An ERISA Coverage Update

by:  Mitchell J. Melamed

A recent 7th Circuit opinion has opened the door quite a bit wider for judicial review of a plan administrator’s denial of coverage.

The seminal case in this area, Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), held that if a plan document grants the plan administrator interpretative or operational discretion, the judiciary will uphold the determinations of the plan administrator unless those determinations are clearly arbitrary or incorrect.  However, if a plan document does not grant such discretion to the administrator, the court must make a “de novo review” of the matter without according deference to the determination of the administrator.  Unless the plan expressly grants interpretative and operational discretion to the administrator, a claimant has the right to have a federal court take a fresh look at the facts and “second guess” the plan administrator, including the right to submit additional evidence.

In the case of Krolnik v. The Prudential Insurance Company of America, 570 F.3d 841 (7th Cir. 2009), the 7th Circuit interpreted Firestone to require much more than a judicial “review” of a plan administrator’s determination.  Indeed, the Court said “it would be best to stop thinking about “de novo review” – with the implication that the judge is simply reviewing [the plan administrator’s] action” – and start thinking about the process as a judge’s “independent decision” about benefits.  As such, the independent decision-making may require a federal judge to conduct an evidentiary hearing.  It certainly requires the court to consider new medical evidence submitted by the claimant (and not previously submitted to the plan administrator) if necessary to make an “independent decision,” rather than simply reviewing the determination of the administrator.

Going forward, at least in the 7th Circuit, a denial of coverage by a plan administrator may not be upheld if the claimant is able to garner additional evidence to introduce in federal court.  So, to “freeze” the administrative record in the event of a judicial appeal, make sure the plan documents expressly grant the plan administrator full discretion to determine benefit eligibility.

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