This month’s Friday Five discusses cases that explore the bounds of claims administrators’ discretion. Several cases highlight the divergent outcomes possible in light of the deferential arbitrary and capricious standard of review. Other cases show some limits of discretion. For example, a claims administrator with discretionary authority must still ensure that a claim is decided on a complete record. Similarly, a claims administrator is bound by statutes which can override certain policy provisions.

1. Can a claim be remanded if a claims administrator with discretionary authority refuses to allow a claimant to supplement the record? Yes, if there are obvious omissions in the record. In Woolsey, the claimant stopped working in his job as a financial advisor complaining of migraines and depression. He was awarded STD benefits, but Aetna terminated STD benefits and denied LTD benefits when they learned that Woolsey never treated in earnest for the conditions at issue. Woolsey pursued treatment after his LTD claim was denied, but Aetna still denied his claim. On appeal to the district court, Woolsey acknowledged that Aetna had discretionary authority, but argued that Aetna’s decision should be reviewed with “additional skepticism” due to a structural conflict of interest. In reviewing the purported conflict of interest, the court ruled that there was a conflict because Aetna both funded and administered the plan, but because the court found no evidence that financial incentives influenced the claims process, it employed only a “modicum” of additional skepticism. The court identified several medical records that should have been in the record and that were not reviewed by Aetna’s experts, so the court permitted Woolsey to supplement the record and remanded the case to Aetna to reconsider its evaluation of Woolsey’s claim. Woolsey v. Aetna Life Ins. Co., No. CV-18-00578-PHX-SMB, 2020 WL 1083932 (D. Ariz. Mar. 6, 2020).
2. Is a claims administrator for a group life insurance policy subject to a state restriction on the length of a suicide exclusion? Yes, when the statute applies to “all” life insurance policies. In Auwae, Mr. Auwae and his wife both enrolled in a group life insurance policy effective November 1, 2009, dropped off the policy effective December 31, 2015 and reenrolled effective January 1, 2018. Mrs. Auwae passed away by suicide on February 4, 2019. Mr. Auwae filed a claim for benefits and a request for policy documents. MetLife denied the claim for life insurance benefits, citing a policy provision indicating that coverage would not apply in the event of a suicide within two years of a policy taking effect. MetLife also did not provide all of the requested documents. Before the district court, MetLife argued that Colorado Revised Statute § 10-7-109, which limited suicide exclusions to one year, did not apply to group policies. The court ruled that the plain language of the statute did not differentiate between group and individual policies, and therefore ruled that MetLife’s exclusion violated the statute. Regarding the requested documents that were not provided, Auwae argued that he was entitled to penalties under ERISA § 502(c) for MetLife’s failure to provide documents. The court rejected that argument, ruling that Section 502(c) applied only to plan administrators, and as a claims administrator MetLife therefore could not be punished under that code section. Auwae v. Metropolitan Life Ins. Co., No 19-cv-02504-RBJ, 2020 WL 996874 (D. Colo. Mar. 2, 2020).
3. Will a conflict of interest mandate overturning a claims administrator’s decision to terminate LTD benefits where the record otherwise supports the decision? No, because a conflict of interest can be viewed as a “tie breaker” that will not alter the outcome of a review if sufficient evidence supports a claims administrator’s decision. In Hinchey, the claimant began receiving LTD benefits in 2010 following an aortic valve replacement, after which the claimant could not continue his duties of director of security for a college in New York. First Unum terminated the claimant’s LTD benefits in 2016 after its review of medical records determined that the claimant’s condition improved and he no longer met the “any gainful employment” standard for LTD benefits. In granting summary judgment to First Unum, the district court determined that First Unum was entitled to arbitrary and capricious review. The claimant argued that First Unum violated Department of Labor claims procedure regulations by conducting an insufficient investigation. The court rejected the argument, finding that First Unum appropriately relied on medical tests which confirmed that the claimant’s condition had improved. The court rejected the claimant’s generalized arguments that the weight of the evidence was in his favor and that First Unum was required to conduct a physical examination. The court also rejected the claimant’s argument that the conflict of interest created by First Unum determining benefits and paying benefits was dispositive, ruling that at best the conflict created a “tie breaker” but the record did not reflect a “tie” between the claimant and First Unum. Hinchey v. First Unum Life Ins. Co., No. 17-cv-08034 (NSR), 2020 WL 1331898 (S.D.N.Y. Mar. 20, 2020).
4. Can a claims administrator with discretionary authority conclude that a claimant is not entitled to STD benefits in a “pain case” where diagnoses are difficult to make or confirm? Yes, when the claims administrator develops a reliable record. In Griffin, the claimant was a premises technician for a phone company, who filed three STD claims in the course of a year related to depression, sleep apnea and chronic fatigue syndrome. The claims administrator granted STD benefits for a period of days where a rheumatologist indicated that the claimant should be off work for further study, but otherwise denied the claimant’s claims. Other medical providers made recommendations such as obtaining a sleep study and using a CPAP machine. Those medical providers indicated some restrictions, such as to not operate heavy machinery while sleepy and to only do ground-level work, but none certified that he could not perform his job. In granting the claim administrator’s motion for summary judgment, the court acknowledged that “pain issues” present unique issues for the claims administrators because related health conditions are difficult to diagnose or confirm. While the court’s observation that the claimant routinely used profanity in interacting with the claims administrator likely didn’t help his case. The court concluded that where the claims information from the claimant’s medical providers was difficult to interpret, the claims administrator acted appropriately in relying on opinions from peer reviewers, who concluded that the claimant did not meet the definition of disabled. Griffin v. AT&T Umbrella Benefit Plan No. 3, No. 18-C-1804, 2020 WL 1185286 (E.D. Wisc. Mar 12, 2020).
5. Where a claims administrator continues payment of LTD benefits subject to a reservation of rights, will a “paper review” of remaining issues support a termination of benefits? Yes, where the claims administrator provides a reasoned basis for terminating benefits. In Feeney, the claimant was an information technology account manager who mostly worked from home, but frequently visited with clients. He fell from a two-story scaffold in his home and suffered a concussion, back pain, and knee pain. The Claimant received LTD benefits while he worked through rehabilitation. As the claimant showed signs of improvement, Unum had the claimant submit to an IME, which indicated that he was physically able to return to work, but withheld judgment on his cognitive abilities. Unum continued to pay benefits following the IME, but subject to a reservation of rights. After peer reviews determined that no cognitive issues presented an issue with the claimant returning to work, Unum terminated LTD benefits, and the claimant appealed. In granting Unum’s motion for judgment on the pleadings, the district court found that Unum had discretionary authority and was therefore entitled to arbitrary and capricious review. The court found that Unum acted reasonably in accepting the results of an IME that showed that the claimant was physically able to return to work. Further, the court concluded that Unum acted reasonably in relying solely on what the court identified as a “paper review” by medical doctors that concluded that there were no cognitive issues that prohibited the claimant from returning to work. Feeney v. Unum Life Ins. Co. of Am., No. 18-1302, 2020 WL 1452099 (C.D. Ill. Mar 25, 2020).