David P. v. United Healthcare Ins. Co.

• Docket Number: 21-4129
• Decision Date: 15 August 2023
• Citation: 77 F.4th 1293
• Parties: DAVID P.; L. P., Plaintiffs - Appellees, v. UNITED HEALTHCARE INSURANCE COMPANY; Morgan Stanley Chief Human Resources Officer; The Morgan Stanley Medical Plan, Defendants - Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

77 F.4th 1293

DAVID P.; L. P., Plaintiffs - Appellees, v. UNITED HEALTHCARE INSURANCE COMPANY;Morgan Stanley Chief Human Resources Officer;The Morgan Stanley Medical Plan, Defendants - Appellants.

No. 21-4129

United States Court of Appeals, Tenth Circuit

FILED August 15, 2023

Appeal from the United States District Court for the District of Utah (D.C. No. 2:19-CV-00225-JNP-JCB).

Amanda Shafer Berman (Jennifer S. Romano, Crowell & Moring LLP, Los Angeles, California, and Amy M. Pauli, Crowell & Moring LLP, Washington, D.C., with her on the briefs), Crowell & Moring LLP, Washington, D.C., for Defendants-Appellants.

Brian S. King (Tera J. Peterson with him on the brief), Brian S. King P.C., Salt Lake City, Utah, for Plaintiffs-Appellees.

Before CARSON, BALDOCK, and EBEL, Circuit Judges.

EBEL, Circuit Judge.

In this action under the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1461 ("ERISA"), Plaintiffs David P. and his daughter L.P. sought to recover health care benefits under a medical plan David P. obtained through his employer. The district court awarded Plaintiffs benefits, determining that the manner in which Defendants processed Plaintiffs' claims for coverage violated ERISA. We agree, concluding Defendants' deficient claims processing circumvented the dialogue ERISA mandates between plan participants claiming benefits and the plan administrators processing those benefits claims. We disagree with the district court, however, as to the appropriate remedy for the violations of ERISA's claims-processing requirements at issue here. Rather than outright granting Plaintiffs their claimed benefits, we conclude, instead, that Plaintiffs' claims for benefits should be remanded to Defendants for proper consideration. Having jurisdiction under 28 U.S.C. § 1291, we, therefore, AFFIRM the district court's ruling that Defendants violated ERISA, but we REVERSE the district court's decision to award Plaintiffs benefits and, instead, REMAND this case to the district court with directions to remand Plaintiffs' benefits claims to Defendants.

I. GOVERNING ERISA PRINCIPLES

Congress enacted ERISA "to promote the interests of employees and their beneficiaries in employee benefit plans, and to protect contractually defined benefits." Black & Decker Disability Plan v. Nord, 538 U.S. 822, 830, 123 S.Ct. 1965, 155 L.Ed.2d 1034 (2003) (quoting Firestone Tire & Rubber v. Bruch, 489 U.S. 101, 113, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)). A plan's administrator is a fiduciary who " 'owes a special duty of loyalty to the plan beneficiaries.' " D.K. v. United Behavioral Health, 67 F.4th 1224, 1236 (10th Cir. 2023) (quoting Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008)). ERISA promotes the interests of plan participants and beneficiaries and protects contractually defined benefits "in part by regulating the manner in which plans process benefits claims." Black & Decker, 538 U.S. at 830, 123 S.Ct. 1965. Relevant here, ERISA does that by specifying minimum requirements for a plan's claims-processing procedure. See Aetna Health Inc. v. Davila, 542 U.S. 200, 220, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). Those minimum claims-processing requirements are set forth in 29 U.S.C. § 1133, which prescribes the following two-step process for denying benefits.

A. Initial denial of benefits

First, § 1133(1) requires that "every employee benefit plan . . . provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant." The Department of Labor ("DOL") fleshed out this statutory requirement through regulations implementing § 1133(1). Those regulations further specify that benefit-denial notices sent to claimants set forth, among other things,

- "[t]he specific reason or reasons for the adverse determination,"

- "the specific plan provisions on which the determination is based," and

- "[a] description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material is necessary."

29 C.F.R. § 2560.503-1(g)(1)(i), (ii), and (iii). In addition, where, as in this case, the benefits denial is made by a "group health plan" and "is based on a medical necessity . . . exclusion or limit," the administrator must also provide the claimant with "an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances." Id. § 2560.503-1(g)(1)(v)(B).

B. Administrative review of a benefits denial

The second step in the required claim-denial process is found in 29 U.S.C. § 1133(2), which requires that "every employee benefit plan . . . afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim." ERISA's implementing regulations further require, among other things, that a plan's administrative review procedures

- "[p]rovide claimants the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits," and

- "[p]rovide for a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination."

29 C.F.R. § 2560.503-1(h)(2)(ii) and (iv). In addition, where, as here, the plan is a "[g]roup health plan[ ]," it must, among other things, further

[p]rovide for a review that does not afford deference to the initial adverse benefits determination and that is conducted by an appropriate named fiduciary of the plan who is neither the individual who made the adverse benefit determination that is the subject of the appeal, nor the subordinate of such individual.

Id. § 2560.503-1(h)(3)(ii).

For the claimant, then, the "full and fair" administrative review required by ERISA "means 'knowing what evidence the decision-maker relied upon, having an opportunity to address the accuracy and reliability of the evidence, and having the decision-maker consider the evidence presented by both parties prior to reaching and rendering his decision.' " Sage v. Automation, Inc. Pension Plan & Tr., 845 F.2d 885, 893-94 (10th Cir. 1988) (quoting Grossmuller v. UAW, Local 813, 715 F.2d 853, 858 n.5 (3rd Cir. 1983)).

C. In sum, ERISA requires meaningful dialogue between a plan participant claiming benefits and the plan administrator considering that benefits claim

29 U.S.C. § 1133 and its implementing regulations thus require

a meaningful dialogue between ERISA plan administrators and their beneficiaries. If benefits are denied the reason for the denial must be stated in reasonably clear language[,] if the plan administrators believe that more information is needed to make a reasoned decision, they must ask for it. There is nothing extraordinary about this: it's how civilized people communicate with each other regarding important matters.

Rasenack ex rel. Tribolet v. AIG Life Ins. Co., 585 F.3d 1311, 1326 (10th Cir. 2009) (quoting Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 635 (10th Cir. 2003)).

Congress intended these [claim] review procedures "to help reduce the number of frivolous lawsuits under ERISA; to promote the consistent treatment of claims for benefits; to provide a nonadversarial method of claims settlement; and to minimize the costs of claims settlement for all concerned." Amato v. Bernard, 618 F.2d 559, 567 (9th Cir. 1980). Absent such safeguards, mounting costs of administering a plan might discourage employers from establishing such plans. Cf. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (civil enforcement scheme of 29 U.S.C. § 1132 "represents a careful balancing of the need for prompt and fair claims settlement procedure against the public interest in encouraging the formation of employee benefit plans.").

Sandoval v. Aetna Life & Cas. Ins. Co., 967 F.2d 377, 382 (10th Cir. 1992).¹ ERISA's

goals are undermined where plan administrators have available sufficient information to assert a basis for denial of benefits, but choose to hold that basis in reserve rather than communicate it to the beneficiary. Such conduct prevents ERISA plan administrators and beneficiaries from having a full and meaningful dialogue regarding the denial of benefits.

Spradley, 686 F.3d at 1140 (quoting Glista, 378 F.3d at 129 (1st Cir.)). That is why

federal courts will consider only "those rationales that were specifically articulated in the administrative record as the basis for denying a claim." "The reason for this rule is apparent[:] we will not permit ERISA claimants denied the timely and specific explanation to which the law entitles them to be sandbagged by after-the-fact plan interpretations devised for purposes of litigation." A plan administrator may not "treat the administrative process as a trial run and offer a post hoc rationale in district court."

Id. at 1140-41 (quoting Flinders v. Workforce Stabilization Plan of Phillips Petroleum Co., 491 F.3d 1180, 1190-92 (10th Cir. 2007), overruled on other grounds by Glenn, 554 U.S. at 116-17, 128 S.Ct. 2343, as recognized in Holcomb v. Unum Life Ins. Co., 578 F.3d 1187, 1192-93 (10th Cir. 2009)).

II. THIS CASE

David P. initiated this ERISA action seeking coverage under a group health plan he obtained through his employer, Defendant Morgan Stanley Medical Plan ("Plan"). David P.'s teenage daughter L.P. was a beneficiary under the Plan. The claimed benefits at issue here were for L.P.'s year-long mental health and substance abuse treatment that occurred at two residential treatment centers ("RTC"), Summit Achievement and Uinta Academy.

The Plan's administrator, Defendant Morgan Stanley's Chief Human Resources Officer,...