Zall v. Standard Ins. Co.
| Decision Date | 19 January 2023 |
| Docket Number | 22-1096 |
| Citation | 58 F.4th 284 |
| Parties | Eric S. ZALL, Plaintiff-Appellant, v. STANDARD INSURANCE COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
William E. Parsons, Brook E. Tylka, Attorneys, Hawks Quindel, S.C., Madison, WI, for Plaintiff-Appellant.
Jacqueline J. Herring, Attorney, Smith, Von Schleicher & Associates, Chicago, IL, for Defendant-Appellee.
Before Hamilton, St. Eve, and Kirsch, Circuit Judges.
Plaintiff-appellant Eric Zall worked more than twenty years as a dentist, but chronic pain and numbness in his neck and right arm made it impossible for him to keep working. In 2013, Zall filed a claim for long-term disability benefits under an insurance policy with defendant-appellee Standard Insurance Company. Standard approved his claim and began paying benefits. Six years later, Standard terminated Zall's benefits. Standard concluded that Zall's spinal condition and associated symptoms did not satisfy policy requirements for paying disability benefits for such conditions for more than two years without additional medical findings.
Zall filed this suit under ERISA, the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., which governs his policy with Standard. Zall contends that Standard's termination of his benefits was arbitrary and capricious on the merits. He also contends that Standard violated ERISA's procedural requirements by failing to afford him "a full and fair review ... of the decision denying the claim." 29 U.S.C. § 1133. The district court granted summary judgment for Standard. Zall v. Standard Ins. Co. , 21-cv-19-slc, 2021 WL 6112638, at *1, *11 (W.D. Wis. Dec. 27, 2021). Zall has appealed. We agree with Zall on the procedural issue, reverse summary judgment, and remand for further proceedings. The decisive legal issue here is which version of an amended procedural regulation issued under § 1133 applies to Standard's internal administrative review of its termination of Zall's benefits. The plain language of the 2018 amendments to the regulation shows that the amended version applies, and Standard failed to comply with it.
Since the turn of the century, Department of Labor regulations have required the administrator of an employee benefit plan to give a claimant, "upon request ," copies of "all documents, records, and other information" that the administrator has considered, generated, or relied upon in making an adverse benefit determination.
29 C.F.R. § 2560.503–1(h)(2)(iii), (m)(8)(i)–(ii) (2002) (emphasis added); 81 Fed. Reg. 92,316, 92,323 (Dec. 19, 2016) ( amendments). In 2018, the Department amended the regulations to eliminate the "upon request" language and to require an administrator to provide such information "sufficiently in advance" of an adverse determination "to give the claimant a reasonable opportunity to respond" to it. § 2560.503–1(h)(4)(i) ; 82 Fed. Reg. 56,560 -01, 56,560 (Nov. 29, 2017). In other words, under the amended regulation, a plan administrator must provide the pertinent information whether the claimant has asked for it or not. This appeal turns on which version of the regulation applies to the administrative review of the termination of Zall's benefits.
Zall filed his original claim for long-term disability benefits back in 2013, when the 2000 version of the regulations was operative, after pain and numbness forced him to stop working. Standard denied the claim initially, but Zall appealed through Standard's administrative review process. His appeal was successful. In late 2014, after considering additional medical information that Zall had submitted and consulting a board-certified orthopedic surgeon, Standard approved Zall's claim, including payment of benefits retroactive to November 2013, when Zall had filed the claim.
Less than a year after approving Zall's claim, however, Standard began reviewing his case to see if his condition might be subject to a 24-month benefit limit in the policy. That limit applies, in relevant part, to a disability "caused or contributed to by ... carpal tunnel
or repetitive motion syndrome" or "diseases or disorders of the cervical, thoracic, or lumbosacral back and its surrounding soft tissue." The 24-month limit does not apply, however, to a disability "caused or contributed to by ... herniated discs with neurological abnormalities that are documented by electromyogram and computerized tomography or magnetic resonance imaging" or "radiculopathies that are documented by electromyogram." The disputed issue on the merits in this lawsuit is whether Zall qualifies for that exception to the 24-month limit.
For reasons that are unclear from the record, Standard did not, during its 2015 review, ask Zall for copies of his then-recent magnetic resonance imaging
and electrodiagnostic reports even though (a) consulting physicians recommended reviewing those reports and (b) such documentation was required for coverage under the policy. Also for reasons that are unclear, Standard did not immediately complete its review of Zall's claim. It continued to pay benefits for years.
In 2018 Standard resumed its review in earnest. Standard finally requested copies of Zall's diagnostic reports for his electromyography
and magnetic resonance imaging. Zall provided them. After consulting with physicians who had studied Zall's medical file, Standard concluded that his condition was subject to the 24-month limit, and it stopped paying benefits at the end of 2019. By that time, as we discuss below, the Department of Labor's amendments to the regulations had taken effect for cases like Zall's. See 82 Fed. Reg. 56,560 -01, 56,560 (Nov. 29, 2017) (). Zall again appealed through Standard's administrative review process.
During the administrative review process, Standard consulted with another physician, Dr. Michelle Alpert. Dr. Alpert reviewed Zall's medical file and summarized her findings in a report dated August 3, 2020. She disagreed with Zall's own physicians' readings of his diagnostic reports. Her interpretations supported the conclusion that his condition was subject to the 24-month benefits limit. On August 20, 2020, Standard notified Zall that his file had been reviewed "by a physician who had not previously reviewed" it—presumably Dr. Alpert—and that Standard "require[d] additional time to review" the physician's "medical review report." Standard did not provide Zall with a copy of that report.
Nine days later, Standard notified Zall that it was rejecting his appeal and would in fact be terminating his benefits. Based substantially on Dr. Alpert's report, Standard had determined that Zall's condition was subject to the 24-month benefit limit. Although the denial letter summarized Dr. Alpert's findings, Standard did not attach a copy of her report. The letter noted, however, that Standard would, upon "request," provide Zall "with copies of all documents, records and other information relevant to the claim."
Having exhausted his administrative appeals, Zall filed this suit against Standard. He alleged that Standard had violated ERISA by arbitrarily and capriciously conducting the review of his benefits claim and wrongfully refusing to continue paying him long-term disability benefits. Zall sought both payment of retroactively owed benefits and a declaration that Standard continues to owe him benefits.
Zall presented three principal challenges in the district court. First, Standard had "denied him a full and fair review" by failing to give him a copy of Dr. Alpert's report. See Zall , 2021 WL 6112638, at *6. That failure, Zall contended, meant that he never had an "opportunity to respond" to Dr. Alpert's findings before Standard made its final decision to terminate his benefits. Second, Zall argued that Standard's conclusion that his condition was subject to the 24-month limit was "not rationally supported by the medical evidence." Finally, Zall argued that, by paying him benefits for more than six years after Standard claims his benefits should have ended, Standard waived its right to terminate those benefits.
The district court was not persuaded. The court read the 2018 amendments to the regulations as applying only to claims first filed after April 1, 2018. Id. at *7. Under that view, the old regulation applied and Standard had not been "obliged to produce Dr. Alpert's report to Dr. Zall before issuing its final decision," so Zall's "full and fair review" claim must fail. Id.
In terms of the medical evidence, because Standard's determination needed only to be "rationally supported by record evidence," Standard "was entitled to credit the opinions of its consulting physicians," including those of Dr. Alpert, over those of Zall's own physicians. Id. at *8, quoting Black v. Long Term Disability Ins. , 582 F.3d 738, 745 (7th Cir. 2009) (). Standard's determination that Zall's condition fell within the 24-month benefit limit was neither arbitrary nor capricious, the court said, because Dr. Alpert's interpretations of Zall's 2014 diagnostic reports provided rational support for the denial. Id. at *8–9, *11. The district court also rejected Zall's waiver argument: "ERISA does not prohibit a plan administrator from performing a periodic review of a beneficiary's disability status." Id. at *11, quoting Holmstrom v. Metropolitan Life Ins. Co. , 615 F.3d 758, 767 (7th Cir. 2010). On cross-motions for summary judgment, the district court therefore ruled against Zall and entered judgment for Standard. Id. at *1, *11.
On appeal, Zall has abandoned the waiver argument, but he continues to argue that (1) Standard did not afford him a "full and fair review" because it failed to provide him with Dr. Alpert's report before reaching a final benefit determination, and (2) Standard arbitrarily...
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