A recent ruling from the U.S. Court of Appeals for the Fourth Circuit made it clear that the Employee Retirement Income Security Act’s deferential review standard is not a rubber stamp of claim determination made by benefit plans.

In Garner v. Central States, Southeast and Southwest Areas Health and Welfare Fund Active Plan,[1] the Fourth Circuit on April 20 affirmed a ruling issued by the U.S. District Court for the Middle District of North Carolina holding that a health benefit plan had abused its discretion when it denied Dorothy Garner’s claim for back surgery.

In an opinion authored by U.S. Circuit Judge J. Harvie Wilkinson, the court made several crucial points that are universally applicable to all ERISA benefit dispute cases.

The Fourth Circuit upheld the district court’s findings as to two significant issues relating to the manner in which the claim was evaluated.

The first was that the doctor who initially reviewed the reimbursement request for medical necessity was not furnished with the MRI scan taken of the plaintiff. That omission was significant because the MRI revealed findings that led Garner’s treating doctor to recommend surgery.

The reviewing doctor was also not supplied with the treating doctor’s notes in which he documented the rationale for performing surgery following a review of the MRI.

Garner appealed the unfavorable claim decision but was unsuccessful because a second doctor hired by the plan to review the claim concurred with the initial doctor’s opinion.

Although the second doctor considered all of Garner’s records, the Fourth Circuit found that the procedural defect in the initial review was not cured because the second doctor misstated the course of Garner’s treatment leading up to her surgery.

Thus, the Fourth Circuit concluded that despite according deference to the plan’s determination, the denial was not “the result of a deliberate, principled, reasoning process,” as circuit precedent requires.[2]

The court ruled that the plan administrator’s failure to supply its medical consultant with all of the relevant medical records resulted in a decision that was not reasoned and principled nor consistent with the purposes and goals of the plan.

That error was compounded by the second reviewing doctor, whose opinion was based a false assumption that the claimant had not received conservative treatment before undergoing surgery. In fact, Garner had undergone extensive conservative treatment, which was unsuccessful in remediating her symptoms.

The court went even further, though, and determined there was no basis for Central States to require conservative treatment as a precondition to approving surgery.

The court pointed out that the plan offered no justification for requiring such treatment as an absolute condition. The court suggested, “Sometimes it is readily apparent that no amount of conservative treatment would alleviate a patient’s pain or render surgery unnecessary.”

Moreover, the court deemed the imposition of a “fail first” requirement the equivalent of “effectively … [adding] a new term to the plan, a term for which Garner did not bargain, and about which she lacked any notice.”[3]

Finally, although the Fourth Circuit was careful to state that it was not making a finding that Central States acted in bad faith, it refused to remand the matter to the plan and upheld the district court’s order requiring that the claim be paid.

The court pointed out that the plan had no fewer than three opportunities to properly adjudicate the matter during the claim and appeal process, yet failed to give the claim appropriate consideration. Hence, the court concluded:

It would neither encourage the careful and efficient resolution of benefits claims, nor would it be fair to Garner, to permit Central States a fourth opportunity. Three strikes are enough.

Although the opinion is brief, the Fourth Circuit made several obvious but key points.

First, discretion is not limitless, and it is an abuse of discretion to fail to supply a medical consultant with all of the relevant medical records.

A doctor’s opinion relied on by the plan that was not based on a full review of the relevant evidence was viewed by the court as neither principled nor reasoned. That affords guidance to both the plaintiff and defense bars. In future cases involving medical opinions, plaintiffs should be alert to whether the consultants retained by benefit plans reviewed and considered all of the relevant evidence.

Likewise, attorneys who advise plans should make this issue part of the compliance advice they offer their clients. Upon receipt of reports from medical consultants, it should be ascertained whether all the evidence was addressed.

Second, the plan’s imposition of an absolute requirement that all conservative treatments must be exhausted before approving surgery was also considered an abuse of discretion.

While it may be relevant to consider whether conservative measures have failed, that needs to be done on a case-by-case basis. Imposing an absolute requirement was deemed both unreasonable and imposed requirements that are unstated in the plan.

Here, too, counsel — regardless of which side they are on — can benefit from the guidance offered in Garner. Counsel for claimants should carefully examine the rationale behind claim denials, and should be ready to pounce if the decision was based on a requirement that was not incorporated in the plan.

Those who advise plans should also make sure that the basis for any decision reached is soundly grounded on plan terms.

Third, the court’s position — refusing to grant a remand in this case because the evidence was clear-cut and the plan had failed to properly administer the claim — is a step forward in undermining the practice in ERISA claims of permitting remands.

However, the court could have gone even further based on a concurring opinion in the U.S Court of Appeals for the Sixth Circuit’s November 2021 ruling in Card v. Principal Life Insurance Co.,[4] which pointed out that remands of ERISA cases are an anomaly unique to ERISA procedure that is entirely lacking in statutory authority.

Finally, there is a critical fourth issue that Judge Wilkinson pointed out: An abuse of discretion may exist when the benefit determination is inconsistent with the purpose of the plan.

The purpose of the Central States plan was to reimburse plan participants and their beneficiaries for medically necessary services. A denial that is plainly contrary to a plan’s purpose obviously cannot stand, no matter how much discretion is reserved by the plan administrator.

As the Fourth Circuit made clear, discretion is not limitless, and the Garner opinion skillfully mapped out where the boundaries of discretion end.

These principles are mandated by ERISA’s fiduciary requirements, as well as the requirement that claimants for benefits have the right to a full and fair review, as set forth in ERISA Section 503.[5]

As the U.S. Supreme Court explained in its 2008 Metropolitan Life Insurance Co. v. Glenn decision,[6] in addition to acting “solely in the interests of plan participants and beneficiaries,”[7] ERISA “simultaneously underscores the particular importance of accurate claims processing by insisting that administrators provide a full and fair review of claim denials.”[8]

The Garner ruling issued by the Fourth Circuit reinforces the requirement that administrators of employee benefit plans must provide benefit claimants with reviews that are both full and fair.

Mark D. DeBofsky is a shareholder at DeBofsky Law.

This article was first published by Law 360 on May 10, 2022.

[1] Garner v. Central States, 2022 U.S. App. LEXIS 10737, 2022 WL 1160386 (4th Cir. April 20, 2022).

[2] Evans v. Metro. Life Ins. Co., 358 F.3d 307, 310–11 (4th Cir. 2004).

[3] Citing Jones v. Metro. Life Ins. Co., 385 F.3d 654, 661 (6th Cir. 2004) (“Discretion to interpret a plan, however, does not include the authority to add eligibility requirements to the plan.”).

[4] Card v. Principal Life Ins. Co., 17 F.4th 620 (6th Cir. 2021) (Murphy, J., concurring).

[5] 29 U.S.C. § 1133.

[6] 554 U.S. 105, 115 (2008).

[7] 29 U.S.C. § 1104(a)(1).

[8] Citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113 (1989) (internal quotations omitted).

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