Courts have long held that ERISA plan administrators need to consider the evidence considered and the determination made by the Social Security Administration (SSA) in evaluating disability benefits claims. But the Eleventh Circuit in Melech v. Life Insurance Company of North America, 739 F.3d 663 (11th Cir. 2014) has now ruled that administrators must consider SSA benefit determinations and related evidence issued after the administrator has denied a claim. Further, the court held that the administrator erred by not contacting the SSA to obtain information about the benefit determination when the beneficiary did not submit the information to the administrator with her appeal. This holding will require additional effort and analysis in claim appeals determinations.
Since virtually all disability benefit plan procedures are similar to the one considered by Melech, this case means that administrators must consider SSA benefit determinations and evidence that occur after the initial denial of benefits. Further, this case requires administrators to obtain the SSA information and evidence even if the beneficiary does not.
Plaintiff Melech was a station manager for Hertz who was diagnosed with degenerative disc disease in her cervical spine and tendinitis in her right shoulder. She was a beneficiary of Hertz’s long term disability policy, which was issued and administered by the Life Insurance Company of North America (LINA).
LINA denied Melech’s application for benefits before the SSA decided her benefit application. Melech appealed LINA’s denial of benefits, and while that appeal was pending, the SSA approved Melech’s application for benefits. Melech informed LINA about the SSA benefits she was awarded. LINA denied Melech’s appeal, and offered her another opportunity to appeal, asking her for any additional information she had to assist in her appeal. Melech did not submit any of the SSA information.
The trial court rejected Melech’s attempt to introduce evidence about the SSA benefits determination and its basis, as that information was not part of the administrative record. Having rejected the additional evidence, the trial court approved LINA’s denial of benefits, basing the determination on the existing administrative record that in turn was based on the information Melech had submitted to LINA. The trial court granted summary judgment in favor of LINA.
On appeal, the Eleventh Circuit reversed, holding that LINA should have considered the evidence gathered in the SSA process and, further, should have obtained the evidence independently of Melech because to ignore the evidence was procedurally unreasonable. The Eleventh Circuit noted that LINA’s benefits procedure requires claimants to pursue SSA disability benefits at least through the second stage of appeals if LINA determines the claimant should appeal, and allows LINA to deduct SSA benefits from the benefits owed to claimants. The court determined that LINA “actively inserted” itself into the claimants’ SSA benefit application process when it was to LINA’s advantage. But in Melech’s case, once LINA denied Melech’s request for benefits, it completely ignored the SSA process, even when Melech informed it that the SSA had awarded her benefits.
The court applies a six-factor test in its de novo review of summary judgment rulings on benefits determinations. Melech, supra, 739 F.3d at 672 (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) and Williams v. BellSouth Telecomms., Inc., 373 F.3d 1132, 1138 (11th Cir. 2004)). But before the analysis can be performed, the court must first determine whether the administrative record was complete.
The court started by noting that under LINA’s procedures the burden was on Melech to produce evidence of her disability sufficient to establish that she was disabled, including that LINA was not obligated to “ferret out evidence in Melech’s or the SSA’s possession.” Id. at 673. Notwithstanding this burden, the court stated that in light of LINA’s self-interested actions concerning claimants’ SSA benefits application process “we are troubled by the implication of LINA’s actions in Melech’s case, where it ignored her SSDI application and the evidence generated by the SSA’s investigation once it no longer had a financial stake in the outcome.” Id. at 674.
The court dispensed with Melech’s failure to provide the SSA evidence to LINA by examining LINA’s conduct: “once LINA decided at first blush that Melech had not provided enough medical evidence to support her claim, it treated the SSA process and the evidence generated by it as irrelevant and unavailable. This treatment is internally inconsistent with LINA’s mode of evaluating claims.” Id. The court found that LINA’s conduct was procedurally unreasonable.
The court then reviewed what other circuits have done when confronted with procedural unreasonableness, determining that they use an abuse of discretion standard. The court then held that LINA’s procedure was improper because it did not deny benefits based on a complete administrative record that was the product of a fair claim evaluation process. Id. at 676. The court determined that the appropriate remedy was the remand the matter to LINA to reconsider Melech’s benefits with the SSA evidence. Id. at 667.
This decision imposes new obligations on ERISA disability plan administrators. Adminstrators now must consider evidence concerning SSA benefits generated after a claim is denied. Further, administrators now must affirmatively obtain that evidence when the beneficiary failes to provide it.