A new decision from the U.S. Court of Appeals for the Sixth Circuit, Wenner v. Sun Life Ass. Co. of Canada, ___ F.3d ___, 2007 U.S. App. LEXIS 8367 (6th Cir. 2007), provides two separate noteworthy rulings. The first involves ERISA’s claims procedure requirements and the second deals with the proper remedy for an insurer’s procedural violations. Both issues were resolved in favor of the claimant and provide lessons to be learned. While Thomas Wenner was working as COO of a manufacturing company, he had a heart attack that disabled him. After several months of recuperation, Sun Life, the insurer, sent Wenner a letter requesting medical information to establish that his health justified continued payment of benefits. The problem was that Sun Life sent the letter to the wrong address and Wenner never got it. Sun Life sent a follow up letter to the same address. As with the first, Wenner asserted that he never received the second letter. Sun Life then sent a letter terminating Wenner’s benefits because Wenner had failed to provide the documentation requested by Sun Life. That letter also, as required by ERISA, gave Wenner 180 days to appeal. Wenner received this letter and submitted documentation that he asserted justified continued payment of benefits. Sun Life reviewed these materials and upheld its denial. But it changed the rationale for its decision. After reviewing Wenner’s newly submitted medical records, Sun Life stated that it did not believe they established that Wenner continued to be disabled. In and of itself, this was not necessarily a problem. The error Sun Life made was that at the end of this letter it did not give Wenner any opportunity to appeal its decision. Rather, it stated that its decision was final, the pre-litigation appeal process was over and that Wenner’s file would remain closed. Wenner was not deterred. He appealed again and addressed Sun Life’s concerns about the medical documentation. But Sun Life was having none of it. It refused to consider Wenner’s information and arguments. The Sixth Circuit didn’t have any hesitation in ruling that Sun Life’s failure to give Wenner an opportunity to specifically respond to its argument that his medical documentation did not establish his disability was error. This was so because until Wenner received the last letter, Sun Life had not specifically told Wenner that the updated information he submitted did not satisfactorily establish his continued disability. As such, Sun Life violated ERISA's claims procedure mandates that require insurers to provide claimants with an opportunity to 1) know the reasons their claim is being denied and 2) be given a chance to respond to and appeal those reasons. The Sixth Circuit’s ruling on this first point raised the second question: what is the proper remedy for Sun Life’s failure to give Wenner the opportunity to appeal its decision? Judge Oberdorfer, joined by Judge Griffin, ruled that the proper remedy was reinstatement of Wenner’s benefits through the date of the decision. Wenner was entitled to be put back in the position he would have been in but for Sun Life’s improper termination of benefits. The critical fact for the majority opinion on this issue was that the status quo ante involved Wenner receiving benefits. If the procedural error had occurred during Wenner’s initial application for benefits, remand to the insurer for additional processing of Wenner’s claim, rather than reinstatement of benefits, would have been the proper remedy according to Judges Oberdorfer and Griffin. On this second issue, Judge Rogers dissented. He felt that reinstatement rather than remand provided a windfall for Wenner. One problem with Judge Rogers’ argument, however, is that sending the case back to Sun Life to get a second bite at the procedural apple provides little incentive for insurers to get it right the first time. When insurers know the worst a court will do if the insurer cuts procedural corners is to send the claim back to the insurer to try it again, without any requirement that the insurer actually pay the funds in question, insurers will be much slower to spend the time and resources to establish a thorough and fair procedure the first time around. Why do more than they have to? All the while the claimant is dying on the financial vine for lack of funds. Judge Rogers' dissent simply misses the big picture here: few claimants have the staying power to endure repeated procedural short cuts and screw ups by insurers. For a claimant to find and be able to pay for a competent attorney to handle these cases in the first place is daunting. Add to this the time it takes to litigate the question of whether the insurer has satisifed its fiduciary and procedural obligations and you have an unbearable situation presented to most ERISA participants and beneficiaries in Wenner's situation. Claimants in this position generally either walk away empty handed without even filing a case or settle their claims for pennies on the dollar just to get a little money to make ends meet. It is the rationale of the dissent that results in a windfall–to the insurer! The refusal of the federal judiciary to hold ERISA fiduciaries’ feet to the fire on the statute’s procedural requirements is widespread and one of the worst aspects of ERISA. The Sixth Circuit opinion provides two steps in the right direction on this point.
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