma as before.  So now what?


Since few claimants can afford to pay an attorney’s hourly rate for an indefinite period of time or even a flat fee, most cases are handled on a contingency fee basis. The contingency fee may be reduced and in some instances even eliminated if there is an ultimate fee award by the court.  But since fees are not recoverable at the administrative level, should the denial be reversed as a result of the appeal, the contingency fee must come directly out of the benefits recovered.  The claimant effectively loses benefits by winning benefits. Yet another ERISA paradox.  Although the claimant will no doubt fare better with a good attorney than without one, the sad fact is that he loses either way.  This is one of the most fundamentally unfair aspects of ERISA. At a minimum, Congress should amend the law to allow for an application to the court for an award of all attorney fees incurred by a successful claimant, including fees incurred during the administrative review process.  But there has never been any effort by Congress to do that and I don’t expect there ever will.


The unavailability of court awarded attorney fees gives rise to yet another problem.  Since fees are recoverable only for time spent in the litigation and since punitive damages are not available, there’s no pot of gold at the end of the ERISA rainbow for an attorney to recover.  Also, the amount of time that must be devoted to what is document-intensive administrative process and/or litigation, coupled with the prospects of delayed payment, low payment or no payment, can make such cases undesirable to most lawyers.


Perhaps that’s a good thing.  When I started out in the field, very few lawyers wanted anything to do with ERISA cases for those very reasons.  For the first 11 years of my own private practice, I avoided them altogether, despite the fact that I had considerable familiarity with the area of law.  When I did take the plunge more than 25 years ago, there were only a few of us locally doing it.  We all came to the field from different directions and for different reasons.  We all knew each other and we all shared one common value, a commitment to excellence. Because in the immortal words of Bones McCoy from the TV series Star Trek, when it comes to the battle of good vs. evil, “I've found that evil usually triumphs unless good is very, very careful.” [40] So the odds are if you find an attorney willing to take on an ERISA benefit case, he or she will likely be very good at the job.


But unfortunately, I have noticed a growing trend in recent years in the number of lawyers, who enter the ERISA arena with the idea of building volume practices as their business model.  This is done by spending large sums of money on advertising, delegating responsibility for handling cases to inexperienced paralegals or younger associates, rushing cases through the process, investing minimal time into each case, shooting for  low-ball settlements and then moving on to the next case. If they fail and find themselves in court, the administrative records are often inadequate and the lawyers ill-prepared.  The result is likely a loss in which case the client’s interests are not well served. 



     [1]    29 USCS @ 1133; 29 CFR 2560.503-1.


     [2]    See 29 U.S.C. § 1144.


     [3]    California Code of Regulations, Title 10, Regs., §2695.7, subd. (b). 


     [4]    California Code of Regulations, Title 10, Regs.,, §2695.2, subd. (s).


     [5]    See, Neurocare, Inc. v. Principal Life Ins. Co., 1999 WL 33221123, *5  (N.D. Cal. 1999). (“Under Ninth Circuit law, it is the insurer’s duty to obtain all evidence necessary to make an informed decision on a claim”,  citing  Kunin v. Benefit Trust Life Ins. Co., 910 F.3d 534, 538 (9th Cir. 1990);   Brown v. Blue Cross & Blue Shield of Alabama, Inc., 898 F.2d 1556, 1566 (11th Cir. 1990) cert. denied, 498 U.S. 1040; Brock v. Walton, 794 F.2d 586 (11th Cir. 1986) (a fiduciary’s duty to investigate is a key facet of prudence and is often at the heart of fiduciary litigation).  See also Shannon v. Jack Eckerd Corp., 113 F.3d 208, 212, (11th Cir. 1997),  cert. denied, 522 U.S. 1111 (1998);   Salley v. EI. Du Pont de Nemours & Co., 966 F.2d 1022 (5th Cir. 1992) (administrator has an affirmative duty to assemble information with reasonable completeness and to follow ERISA standards.)  


     [6]    (Former) 29 CFR 2560.503-1(e): “(e) Notification to claimant of decision. (1) If a claim is wholly or partially denied, notice of the decision, meeting the requirements of paragraph (f) of this section, shall be furnished to the claimant within a reasonable period of time after receipt of the claim by the plan.”


     [7]    29 CFR 2560.503-1(g):  “(g) Manner and content of notification of benefit determination. (1) Except as provided in paragraph (g)(2) of this section, the plan administrator shall provide a claimant with written or electronic notification of any adverse benefit determination .  .  .”


     [8]    Id.


     [9]    29 USC @ 1133; 29 CFR 2560.503-1(h).


     [10]    29 USC Section 1133(2); 29 C.F.R. § 2560.503-1(h)(3)(ii) and (h)(4).


     [11]    See, e.g. 29 CFR 2560.503-1(i).  “(i) Timing of notification of benefit determination on review - (1) In general. (i) Except as provided in paragraphs (i)(1)(ii), (i)(2), and (i)(3) of this section, the plan administrator shall notify a claimant in accordance with paragraph (j) of this section of the plan's benefit determination on review .  .  .”


     [12]    Merriam-Webster's Collegiate Dictionary: Eleventh Edition Merriam-Webster Inc. Merriam-Webster, 2004.


     [13]    29 C.F.R. § 2560.503-1(h)(2)(iii), (m)(8) and (b)(5); see also Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623 (9th Cir. 2009) and see Andrew C., v. Oracle America Inc. Flexible Benefit Plan, No. 17-CV-02072-YGR, 2019 WL 1931974, at *3 (N.D. Cal. May 1, 2019).


     [14]    See, e.g. Muniz v. Amec Const. Mngmt., 623 F.3d 1290, 1294 (9th Cir. 2010); Horton v. Reliance Standard Life Ins. Co., 141 F.3d 1038, 1040 (11th Cir.1998);  Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 658 (8th Cir.1992).


     [15]    A court’s review of the Plan’s benefit determination will, in all probability, be limited to the administrative record. See,  Snow v. Standard Ins. Co., 87 F. 3d 327, (9th Cir. 1996). Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, (9th Cir.  1995). Under a deferential standard, judicial review would is strictly limited to the administrative record. See: Snow, supra, Jones v. Laborers Health & Welfare Trust Fund, 906 F.2d 480 (9th Cir. 1990);  McKenzie v. General Telephone Co. of California 41 F.3d 1310, 1310 (9th Cir., 1994);  Taft v. Equitable Life Assurance Soc’y, 9 F.3d 1469, 1472 (9th Cir., 1993).


     [16]    29 CFR 2560.503-1(h).


     [17]    See, e.g. Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (9th Cir. 2001).


     [18]    Collins v. Liberty Life Assurance Company of Boston, 988 F.Supp.2d 1105, 1123 (CD, CA 2013).


     [19]    Id. at 1127.


     [20]    See, footnote no. 14, above.


     [21]    29 CFR 2560.503-1(g).     


     [22]    Booton v. Lockheed, 110 F.3d 1461, 1463, 1465 (9th Cir., 1997);  See also, Jebian v. Hewlett Packard, 349 F.3d 1098, 1107 (9th Cir, 2003.


     [23]    29 CFR 2560.503-1(g).


     [24]    West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved; Black's Law Dictionary, Ninth Edition, 1891 - 2009, Thomas, Reuters.


     [25]    Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 680 (9th Cir., 2011).


     [26]    Booton v. Lockheed, 110 F.3d 1461, 1463, 1465 (9th Cir., 1997);  See also: Jebian v. Hewlett Packard, 349 F.3d 1098, 1107 (9th Cir, 2003).  (“ERISA is designed to promote a good-faith bilateral exchange of information on the merits of claims, not hasty decision-making by administrators.  .  .  .”);  


     [27]    29 CFR 2560.503-1(h).


     [28]    29 CFR 2560.503-1(m)(8(ii)).


     [29]    Palmer v.  University Medical Group, 994 F. Supp. 1221, 1240 (Ore. Dist., 1998).


     [30]    D’Emanuele v. Montgomery Ward & Co, Inc., 1987 U.S. Dist. LEXIS 16830 (C.D. CA  1987).


     [31]    Halpin v. Grainger, 962 F.2d 685, 689 (7th Cir. 1992).


     [32]    “All the Gold in California”, written by: Larry Gatlin,  Lyrics © Sony/ATV Music Publishing LLC, Universal Music Publishing Group.


     [33]    See e.g. Neiheisel v. AK Steel Corporation, 2005 U.S. Dist. LEXIS 4639 at *25-26 (S.D. Ohio, Feb. 17, 2005), (“Such an examination results in the insertion of new information into the record at the appeal stage .  . . .”);  Nickola v. CAN Group Assur. Co., 1:03-cv-08559, 2005 U.S. Dist. LEXIS 16219, 2005 WL 1910905 (N.D. Ill., Aug. 5, 2005) (it is improper to terminate without medical evidence and then seek a doctor’s report to  shore up a defective denial);  Perez v. Cozen & O’Connor Group [LTD] Coverage, 459 F. Supp. 2d 1018, 1023 (S.D. Cal. 2006), (Prudential claimed that it had “the right to examine the person whose loss is the basis of the claim. . . . contrary to [Prudential’s] argument, however, this language does not establish a requirement that plaintiff submit to an IME to exhaust her administrative remedies.”);  Williams v. Group Long Term Disability Ins., 2006 U.S. Dist. LEXIS 56679 (N.D. Ill., Aug. 2, 2006) (Prudential requesting a neuropsyche exam for the first time on appeal is unreasonable);   Kosiba v. Merck, 384 F.3d 58 (3rd Cir. 2004)(cert. denied)(abbrog. on other grounds  (expressing concerns that a post-denial demand by a payor for an IME is just a fishing expedition to support a denial and could lead to a finding of procedural irregularity).


     [34]    See  Palmer v. University Medical Group, 994 F. Supp. 1221, 1240 (Ore. Dist., 1998;  D’Emanuele v. Montgomery Ward, 1987 U.S. Dist. LEXIS 16830 (C.D. CA 1987);   Halpin v. W.W. Grainger, 962 F.2d 685, 689 (7th Cir. 1992),  (cited, approvingly by 9th Circuit in Booton v. Lockheed supra, at 1464 (9th Cir., 1997); also cited approvingly in Vizcaino v.  Microsoft Corp., 120 F. 3d 1006, at 1016 (9th Cir., 1997).  


     [35]    Winebarger v. Liberty Life Assur. Co. of Boston, 571 F.Supp.2d. 716,726 (W.D. Va. 2008). (“the plan administrator's initial grounds of denial will be considered by the court as justification for withholding benefits, and not any later rational relied upon in an administrative appeal, in order to prevent beneficiaries from being sandbagged by post-hoc justifications of plan decisions.”). Abatie v. Alta Health & Life Insurance Company, 458 F.3d 955, 974 (9th Cir.; 2006). (“an administrator that adds, in its final decision, a new reason for denial, a maneuver that has the effect of insulating the rationale from review, contravenes the purpose of ERISA. This procedural violation must be weighed by the district court in deciding whether Alta abused its discretion.”); Holmstrom v. Metropolitan Life Insurance Company, 615 F.3d 758, 775-776 (7th Cir., 2010) (“Another sign of MetLife's arbitrary and capricious decision-making is that it repeatedly ‘moved the target.’”); Lee v. California Butchers' Pension Trust Fund, 154 F.3d 1075, 1080 (9th Cir. 1998). (“(T)he plan made it impossible for Mr. Lee to know exactly what was at issue between himself and the plan.”).  


     [36]    29 CFR 2560.503-1 (h)(3).


     [37]    Saffon v. Wells Fargo & Co. Long Term Disability, 522 F. 3d 863, 872 (9th Cir., 2008). (“coming up with a new reason for rejecting the claim at the last minute suggests that the claim administrator may be casting about for an excuse to reject the claim rather than conducting an objective evaluation.”); Lee v. California Butchers' Pension Trust Fund, 154 F.3d 1075, 1080 (9th Cir. 1998). (“(T)he plan made it impossible for Mr. Lee to know exactly what was at issue between himself and the plan.”); Abatie v. Alta Health & Life Insurance Company, 458 F.3d 955, 974  (9th Cir.; 2006) (“administrator that adds, in its final decision, a new reason for denial, a maneuver that has the effect of insulating the rationale from review, contravenes the purpose of ERISA.”); Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 680 (9th  Cir., 2011) (“-  “.  .  .  By denying Salomaa the disclosure and fair opportunity for comment, the plan denied him the statutory obligation of a fair review procedure.”);  Grossmuller v. Int'l Union, UAW, 715 F.2d 853, 858 (3rd Cir.1983) (“To afford a plan participant whose claim has been denied a reasonable opportunity for full and fair review .  .  .  the fiduciary must also inform the participant of what evidence he relied upon and provide him with an opportunity to examine that evidence and to submit written comments or rebuttal documentary evidence.”); Robinson v. Aetna, (5th Cir) 443 F.3d at 393-94 (“Aetna's shifting justification for its decision and failure to identify its vocational expert meant that Robinson was unable to challenge Aetna's information or to obtain meaningful review of the reason his benefits were terminated.”); Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 689 (7th Cir. 1992). (“[T]he persistent core requirements of review intended to be full and fair include knowing what evidence the decision-maker relied upon, having an opportunity to address the accuracy and reliability of that evidence, and having the decision-maker consider the evidence presented by both parties prior to reaching and rendering his decision.  .  .  .  These requirements enable the claimant to prepare adequately for any further administrative review, as well as appeal to the federal courts.”). 


     [38]    Midgett v. Washington Group Intern. Long Term Dis., 561 F. 3d 887 (8th Cir. 2009);  Metzger v. Unum Life Ins. Co. of America, 476 F. 3d 1161(10th Cir. 2007); Glazer v. Reliance Standard Life Ins. Co., 524 F. 3d 1241 (11th Cir. 2008) .


     [39]    Cann v. Carpenters' Pension Trust Fund, 989 F.2d 313, 315-17 (9th Cir 1993); Hensley v. Eckerhart, 461 US 424, 433 (SC 1983).  (“A typical formulation is that ‘plaintiffs may be considered `prevailing parties' for attorney's fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.’ Nadeau v. Helgemoe, 581 F. 2d 275, 278-279 (CA1 1978).”


     [40]    Star Trek, The Omega Glory (TOS), Season 2, Episode 23 (1968).

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