PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

JOANNE GAGLIANO, 

Plaintiff-Appellee,

v.

RELIANCE STANDARD LIFE

INSURANCE COMPANY,

Defendant-Appellant,  No. 07-1901 and

MARIAM, INCORPORATED, trading as

Darcars Automotive Group;

UNNAMED LONG TERM DISABILITY

INSURANCE PLAN FOR EMPLOYEES OF

DARCARS,

Defendants. 

Appeal from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Leonie M. Brinkema, District Judge.

(1:03-cv-00160-LMB)

Argued: September 25, 2008

Decided: November 18, 2008

Before NIEMEYER and AGEE, Circuit Judges,

and Richard L. VOORHEES, United States District Judge

for the Western District of North Carolina, sitting by

designation.
Affirmed in part, reversed in part, and remanded by published

opinion. Judge Agee wrote the opinion, in which Judge Niemeyer and Judge Voorhees joined.

COUNSEL

Joshua Bachrach, WILSON, ELSER, MOSKOWITZ,

EDELMAN & DICKER, L.L.P., Philadelphia, Pennsylvania,

for Appellant. Karl William Pilger, BORING & PILGER,

P.C., Vienna, Virginia, for Appellee.

OPINION

AGEE, Circuit Judge:

Reliance Standard Life Insurance Company ("Reliance")

appeals from the judgment of the United States District Court

for the Eastern District of Virginia at Alexandria, in favor of

Joanne Gagliano ("Gagliano"). The district court held that

Gagliano was entitled to benefits under a policy of disability

insurance issued by Reliance, based on noncompliance with

certain procedural requirements of the Employee Retirement

Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et

seq. For the following reasons, we affirm in part and reverse

in part the judgment of the district court. We hold that,

although Reliance violated ERISA, the proper remedy is to

remand the case to the plan administrator for a full and fair

review. 

I.

On March 13, 2001, Gagliano enrolled in an employee welfare benefit plan ("the Plan") offered by her employer,

Mariam, Incorporated ("Darcars"). The Plan was insured by

Reliance, also the plan administrator. In September, 2001,

Gagliano, a finance manager for her employer, "was diag2 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
nosed with stress syndrome, anxiety disorder, depression and

migraine by her treating physician and was advised to discontinue working at Darcars until her condition improved."

Gagliano v. Reliance Standard Life Ins. Co., No. 1:03-cv-160,

slip op. at 2 (E.D. Va. Aug. 22, 2007). In October, 2001,

Gagliano filed a claim with Reliance for short-term disability

benefits based on these mental health problems. Id. Reliance

approved her claim for short-term benefits, and began reviewing her claim for long-term disability benefits.1

 In that process, Reliance requested that Gagliano complete a PreExisting Conditions Questionnaire to verify that the PreExisting Conditions Limitation did not apply to her claim.2

Gagliano completed the Questionnaire and Reliance approved

her claim for long-term disability benefits in March, 2002.3

Upon a review of Gagliano’s medical records, Reliance

determined "that the medical records provided do not support

a physical or mental condition, which would prevent you from

performing your occupation as a finance manager in the general economy." A covered disability under the Plan required

that "an Insured cannot perform the material duties of his/her

regular occupation." By a letter dated September 17, 2002

(the "Initial Termination Letter"), Reliance informed Gagliano that it was terminating the long-term disability benefits

because she was not restricted from returning to work and

thus failed to qualify for disability benefits under the Plan. 

1Gagliano received the short-term disability benefits provided under the

Plan. The issue in this case relates only to the termination of Gagliano’s

long-term disability benefits. 

2The Pre-Existing Conditions Limitation under the Plan excludes from

coverage any claims that arose from a pre-existing condition, defined as

"any Sickness or Injury for which the Insured received medical treatment,

consultation, care or services . . . during the three months immediately

prior to the Insured’s effective date of insurance." March 13, 2001 was

Gagliano’s effective date of insurance. 

3Although long-term, these benefits are limited under the Plan to payments for twenty-four months. 

GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 3
The Initial Termination Letter included the requisite notice

required by ERISA, 29 U.S.C. § 1133, informing Gagliano of

her right to appeal the denial of her claim. Gagliano did

timely appeal the denial of benefits in the Initial Termination

Letter to the plan administrator, but during the administrative

review process she filed the present civil action in the district

court on February 5, 2003 before the review was completed.

Gagliano’s complaint named Darcars, the Plan, and Reliance as defendants and alleged various breaches by them of

obligations under the Plan and ERISA. Gagliano alleged that

she "has met and currently meets all requirements for the

receipt of long term disability benefits from Reliance," including an inability to return to work. Gagliano claimed that Reliance had abused its authority in failing to recognize that she

met the Plan requirements, had failed to articulate a rational

basis for the determination in the Initial Termination Letter,

and had relied on an incomplete record. Gagliano sought an

injunction directing payment to her of the long-term disability

benefits and preventing any adverse benefit determinations

against her "until such time as they have established a full and

fair review of claims and adverse benefit determinations, as

well as establishing and following reasonable claim procedures." In the alternative, Gagliano requested monetary damages, pre-judgment interest, and attorney’s fees.4

During summary judgment proceedings, the district court

determined that the record was not complete because the

administrative review of Gagliano’s appeal from the Initial

Termination Letter was unfinished. By order dated July 11,

2003 ("the July 11 Order"), the court stayed Gagliano’s pending motion for summary judgment and directed Reliance to

4Gagliano’s employer, Mariam, Incorporated, trading as Darcars Automotive Group, is a Maryland corporation that operates a group of car

dealerships in the Washington, D.C. area. Darcars was a defendant in the

initial suit filed by Gagliano. All claims against Darcars were resolved and

are not before the Court in this appeal. 

4 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
conduct an Independent Medical Examination ("IME") and to

"complete the administrative review process and render a

final decision on [Gagliano’s] administrative appeal." 

The IME established that Gagliano was suffering from a

covered disability which entitled her to benefits under the

Plan because her mental health condition prevented her from

working in her regular occupation. Gagliano, slip op. at 5.

Reliance then sent Gagliano a letter dated September 9, 2003

(the "Second Termination Letter"), purporting to be its final

decision on her claim pursuant to the July 11 Order. However,

the Second Termination Letter did not address the basis for

denial of benefits in the Initial Termination Letter or the

results of the IME, which were the subjects of the pending

administrative review. Instead, for the first time, Reliance

cited the Pre-Existing Conditions Limitation under the Plan as

the basis to deny the disability benefits. Reliance informed

Gagliano in the Second Termination Letter that her medical

records presented for review showed she had received treatment for "stress syndrome/anxiety disorder" within three

months of March 13, 2001, the effective date of her insurance

under the Plan. Since Gagliano "received medical care for a

condition(s) which caused, contributed to or resulted in her

eventual Total Disability due to psychiatric illness during the

three months prior to her effective date of coverage, her claim

must be refused under the Policy’s Pre-Existing Conditions

Limitation." 

The Second Termination Letter did not advise Gagliano

that she was entitled to an administrative appeal, or otherwise

reference her rights under ERISA. Reliance further stated in

the Second Termination Letter that "our claim decision is now

final in accordance with the court’s July 11, 2003 ruling . . . .

[H]owever, . . . we would be happy to consider any additional

information . . . if the court thinks further review by [Reliance] would be warranted in the present case."

Gagliano again moved for summary judgment, arguing that

Reliance improperly denied benefits in the Second TerminaGAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 5
tion Letter on entirely new grounds and its "failure to even

minimally comply with ERISA." Reliance responded that it

was Gagliano’s lack of complete disclosure on the Questionnaire which prevented it from asserting the Pre-Existing Conditions Limitation at an earlier time. In light of this argument,

the district court denied Gagliano’s motion for summary judgment and sua sponte reconsidered and granted Reliance’s previously denied motion for summary judgment by order of

October 20, 2003. Gagliano timely filed a motion for rehearing and reconsideration and relief from that judgment. For

reasons not adequately explained in the record, this motion

lay dormant in the district court until Gagliano renewed the

motion in January, 2007. The district court directed the parties

to re-file motions for summary judgment. By opinion and

order dated August 22, 2007, the court awarded summary

judgment to Gagliano. 

The district court held that Reliance did not comply with

the notice requirements of ERISA when it denied Gagliano’s

claim in the Second Termination Letter on a different basis

than in the Initial Termination Letter. By doing so, Reliance

did not accord Gagliano the opportunity for administrative

appeal of its decision to terminate benefits based on the PreExisting Conditions Limitation. Gagliano, slip op. at 9-10.

The district court held this action violated the notice requirements under ERISA, particularly 29 U.S.C. § 1133 and its

underlying regulations.

The district court then determined that the proper remedy

for the violation of ERISA’s procedural requirements was to

award the payment of disability benefits to Gagliano rather

than to remand the case to the plan administrator for an

administrative review on the Pre-Existing Conditions Limitation issue. The court opined that Reliance "negligently misse[d] available facts" by failing to cite the Pre-Existing

Conditions Limitation in the Initial Termination Letter, and

that Reliance, "given the equitable nature of the protections

found in ERISA," should not be allowed to benefit by this

6 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
"mistake" with a "second chance to litigate [the] issue."

Gagliano, slip op. at 15. The court vacated its earlier award

of judgment to Reliance and ordered Reliance to pay Gagliano the remaining disability benefits because "[i]t was Reliance’s failure to evaluate that evidence in its initial processing

of Gagliano’s claims that led to this litigation." Id.

Reliance timely brings this appeal of the district court’s

judgment. This Court has jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.

II.

Reliance argues four issues on appeal. First, Reliance

asserts no procedural violation of ERISA occurred, therefore

the district court could not award judgment to Gagliano. Next,

Reliance contends that the district court erred when it held

that Reliance could not assert the Pre-Existing Conditions

Limitation because Reliance was "negligent" in failing to

properly recognize that defense before assigning a different

basis for termination of benefits in the Initial Termination

Letter. Third, Reliance argues that, even if there was a procedural ERISA violation, the district court erred because the

proper remedy was a remand of the case to the plan administrator for an administrative review of the termination basis in

the Second Termination Letter. Lastly, Reliance posits that

the district court erroneously reconsidered its earlier award of

summary judgment to Reliance because there was no basis to

do so.

On appeal from the district court, we review de novo the

court’s conclusions of law. Provident Life & Accident Ins. Co.

v. Cohen, 423 F.3d 413, 418 (4th Cir. 2005). We also review

de novo a district court’s ruling on a motion for summary

judgment. Eckelberry v. Reliastar Life Ins. Co., 469 F.3d 340,

343 (4th Cir. 2006).

GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 7
A. ERISA Violation

ERISA requires that every employee benefit plan "provide

adequate notice in writing to any participant or beneficiary

whose claim for benefits . . . has been denied, setting forth the

specific reasons for such denial." 29 U.S.C. § 1133 (2008).

The Plan must further "afford a reasonable opportunity to any

participant whose claim for benefits has been denied a full

and fair review by the appropriate named fiduciary of the

decision denying the claim." Id. The regulations implementing these statutory requirements provide that a "full and fair

review" includes the opportunity for the claimant to appeal

the adverse benefits determination and to submit written comments or records. The claimant must also be given reasonable

access to documents relevant to her claim, and the resulting

review must take into account all relevant information submitted by the claimant. 29 C.F.R. § 2560.503-1(h)(1-2) (2008).

The purpose of the ERISA mandated appeal process is an

important one. That process enables a claimant who is denied

benefits to have an impartial administrative review, but also

make an administrative record for a court review if that later

occurs. Ellis v. Metro. Life Ins. Co., 126 F.3d 228, 236-37

(4th Cir. 1997). Without this opportunity to make a meaningful administrative record, courts could not properly perform

the task of reviewing such claims, a specific function

entrusted to the courts by ERISA. Moreover, plan participants

would be denied their statutory rights. Id. Procedural guidelines are at the foundation of ERISA and "full and fair review

must be construed . . . to protect a plan participant from arbitrary or unprincipled decision-making." Weaver v. Phoenix

Home Life Mut. Ins. Co., 990 F.2d 154, 157 (4th Cir. 1993)

(quoting Grossmuller v. UAW Local 813, 715 F.2d 853, 857

(3d Cir. 1983)).

The district court’s award of summary judgment to Gagliano was based on the threshold determination that "[i]t is

uncontested that Reliance failed to comply with the notice

8 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
requirements of ERISA, because it never afforded Gagliano

the opportunity to appeal its decision to terminate her benefits

on the new ground of the pre-existing condition exclusion."

Gagliano, slip op. at 9. On appeal, Reliance argues that holding is contested and contends no ERISA violation, procedural

or otherwise, occurred and thus Gagliano was not entitled to

judgment.

Reliance contends that no ERISA violation occurred by virtue of the claim resolution in the Second Termination Letter

because (1) ERISA "only requires the inclusion of appeal language in an initial denial letter," (Br. 27); (2) the July 11

Order required a "final decision on plaintiff’s administrative

appeal" and therefore took precedence over any ERISA statutory requirement; and (3) assuming a technical ERISA violation occurred, Reliance nonetheless "substantially complied

with its obligations under ERISA, and that is all that is

required." (Br. 29). For the following reasons, we disagree

with Reliance.

1. Initial Denial

The Initial Termination Letter denied Gagliano benefits

because "the records do not include information to suggest

that you are restricted from returning to work." It is from this

determination that she noted her administrative appeal and,

that appeal not having been resolved when Gagliano filed her

complaint in the district court, was the subject matter to which

the July 11 Order was directed.

However, the grounds Reliance cited to deny Gagliano’s

claim for disability benefits in the Second Termination Letter

were completely different from those in the Initial Termination Letter. In fact, Reliance never addressed in the Second

Termination Letter the grounds for denial in the Initial Termination Letter. Instead, the Second Termination Letter cited a

wholly new basis to deny Gagliano’s claim, the Plan’s PreExisting Conditions Limitation.

GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 9
Assuming, but not deciding, that the notice and appeal

requirements, as implemented by the ERISA regulations, 29

C.F.R. § 2560.503-1(h) et seq., apply only to an "initial"

denial, it is clear the denial of benefits rationale in the Second

Termination Letter was an initial denial on the basis of the

Pre-Existing Conditions provision. As such, Gagliano was

statutorily entitled to the ERISA appeals notice as to the new

basis for denying her claim and Reliance failed to provide that

notice. Reliance thus cannot avoid the determination of an

ERISA violation under 29 U.S.C. § 1133, for failure to provide the required appeal information in the Second Termination Letter, because that letter was an initial denial as to the

Pre-Existing Conditions Limitation. 

2. The July 11 Order

Reliance next contends that if an ERISA appeals notice to

Gagliano was required, based on the new grounds in the Second Termination Letter, it was relieved of that requirement by

the directory language of the July 11 Order, to "render a final

decision on plaintiff’s administrative appeal." 

As just noted above, however, the Second Termination Letter did not address the subject matter of Gagliano’s administrative appeal (the reason for denial of benefits in the Initial

Termination Letter), but made a "final decision" to deny benefits on a wholly new ground (pre-existing condition). Nothing

in the July 11 Order limited Reliance’s statutory duty to comply with the mandates of ERISA while making a "final decision," even though the Second Termination Letter effectively

made an initial decision on new grounds. Moreover, we are

aware of no provision in ERISA or otherwise, which would

permit the district court, by judicial fiat, to abrogate and nullify a claimant’s validly existing statutory entitlements under

ERISA. 

The force of such a rule, making the party act on

pain of certain punishment regardless of the validity

10 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
of the order violated or the court’s jurisdiction to

enter it as determined finally upon review, would be

not only to compel submission. It would be also in

practical effect for many cases to terminate the litigation, foreclosing the substantive rights involved

without any possibility for their effective appellate

review and determination.

United States v. United Mine Workers of America, 330 U.S.

258, 351-52 (1947).

Putting aside the frailty of Reliance’s proposed judicial limitation of a claimant’s statutory rights, it is evident from the

plain language of the July 11 Order that the district court did

not direct Reliance to ignore Gagliano’s ERISA rights during

the process of an administrative review or purport to grant

Reliance the authority to do so.

3. Substantial Compliance

Citing Ellis v. Metropolitan Life Insurance Co., 126 F.3d

228 (4th Cir. 1997), for the proposition that "substantial"

compliance with the spirit of the regulation will suffice, for

"not all procedural defects will invalidate a plan administrator’s decision," id. at 235 (quoting Brogan v. Holland, 105

F.3d 158, 165 (4th Cir. 1997)), Reliance contends the language of the Second Termination Letter was in substantial

compliance with the ERISA requirement for appeal notice to

a claimant. Specifically, Reliance posits that the closing sentence of the Second Termination Letter, "we would be happy

to consider any additional information your client wishes

[Reliance] to review" effectuated substantial compliance with

ERISA. We disagree.

Reliance does not challenge the validity of the regulations

at 29 C.F.R. § 2560.503-1 implementing the notice provision

of 29 U.S.C. § 1133. Those regulations specify the claims

procedures necessary to meet the ERISA requirements for a

GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 11
"full and fair review," including, but not limited to the following:

[T]he claims procedures of a plan will not be

deemed to provide a claimant with a reasonable

opportunity for a full and fair review of a claim and

adverse benefit determination unless the claims procedures . . . (ii) Provide claimants the opportunity to

submit written comments, documents, records, and

other information relating to the claim for benefits;

(iii) Provide that a claimant shall be provided, upon

request and free of charge, reasonable access to, and

copies of, all documents, records, and other information relevant to the claimant’s claim for benefits; (iv)

Provide 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)-(iv) (2008); see also

§ 2560.503-1(h)(4). Reliance’s offer to "consider any additional information" is not remotely close to any concept of

substantial compliance under the regulations and is further

evidenced by the absence of any case authority cited by Reliance to support its argument. Thus, the contention that Reliance substantially complied with the ERISA notice

requirements is without merit.

Accordingly, we conclude the district court did not err in

determining "that Reliance failed to comply with the notice

requirements of ERISA," Gagliano, slip op. at 9, and affirm

the district court’s judgment in that regard.

B. Remedy

"Having concluded that Reliance violated ERISA," the district court properly reasoned that "the remaining question is

12 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
how to remedy the violation." Gagliano, slip op. at 11. Concluding that Reliance made a mistake in not initially asserting

the Pre-Existing Conditions Limitation as the basis to terminate Gagliano’s disability benefits, the district court held that

this "negligent failure" on the part of Reliance was a bar "to

a second chance to litigate an issue." Id. at 15. Citing Wenner

v. Sun Life Assurance Co. of Canada, 482 F.3d 878 (6th Cir.

2007), the district court opined that once Reliance denied

Gagliano’s claim for the reason given in the Initial Termination Letter, it could not thereafter support termination of "benefits for an entirely different and theretofore unmentioned

reason" in the Second Termination Letter. Wenner, 482 F.3d

at 882. To do so, the district court reasoned, nullifies "the

opportunity for ‘full and fair review’" as afforded by ERISA.

"When an insurer changes the basis for its denial during the

appeal process—whether during administrative review or

judicial review—that opportunity is lost."5 Gagliano, slip op.

at 10. Insomuch as the record reflected the basis for denial of

benefits in the Initial Termination Letter was no longer valid,6

and Reliance could not assert the Pre-Existing Conditions

Limitation, no other basis existed in the record to deny Gagliano’s claim. The district court thus concluded an award to

Gagliano of the long-term disability benefits was the appropriate remedy. "To allow an insurance company to benefit

from its own negligence in the processing of an ERISA bene5The district court also relied on an unpublished opinion from this circuit, Thompson v. Life Insurance Co. of North America, 30 Fed. Appx.

160 (4th Cir. Mar. 4, 2002) (unpublished), for this viewpoint. For the reasons set forth herein, Thompson appears incorrectly decided, but is of no

precedential value in any event. 

6The basis for terminating benefits in the Initial Termination Letter was

that Gagliano was able to perform the functions of her employment and

was not suffering from a covered disability. However, the IME conducted

pursuant to the July 11 Order proved this rationale was not valid. The

evaluating physician found that "Mrs. Gagliano’s current emotional and

psychological condition would prevent her from returning to her job in the

finance office of an automobile dealership." Reliance did not contest this

finding in the district court or on appeal. 

GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 13
fit claim would send the wrong message to insurers, unduly

extend the review process, and pose potential unreasonable

burdens on the judiciary, which would be faced with multiple

rounds of litigation." Gagliano, slip op. at 15.

Reliance contends the district court’s remedy was in error

for several reasons. First, Reliance argues the district court

ignored Fourth Circuit precedent which establishes "that state

law claims for waiver and estoppel are pre-empted by

ERISA," but that the court nonetheless applied the concept of

waiver to estop Reliance from asserting the Pre-Existing Conditions Limitation. Second, Reliance contends the summary

award of benefits to Gagliano is contrary to controlling Fourth

Circuit precedent when a procedural ERISA violation is

involved. Instead, Reliance contends a substantive remedy is

inappropriate for a procedural ERISA violation and the correct remedy is a remand to the plan administrator for a "full

and fair review." We agree with Reliance.

1. ERISA Preemption

In White v. Provident Life & Accident Insurance Co., 114

F.3d 26 (4th Cir. 1997), the insurer issued an insurance policy

based upon a legitimate "mistake." Upon discovery of the

error, the insurer notified the insured of the mistake, tendered

repayment of all premiums, and cancelled the policy. The

insured asserted the insurer’s "mistaken acceptance of premiums constituted a waiver of its right to deny" the validity of

the policy. Id. at 29. We rejected that argument outright

because an ERISA claimant:

cannot premise this waiver theory on state law.

ERISA preempts "any and all State laws insofar as

they may now or hereafter relate to any employee

benefit plan" covered by ERISA. In Holland v. Burlington Industries, 772 F.2d 1140 (4th Cir. 1985), we

specifically held that state law waiver and estoppel

claims were preempted by ERISA, noting that such

14 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
claims pose a risk of creating "conflicting employer

obligations and variable standards of recovery." This

is precisely the result that ERISA’s broad preemption clause was enacted to avoid. 

Nor can White rely on the federal common law

under ERISA, which does not incorporate the principles of waiver and estoppel. 

White, 114 F.3d at 29. (citations omitted). See also Crull v.

GEM Ins. Co., 58 F.3d 1386, 1390 (9th Cir. 1995); Coleman

v. Nationwide Life Ins. Co., 969 F.2d 54, 58-59 (4th Cir.

1992); Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d

1272, 1275-76 (6th Cir. 1991). Although the district court did

not use the terms "waiver" or "estoppel," that is clearly the

actual effect of the court’s holding.

The "mistake" in White of negligently issuing the insurance

policy could not create an equitable bar of waiver and estop

the insurer from applying the ERISA plan as written and

administering the Plan in compliance with ERISA which

required cancellation of the insurance policy in question. Similarly, the "mistake" by Reliance in failing to initially assert

the Pre-Existing Conditions Limitation cannot estop Reliance

from asserting that exclusion under some notion of waiver

because Reliance is required to administer the Plan as written,

including the Pre-Existing Conditions Limitation. The district

court’s holding has the actual effect of deeming Reliance to

have waived the Pre-Existing Conditions Limitation and

estopping it from administering the Plan according to its

terms. But as we made clear in White, "ERISA . . . does not

provide for such unwritten modifications of ERISA plans. See

29 U.S.C. § 1102(a)(1) (requiring that ‘[e]very employee benefit plan shall be established and maintained pursuant to a

written instrument’); 29 U.S.C. § 1102(b)(3) (requiring that

an ERISA plan describe the formal procedures by which the

plan may be amended.)" White, 114 F.3d at 29. See also Canada Life Assurance Co. v. Estate of Lebowitz, 185 F.3d 231,

GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 15
235 (4th Cir. 1999) ("This Court will enforce the plain language of an insurance policy unless it is in violation of

ERISA."); Coleman, 969 F.2d at 56 ("While a court should be

hesitant to depart from the written terms of a contract under

any circumstances, it is particularly inappropriate in a case

involving ERISA, which places great emphasis upon adherence to the written provisions in an employee benefit plan.");

Lockhart v. United Mine Workers of America 1974 Pension

Trust, 5 F.3d 74, 78 (4th Cir. 1993) ("The award of benefits

under any ERISA plan is governed in the first instance by the

language of the plan itself.").

Under the terms of the Plan, a claimant with a pre-existing

condition (as defined in the Plan) is not entitled to receive

benefits. ERISA requires the Plan be administered as written

and to do otherwise violates not only the terms of the Plan but

causes the Plan to be in violation of ERISA. See 29 U.S.C.

§ 1102(a)(1) (2008). As the foregoing cases readily illustrate,

the district court was without authority to direct the plan

administrator to administer the Plan contrary to its terms by

injecting the prohibited concepts of waiver and estoppel.

Thus, the district court erred in making the effective holding

that Reliance was estopped from asserting the Pre-Existing

Conditions Limitation as a basis to deny Gagliano benefits

under the Plan.

2. Remand

Insomuch as Reliance can assert the Pre-Existing Conditions Limitation, the district court’s conclusion that Gagliano

was entitled to summary judgment because there was no

remaining basis for denial of the disability benefits is incorrect. Similarly, the district court’s holding that the procedural

ERISA violation, by virtue of the defective Second Termination Letter, entitled Gagliano to the substantive relief of an

award of benefits is also in error.

Our decision in Sedlack v. Braswell Services. Group, Inc.,

134 F.3d 219 (4th Cir. 1998), guides the result in this case.

16 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
We determined in Sedlack that, as in the case at bar, a defective notice to a plan participant could not create a substantive

remedy for a claim that was otherwise not cognizable under

the terms of the ERISA plan.

Section 1133 requires that every 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." 29 U.S.C. § 1133(1).

Although the district court found that Braswell’s

notices were defective, it held that Sedlack could not

recover for unreasonable claims practices because a

breach of section 1133 does not provide a claimant

with any new substantive rights. "Where, as here,"

the district court concluded, "Sedlack’s claim is not

covered, Braswell’s breach of section 1133 would

not entitle him to benefits or to an award of damages." This reasoning is sound and supported by persuasive judicial authority. See Ashenbaugh v.

Crucible Inc., 1975 Salaried Retirement Plan, 854

F.2d 1516, 1532 (3d Cir. 1988) (noting "general

principle" that "an employer’s or plan’s failure to

comply with ERISA’s procedural requirements does

not entitle a claimant to a substantive remedy"), cert.

denied, 490 U.S. 1105; Ellenburg v. Brockway, Inc.,

763 F.2d 1091, 1096 (9th Cir. 1985) ("A substantive

remedy would be appropriate only if the procedural

defects caused a substantive violation or themselves

worked a substantive harm.").

Sedlack, 134 F.3d at 225.

Even though Reliance failed to provide Gagliano with the

proper appeals notice required by ERISA in the Second Termination Letter, that procedural violation cannot afford Gagliano a substantive remedy if she has no entitlement to benefits

GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 17
under the terms of the Plan.7

 In cases where there is a procedural ERISA violation, we have recognized the appropriate

remedy is to remand the matter to the plan administrator so

that a "full and fair review" can be accomplished. "Normally,

where the plan administrator has failed to comply with

ERISA’s procedural guidelines and the plaintiff/participant

has preserved his objection to the plan administrator’s noncompliance, the proper course of action for the court is

remand to the plan administrator for a ‘full and fair review.’"

Weaver, 990 F.2d at 159. See also Caldwell v. Life Ins. Co.

of N. America, 287 F.3d 1276, 1288-89 (10th Cir. 2002).

The only exception to that rule would be where the record

establishes that the plan administrator’s denial of the claim

was an abuse of discretion as a matter of law. That was, in

fact, the situation in Weaver, where the insurer "produced no

evidence that it even remotely considered any specific reasons

in denying the claim." Weaver, 990 F.2d at 159. No similar

circumstance exists in the case at bar, as the record reflects,

at minimum, a colorable claim that the Pre-Existing Conditions Limitation applies.

The district court’s reliance on the Sixth Circuit’s decision

in Wenner was misplaced, both because it is contrary to the

law of this circuit and because that decision’s rationale is

flawed. In Wenner, a claimant’s ERISA benefits were ordered

reinstated, a substantive remedy, even though the only ERISA

violation was a 29 U.S.C. § 1133 procedural violation and the

merits of the claim had not been decided. The dissent in Wen7Whether the Pre-Existing Conditions Limitation does, in fact, apply is

not an issue before the Court in this appeal. Even though Reliance argues

on brief that the record proves the Pre-Existing Conditions Limitation

applies, and thus we should enter judgment for Reliance, this argument is,

at best, premature. Due to the failure of Reliance to comply with ERISA

notice requirements, Gagliano was denied her right to make an administrative record on the Pre-Existing Conditions Limitation issue as well as

other rights set forth in 29 C.F.R. § 2560-503-1(h). Reliance has no basis

to receive a judgment in its favor at this stage of the proceedings. 

18 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE
ner correctly analyzed the frailty of the majority position and

that of the district court in this case.

There is no legal basis to order the payment of

benefits as a penalty for violation of the procedural

requirements of ERISA. First, there is no statutory

basis in ERISA for the payment of benefits not otherwise required by the plan as a penalty for violating

procedural requirements. We held, for instance, in

McCartha v. National City Corp., 419 F.3d 437, 447

(6th Cir. 2005), that a plan administrator’s procedural violation did not require a substantive remedy

because the administrator affirmed the initial benefits denial on appeal. Thus, even though the administrator violated 29 U.S.C. § 1133, the plaintiff was

not entitled to a substantive remedy under ERISA

because the administrator properly determined that

the plaintiff was not entitled to disability benefits.

See also Marks v. Newcourt Credit Group, Inc., 342

F.3d 444, 461 (6th Cir. 2003); Syed v. Hercules, Inc.,

214 F.3d 155, 162 (3d Cir. 2000) (Alito, J.).

Reinstatement is not necessary in order to make

the plaintiff whole for a procedural violation. The

flaw in holding otherwise is that a plaintiff is more

than made whole—and indeed receives a windfall—if after proper procedures it is determined that

the plaintiff was not entitled to the benefits that the

administrator terminated with flawed procedures.

Wenner, 482 F.3d at 884 (Rogers, J., dissenting).

By failing to follow the precedent in this Circuit established

by Sedlack and Weaver, the district court erred in granting

Gagliano a substantive remedy in the form of an award of disability benefits for a procedural violation of ERISA. The

proper remedy was to remand to the plan administrator for the

"full and fair review" to which Gagliano is entitled regarding

GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE 19
the denial of benefits on the basis of the Pre-Existing Conditions Limitation in the Second Termination Letter. Accordingly, the district court’s award of summary judgment to

Gagliano is reversed.8

III.

For the foregoing reasons, the judgment of the district court

is affirmed in part, reversed in part, and the case remanded for

entry of an order to remand the case to the plan administrator

for a full and fair review regarding the basis for denial of benefits in the Second Termination Letter.

AFFIRMED IN PART, 

REVERSED IN PART, 

AND REMANDED

8As to Reliance’s final issue on appeal the district court did not err in

granting a motion to reconsider its earlier award of summary judgment to

Reliance. The district court has considerable discretion in deciding

whether to modify or amend a judgment. While it is true that it is a remedy

to "be used sparingly," this Court has determined that a motion to alter or

amend a judgment under Rule 59(e) is appropriate on three different

grounds: "(1) to accommodate an intervening change in controlling law;

(2) to account for new evidence not available at trial; or (3) to correct a

clear error of law or prevent manifest injustice." Pacific Ins. Co. v. Am.

Nat’l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998). 

The district court did not err in holding that there was an error of law

with respect to its earlier award of summary judgment to Reliance because

the earlier judgment did not take into account the procedural violation of

ERISA by Reliance. Accordingly, the district court’s reconsideration of its

prior judgment was appropriate. 

20 GAGLIANO v. RELIANCE STANDARD LIFE INSURANCE