ERISA-Tenth Circuit Case Illustrates How To Build A Record To Support An Insurer’s Decision To Deny Benefits
In Holcomb v. Unum Life Insurance Company of America, No. 08-6183 (10th Cir. 2009), the plaintiff, a participant in her employer’s insured long-term disability plan (the “Plan”), sued the Plan’s insurer under ERISA, challenging the insurer’s decision to deny her benefits under the Plan. The Court reviewed and upheld the insurer’s decision. The case is noteworthy because it illustrates how an insurer may take steps and build the administrative record to support its decision to deny benefits.
In this case, the Plan gave the insurer the discretionary authority to determine eligibility for benefits and to interpret the terms and provisions of the Plan. Therefore, the Court reviewed the insurer’s decision to deny the benefits for abuse of discretion, and said that its review is limited to the administrative record–the materials compiled by the insurer in the course of making its decision. The Court noted that here, the insurer operates under an inherent conflict of interest, since it is in a position to favor its own interest-preserving its assets by not having to pay benefits- over the interests of the Plan’s participants. Under Metropolitan v. Glenn, 128 S. Ct. (2008) this conflict of interest is a factor to be considered in determining whether there has been an abuse of discretion by the insurer in denying the benefits. The conflict assumes greater importance if circumstances suggest a higher likelihood that it affected the benefit denial, and assumes lesser (or no) importance if the insurer has taken has taken active steps to reduce potential bias and to promote accuracy.
The Court reviewed the administrative record to determine if the insurer had abused its discretion. The administrative record shows that the insurer took steps to reduce the inherent conflict of interest by hiring two independent physicians–one who reviewed the plaintiff’s file and one who examined her- and by basing its decision to deny the benefits at least in part on the physicians’ findings. In hiring the independent physicians, the insurer did not rely solely on the evaluations and medical opinions of its own on-site physicians and nurses. The insurer had furnished the two independent physicians with all of the necessary information for the plaintiff’s situation, including information from the plaintiff’s personal physician that challenged the insurer’s decision to deny the benefits. As such, the Court gave the conflict of interest factor limited weight in evaluating whether the insurer had abused its discretion in denying the benefits. Further, the administrative record demonstrates that the insurer diligently endeavored to discover the nature of the plaintiff’s ailments. According to the record, the insurer had routinely requested the plaintiff’s updated medical records, and had conducted its own clinical review of these records. The insurer also solicited expert evaluations from independent medical and psychological examiners, and it performed both vocational assessments and occupational analysis. Based on this review, the Court concluded that the insurer did not abuse its discretion in deciding to deny benefits to the plaintiff.