How should federal courts conduct a de novo review of Employee Retirement Income Security Act benefit claims? One approach was delineated by the U.S. Court of Appeals for the Seventh Circuit in 2009 in Krolnik v. Prudential Insurance Company of America.[1]

There, the court pronounced the phrase “de novo review” as “misleading” and explained the de novo review standard contemplated by the U.S. Supreme Court in Firestone Tire & Rubber Co. v. Bruch[2] in 1989 is “not ‘review’ of any kind; it is an independent decision rather than ‘review.'”[3]

Krolnik mandated, based on the authority of Firestone, that ERISA litigation under the de novo standard “should be conducted just like contract litigation” where the court “takes evidence (if there is a dispute about a material fact) and makes an independent decision about how the language of the contract applies to those facts.”[4]

A conflicting view of de novo review was presented this month by the U.S. Court of Appeals for the First Circuit in Doe v. Harvard Pilgrim Health Care Inc.[5] That case involved treatment of a patient’s serious mental illness at a residential mental health treatment center.

Coverage was denied based on the plan’s assertion that a lower level of care was warranted. Following reversal of a district court ruling in favor of the plan in a prior appellate ruling[6] and a remand to the U.S. District Court for the District of Massachusetts, the lower court reinstated its earlier entry of judgment in favor of Harvard, which the First Circuit then affirmed.

The court of appeals in Doe applied an interpretation of summary judgment unique to ERISA litigation:

As we explained previously, “[i]n the ERISA context, ‘the burdens and presumptions normally attendant to summary judgment practice do not apply.'” Instead, a summary judgment motion in a lawsuit contesting the denial of benefits under ERISA “is simply a vehicle for teeing up the case for decision on the administrative record.”[7]

Doe had argued for a trial with live witnesses and, having “the various experts testify and be subject to cross-examination, as if this were an insurance coverage dispute under state law, rather than judicial review of an administrator’s benefit decision under ERISA.” The court overruled the plaintiff’s request, responding: “That is an argument that we long ago rejected.”[8]

From a federal civil procedure standpoint, Doe’s view of de novo review under ERISA is dubious, as I pointed out in a prior publication.[9] Since ERISA benefits cases are brought as civil actions, the Federal Rules of Civil Procedure mandate uniformity[10] that preclude courts from having license to depart from the requirements of specific rules for certain types of cases.

Rule 56 requires the absence of any “genuine dispute as to any material fact,” and in cases such as Doe, there was nothing but factual disputes presented since Doe’s treating doctors deemed the patient’s treatment medically necessary and the plan’s doctors thought otherwise. Thus, the First Circuit’s view of summary judgment as quoted above deviates markedly from typical requirements for the entry of that draconian remedy.

The refusal to permit a trial also tends to conflate de novo review with ERISA’s other potential review standard — arbitrary and capricious — which typically involves a court’s examination of a claim record to determine whether the benefit decision is reasonable rather than correct.[11] A record review under the de novo standard is hardly different if a judge, who lacks medical expertise, is called upon to weigh competing medical opinions without having the benefit of hearing witnesses testify and assessing their credibility under examination and cross-examination.

In 2003, the Supreme Court ruled in Black & Decker Disability Plan v. Nord[12] that while ERISA plan administrators are not required to give deference to medical opinions offered by treating doctors, they nonetheless must take such opinions into consideration. Courts are ill-equipped to assess the validity and reliability of competing medical opinions without a trial.

The Seventh Circuit’s view of de novo review is also more consistent with the Supreme Court’s jurisprudence regarding plenary versus review proceedings, and with how the Supreme Court characterized de novo review in Firestone, where the court applied a trust law approach to adjudicating benefit disputes under ERISA and observed:

The trust law de novo standard of review is consistent with the judicial interpretation of employee benefit plans prior to the enactment of ERISA. Actions challenging an employer’s denial of benefits before the enactment of ERISA were governed by principles of contract law.[13]

The Supreme Court has also addressed cases arising in other contexts where the lower courts were at odds as to whether courts are permitted to resolve disputes on record review or must hold trials. The court has consistently maintained that plenary hearings are the norm unless the enabling statute says otherwise.

In the employment discrimination context, in Chandler v. Roudebush in 1976[14] the Supreme Court rejected file reviews as the means for courts to resolve federal employee discrimination claims. More recently, the Supreme Court applied the same principles in Kappos v. Hyatt in 2012,[15] which flatly rejected an argument that civil actions challenging the denial of a patent would be resolved following a court’s review of a claim record. The court mandated a trial with examination and cross-examination of witnesses.

A young woman’s serious mental health problems were at stake here. On one side of the dispute were expert treating doctors who were intimately involved with the plaintiff’s treatment and knowledgeable about her history and medical needs. On the other were doctors hired by the benefit plan who never examined Doe. Without an opportunity to hear testimony and cross-examination, the district court had no basis for concluding the plan’s expert opinions were more reliable and informed than the treating doctors’ opinions.

Several recent court rulings that overturned benefit denials under similar circumstances[16] have raised concerns about the accuracy of the medical opinions offered by benefit plans and whether such opinions are consistent with generally accepted standard of medical care and treatment. With those rulings in mind, the court in Doe should have been more skeptical about taking the plan’s medical conclusions at face value. If the First Circuit held the same view of de novo review of ERISA cases as the Seventh Circuit, this case would almost certainly have had a different outcome.

Mark DeBofsky is a shareholder at DeBofsky Law.

This article was originally published in Law 360 on September 23, 2020

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 570 F.3d 841 (7th Cir. 2009).

[2] 489 U.S. 101 (1989).

[3] 570 F.3d at 843.

[4] Id.

[5] 2020 U.S. App.LEXIS 28507, 2020 WL 5405367 (1st Cir. Sept. 9, 2020).

[6] 904 F.3d 1 (1st Cir. 2018).

[7] 2020 U.S. App. LEXIS 28507 *5 (citations omitted).

[8] Citing Orndorf v. Paul Revere Life Ins. Co. , 404 F.3d 510, 519 (1st Cir. 2005) for the proposition that judicial review does not “warrant calling as witnesses those persons whose opinions and diagnosis or expert testimony and reports are in the administrative record.” Id. at *12.

[9] DeBofsky, “A Critical Appraisal of the Current State of ERISA Civil Procedure — An Examination of How Courts Treat ‘Civil Actions’ Brought under the Retirement Income Security Act,” 18 Chicago-Kent Employee Rights & Employment Policy Journal 203 (2014).

[10] Rules 1 and 2 of the Federal Rules of Civil Procedure require the Rules to apply to all “civil actions.”

[11] See, e.g., Perlman v. Swiss Bank Corp. , 195 F.3d 975, 981-82 (7th Cir. 1999).

[12] 538 U.S. 822 (2003).

[13] 489 U.S. at 112-13.

[14] 425 U.S. 840 (1976).

[15] 566 U.S. 431 (2012).

[16] See, Wit v. United Behavioral Health , , 2019 U.S.Dist. LEXIS 35205, 2019 WL 1033730 (N.D. Cal. March 5, 2019); S.B. v. Oxford Health Ins., Inc. , 419 F.Supp.3d 344 (D. Conn. 2019); Jamie F v. Unitedhealthcare Insur. Co. , 2020 U.S. Dist. LEXIS130532, 2020 WL 4249200 (N.D. Cal. July 23, 2020); Bain v. Oxford Health Ins. , 2020 U.S. Dist. LEXIS 30874, 2020 WL 808236 (N.D. Cal. February 14, 2020); Andrew C v. Oracle America, Inc. , 2020 U.S. Dist. LEXIS 132720, 2020 WL 4284839 (N.D. Cal. July 27, 2020).

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