This month’s Friday Five covers recent cases addressing: (1) the validity of a judgment that includes retroactive “any occupation” benefits where no administrative determination on those benefits has been made; (2) the vulnerabilities of “moving target” claims analyses; (3) the purpose of extra-record discovery in ERISA cases subject to a deferential standard of review; (4) an insurer’s burden of proof to justify a termination decision where the insurer is granted discretionary authority; and (5) the significance of functional capacity examinations performed by non-physicians.

1. Insurer unsuccessful in attempting to amend adverse judgment to reflect only past-due “own occupation” benefits. The Northern District of Texas denied a disability insurer’s motion to amend a judgment which determined that the plaintiff was entitled to all past-due LTD benefits through the date of judgment, even though no administrative determination had been made as to the plaintiff’s claim for “any occupation” benefits. The insurer argued that because the operative policy provided “own occupation” benefits for 24 months, the court was only entitled to award benefits for that period and was required to remand the plaintiff’s claim for “any occupation” benefits. The court rejected this argument, holding that “by failing to initiate any administrative action by the time of judgment,” the insurer had waived the right to a “retrospective administrative determination through judgment.” The court also noted that ERISA’s written notice requirement, 29 U.S.C. § 1133(1), supported waiver because the insurer never gave notice to the plaintiff that it was denying benefits because the plaintiff did not meet the definition of “any occupation” disability. Based on its waiver finding, the court only remanded the plaintiff’s claim for “any occupation” benefits after the date of judgment. Chavez v. Standard Ins. Co., No. 3:18-cv-2013-N, 2020 WL 6255407 (N.D. Tex. Sept. 30, 2020).
2. “Moving target” claims analysis deemed improper. Following a bench trial on the administrative record, the Central District of California granted a plaintiff’s motion for judgment and determined that an insurer improperly terminated his LTD benefits. The court disapproved of the insurer’s “moving target” claims analysis, whereby the insurer initially approved the plaintiff’s claim for “own occupation” benefits, but then reassessed that claim after it received a vocational review stating that there were no gainful alternative occupations for the plaintiff. The insurer’s reassessment included an independent medical examination (“IME”) which concluded that the plaintiff possessed sufficient functional capacity to work in his own occupation, and the insurer terminated the plaintiff’s “own occupation” benefits on that basis. The court concluded that the insurer’s IME was “highly suspect” because of its timing and the doctor’s inconsistent positions. The court also found that the plaintiff’s medical and vocational reviews were more credible than the insurer’s because the insurer “cherry-picked” information that supported its decision. Groch v. Dearborn Nat’l Life Ins. Co., No. 2:18-cv-06614, 2020 WL 6374619 (C.D. Cal. Oct. 29, 2020).
3. Court clarifies the purpose of extra-record discovery in ERISA actions involving an “arbitrary and capricious” standard of review. The District of Arizona explained that while extra-record discovery is typically inappropriate in actions where a claim administrator has been vested with discretion to administer a policy, supplementation of the record is appropriate where “procedural irregularities” prevented the full development of the administrative record. The court explained that the purpose of such supplementation is to “in essence, recreate what the administrative record would have been had the procedure been correct.” Based on this guiding principle, the court found that the insurer failed to include information in the administrative record that should have been considered during an administrative appeal. This information included reports from two upcoming office visits that were referenced in the plaintiff’s appeal letter. The court ultimately determined that a remand was the appropriate remedy, such that the insurer could “consider the complete record in the first instance.” Johal v. United States Life Ins. Co. in City of New York, No. CV-20-00204, 2020 WL 6074248 (D. Ariz. Oct. 15, 2020).
4. Sixth Circuit concludes that insurer’s LTD termination was not arbitrary and capricious. In a precedential decision, a Sixth Circuit panel unanimously affirmed the Western District of Kentucky’s decision to grant partial judgment on the pleadings and partial summary judgment in favor of an insurer in a case where the plaintiff-appellant brought claims for wrongful termination of benefits and breach of fiduciary duty. The court concluded that an arbitrary and capricious standard of review was appropriate where the insurer was vested with discretion to determine participants’ eligibility for benefits. On the merits, the court determined that there is no need for an insurer to “show improvement” to terminate benefits, even where benefits have been paid for many years. Instead, the insurer merely has to provide “some reason for the change” in decision. The court also held that any breach of fiduciary duty claim arising under 29 U.S.C. § 1132(a)(3) must be based on an injury “distinct” from a denial of benefits, and determined that the plaintiff-appellant had only alleged facts to support a claim for benefits under 29 U.S.C. § 1132(a)(1)(B). Davis v. Hartford Life & Accident Ins. Co., No. 19-6091, 2020 WL 6789448 (6th Cir. Nov. 19, 2020).
5. Functional capacity evaluations need not be “blindly adopted.” In entering summary judgment in favor of an insurer, the District of Massachusetts took no issue with the insurer’s determination that a functional capacity evaluation (“FCE”) favorable to the plaintiff did not evidence a disability. During the administrative review process, the insurer’s consultant physician heavily criticized the FCE, emphasizing that because it was performed by a physical therapist, rather than a physician, its conclusions were unreliable. The consultant physician also criticized the FCE’s reliance on the plaintiff’s “subjective reporting,” which was particularly apparent based on its lack of corroboration with the plaintiff’s medical records or discussions with her treating providers. The court was persuaded by these critiques, and noted that while FCEs typically provide objective evidence as to a claimant’s functional abilities, they are not dispositive, particularly where they are disputed. Ehlert v. Metropolitan Life Ins. Co., No. 18-10357, 2020 WL 6871021 (D. Mass. Nov. 23, 2020).