Apr 24, 2019

The Problem With Remand As A Remedy

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Brian S. King
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I posted a couple of days ago about Elliott v. Met. Life Ins. Co. The analysis in that case relating to Met Life’s failure to provide a reasonable process in evaluating Patricia Elliott’s claim is spot on. However, the decision goes awry in the last section when the court determines what remedy will be provided for Met Life’s failure to provide Elliott a full and fair review of her denied claim. The court acknowledges that it has the power to evaluate Elliott’s disability claim on its merits and award her insurance benefits and/or to provide her benefits as a sanction for Met Life’s failure to comply with ERISA’s claims procedure requirements. But after reviewing a number of other cases from its own and other Circuits, the court states that the appropriate remedy is to remand the claim, send it back to Met Life, for the insurer to consider anew whether Elliott is entitled to benefits. The court’s rationale is that there are unanswered questions associated with Elliott’s claim and that Met Life is in a better position to gather that information and make a determination on the merits of the claim than is the federal judiciary. This rationale dovetails into restrictions courts have placed on the ability of the parties to supplement the prelitigation appeal record through discovery. The result is that courts commonly latch on to remand as a remedy rather than simply ordering the insurer to pay the benefits the claimant seeks. Remand has been criticized, rightly, as creating a “heads we win; tails let’s play again” mentality on the part of insurers. Benecke v. Barnhart, 379 F.3d 587, 595 (9th Cir. 2004). Remanding claims to the insurer after the court has found significant errors that require reversal of a denial of benefits is generally an insult to concepts of due process. What evidence exists to suggest that the particular insurer involved in the claim, or insurers as a whole in the context of ERISA, are making good faith efforts to do a better job of complying with ERISA’s fiduciary duty and claims procedure requirements? Nevertheless, in many, perhaps most, jurisdictions across the country, remand is the rule rather than the exception when it comes to the remedy courts order for ERISA claims that have been wrongly denied. From a more global perspective, whether or not remand is a good thing depends on whether you believe insurers in the ERISA context are committed solely to the interests of their insureds and for the exclusive purpose of providing them benefits. I do not believe this difficult standard of behavior, ERISA’s fiduciary standard, is something that insurers live up to. The primary reason insurers cannot live up to a fiduciary standard of conduct is that they are profit making entities or, at least, have to compete with profit making entities in a very challenging business climate. ERISA’s fiduciary standards are conceptually and structurally inconsistent with the bottom line oriented climate in which insurers live and breathe. Nevertheless, Congress has spoken in how it set up the dynamics of the statute. It is critical for courts to diligently police insurers' attempts to cut corners on complying with ERISA’s fiduciary and claims procedure requirements. Unfortunately, they frequently fail. More often than not, remand is an excellent example of those failures.

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5 Comments to "The Problem With Remand As A Remedy"

I am on your side in attempting to bring the insurer into the fiduciary arena in as many areas as possible. That is why I believe the Voluntary Employees' Beneficiary Association (VEBA) to be a good match. Here the non commercial insurer is a fiduciary for the entire group, as well as the individual participant. Also, as a non commercial insurer, there is a lot of leeway in plan design, and the financing, that can be offered to its members.
Don Levit
Posted by Don Levit on November 17, 2008 at 01:47 PM
Thanks for your insight.
Just because an insurer has the final right to deny or approve claims, and, thus is a fiduciary in the claims decision area, why would it be a fiduciary in any other area?
For example, I understand insurers, if they have any other fiduciary capacity, it would be to its entire pool of insureds, rather than to a particular group or participant.
Simply issuing a group policy to an employer, does not make a commercial insurer a fiduciary.
Don Levit
Posted by Don Levit on November 17, 2008 at 01:47 PM
Thanks for letting me know more about the dynamics of "remanding." It sounds like nothing is really different the second time around.
What has been your experience when a case is remanded? Do the parties respond differently? Is the review changed to de novo from the arbitrary and capricious standard?
Does the insurer typically look at the claim in a more serious light?
How might a court respond if the insurer does not do so?
Don Levit
Posted by Don Levit on November 17, 2008 at 01:47 PM
I think you are right Don. The activity of the insurer must be reviewed carefully to determine if it falls within the scope of ERISA's fiduciary functions. Actions of the insurer that don't relate to the processing of a particular claim may not fall within the scope of ERISA's fiduciary duty provisions.
Posted by Brian S. King on November 17, 2008 at 01:47 PM
Hi Don. My experience in dealing with remand is that the result rarely changes: the claim remains denied and the insurer does a better job of putting together a record of the prelitigation appeal process that can withstand the court's scrutiny. The standard of review remains at the arbitrary and capricious level. If the insurer was not more careful to adhere to ERISA's procedural requirements, I think you would see a much greater chance that a reviewing judge would take matters into their own hands the second time the case came up for review and more seriously consider reversing and granting benefits.
Posted by Brian S. King on November 17, 2008 at 01:47 PM

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