The U.S. Court of Appeals for the Sixth Circuit issued a case yesterday, Cooper v. LINA, 2007 U.S. App. LEXIS 11408, that discusses a number of points that commonly arise in ERISA disability claim cases. I've placed a copy of the case in the library of this website on the column to the right of this post. Cooper was fortunate to have as her counsel an excellent ERISA claimant’s lawyer in Chattanooga, Eric Buchanan. Becky Cooper had a history of significant back problems. She applied for disability insurance benefits and her insurer initially paid the claim for a period of several months but then cut Cooper off. LINA argued that Cooper had failed to present sufficient evidence to allow for payment of benefits. The trial court ruled that an arbitrary and capricious standard of review was proper. While the court may have ruled in Cooper’s favor under a de novo standard, the deference it was required to show LINA called for upholding the insurer’s denial. On appeal, the Sixth Circuit reversed. It noted that while an arbitrary and capricious standard of review required that some deference be shown the insurer, it was not a “rubber stamp” of LINA’s decision. LINA’s dual role as insurer and ERISA fiduciary created a conflict of interest that courts are required to take into account in evaluating whether an insurer has abused its discretion. In order to survive scrutiny, the decision must be the result of a “deliberate, principled reasoning process” and be “rational in light of the plan’s provisions.” LINA’s procedural errors caused the appellate court to reverse the insurer’s denial. Specifically, the court was troubled by the failure of physicians LINA had retained to review Cooper’s file to contact Cooper’s treating physicians to discuss her conditions and work capacity. They also faulted the reviewing physicians' reports for being internally inconsistent and misstating the exertional requirements of Cooper’s job. Another problem the court identified that warranted reversing the denial was cherry-picking by the reviewing physicians: “Dr. Sassoon . . . summarized those parts of the file favorable to LINA, omitted the parts that tended to support Cooper’s claim, and concluded that there was insufficient evidence of disability. LINA then relied on Dr. Sassoon’s report in denying Cooper’s second . . . appeal. . . . We conclude that this reliance was unreasonable.” The court found other problems with LINA’s handling of Cooper’s claim including its failure to inform Cooper of her need to submit to LINA a functional capacity evaluation to document her limitations, and the fact that the reviewing physicians offered conclusory and unsupported statements in arguing that the information Cooper had presented did not support a finding of disability. To this point in the opinion the three judge panel was unanimous. But when it came to deciding whether remand was the proper remedy for LINA’s wrongful denial, there was a dissent. The majority felt that the evidence before the court was sufficient to justify ordering LINA to reinstate Cooper’s benefits to the date of the opinion. The dissent argued that the claim should be remanded to LINA for further handling to perform their claim review responsibilities correctly. For more on remand issues in ERISA benefit claim cases, take a look at Roy Harmon's recent in depth discussion here at his Health Plan Law blog. I’m with the majority on this point. As they point out, “[p]lan administrators should not be given two bites at the proverbial apple where the claimant is clearly entitled to disability benefits. They need to properly and fairly evaluate the claim the first time around; otherwise they take the risk of not getting a second chance, except in cases where the adequacy of claimant’s proof is reasonably debatable. That is not the case here” (emphasis added). To some extent this language begs the question. The dissent would argue that remand is proper precisely because it is not clear that Cooper was entitled to benefits. But the bigger concern even the majority fails to articulate is that even if Cooper was not “clearly entitled” to benefits, remanding to an insurer or other ERISA plan administrator who has not shown itself capable or willing to comply with ERISA’s procedural and fiduciary requirements simply does not provide a proper or meaningful remedy for an insurer’s violation of ERISA’s fiduciary and claims procedure requirements. When the worst an insurer can expect if they fail to comply with those standards is a chance to redo the process after dragging a claimant through the time and expense of several years of litigation, you can be sure they won’t be very highly motivated to get it right the first time. There is simply no accountability for their bad acts. And failing to provide a deterrent for cutting corners in the processing of these claims results in real hardship for the individuals on the other side of the table. The consequences to a claimant of going months or years without disability or health benefits on a substantial claim are often times catastrophic. ERISA provides no meaningful remedies to claimants for damages that arise as a direct consequence of a plan administrator’s wrongful denial of a claim. In addition, courts generally defer to a plan administrator’s reasons for denying a claim. What in the world justifies the refusal of the federal judiciary to, at the very least, hold insurers’ feet to the fire when they fail to comply with ERISA’s fiduciary and claims procedure requirements?