Because federal courts generally consider the scope of their review of an ERISA benefit denial as being limited to review of a record, what happens if significant material evidence such as a Social Security determination becomes available only after the claim appeals are exhausted. If the standard of judicial review is arbitrary and capricious, it may be tough luck of the claimant. Majeski v. Metropolitan Life Ins.Co., 590 F.3d 478 (7th Cir. 2009); White v. Airline Pilots Assn., 364 F.Supp.2d 747 (N.D.Ill. 2005); Groth v. Centurylink Disability Plan, 2016 WL 1621724 (S.D. Ohio April 25, 2016).And in situations where the evidence could have been obtained and presented earlier, the courts will not allow the evidence later – Alford v. DCH Foundation Group Long-Term Disability Plan, 311 F.3d 955 (9th Cir. 2002). Thus, we counsel all of our clients as to the need to obtain whatever expert support is necessary during the claim process.

Under the de novo standard of judicial review, though, the rules are a little different as illustrated by a recent federal court ruling from California, Nagy v. Group Long Term Disability Plan for Employees of Oracle America, Inc., 2016 WL 1611040 (N.D. Cal. April 22, 2016).  The Nagy ruling involved a claimant who suffered from chronic fatigue syndrome.  The court deemed it a close case because Nagy submitted substantial evidence supporting disability, while Hartford Insurance obtained file-review reports that took an opposite position.  However, the court also considered a favorable Social Security award, even though it was issued after the claim appeals were exhausted

Citing Opeta v. Northwest Airlines Pension Plan for Contract Employees, 484 F.3d 1217 (9th Cir. 2007), the court cited circumstances that would support the admission and consideration of such evidence:

claims that require consideration of complex medical questions or issues regarding the credibility of medical experts; the availability of very limited administrative review procedures with little or no evidentiary record; the necessity of evidence regarding interpretation of the terms of the plan rather than specific historical facts; instances where the payor and the administrator are the same entity and the court is concerned about impartiality; claims which would have been insurance contract claims prior to ERISA; and circumstances in which there is additional evidence that the claimant could not have presented in the administrative process.

The court found many of the listed circumstances were present, and concluded the SSA decision was

necessary to conduct an adequate de novo review of Nagy’s claims. CFS is a complicated medical condition, for which there are no objective tests and for which a diagnosis depends in large part on the patient’s self-reported symptoms. See Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 677 (9th Cir. 2011). Thus, the Court is faced with an unavoidable credibility dispute between the ERISA beneficiary and his treating physicians on one hand, and the insurer’s medical experts on the other, without having heard testimony from the individuals whose credibility is being questioned. In a situation such as this one, where the Court’s holding inevitably relies on a credibility determination, and an administrative law judge (“ALJ”) has heard testimony from the claimant, evaluated the medical record, and made a well-reasoned disability determination, the ALJ’s decision is probative of Nagy’s disability at the time he applied for LTD benefits. Accordingly, while the SSA Decision is not binding, the Court will consider Nagy’s SSA Decision in evaluating whether Nagy was disabled under the terms of the Policy. See Schramm v. CNA Fin. Corp. Insured Grp. Ben. Program, 718 F. Supp. 2d 1151, 1165 (N.D. Cal. 2010) (considering extrinsic award of SSDI benefits); Oldoerp v. Wells Fargo & Company Long Term Disability Plan, No. C 08-05278 RS, 2013 WL 6000587, at *3 (N.D. Cal. Nov. 12, 2013) (same).

Weighing all of the evidence, including the Social Security determination, the court ruled for Nagy. The decision to admit the SSA finding was critical. The Opeta language quoted above comes originally from a Fourth Circuit case, Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1025 (4th Cir.1993) (en banc)), which has since been cited in most circuits.

And the court was absolutely right in pointing out the value of the ALJ having heard testimony and rendering a decision that takes the claimant’s credibility and demeanor into consideration.  One thing the court did not mention, though, is that the decision itself should be supplemented with the entire claim record, including the recorded testimony, so the court has the benefit of that evidence as well.

Another point that was glossed over by the court is that the SSA determination was ultimately the result of the application of the Social Security Medical-Vocational Rules, 20 C.F.R. Sec. 404, Subpart P, Appendix 2.  While some courts have suggested the value of those rules in adjudicating disability benefit disputes under ERISA (see, Demirovic v. Building Service 32B-J Pension Fund, 467 F.3d 208 (2d Cir. 2006)), that point has yet to be conclusively established.

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