Opinion ID: 2668799
Heading Depth: 1
Heading Rank: 2

Heading: The ERISA Standard of Judicial Review.

Text: A “denial of benefits challenged under [ERISA] is to be reviewed under a de novo standard unless the benefit plan gives the administrator . . . discretionary authority to determine eligibility for benefits.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). As the Supreme Court recently noted - Firestone deference[,] . . . by permitting an employer to grant primary interpretive authority over an ERISA plan to the plan administrator, preserves the ‘careful balancing’ on which ERISA is based. Deference promotes efficiency by encouraging resolution of benefits disputes through internal administrative proceedings rather than costly litigation. It also promotes predictability, as an employer can rely on the expertise of the plan administrator rather than worry about -6- unexpected and inaccurate plan interpretations that might result from de novo judicial review. Conkright v. Frommert, 559 U.S. 506, 517 (2010). Thus, although we require “explicit discretion-granting language” in an ERISA plan contained in a group health and welfare insurance policy, the policy need not use the word “discretion.” Hankins v. Standard Ins. Co., 677 F.3d 830, 835 (8th Cir. 2012). A. Prezioso first argues that the district court erred in applying the abuse of discretion standard because the plan did not include discretion-conferring language. Reviewing this issue de novo, see Ferrari v. Teachers Ins. & Annuity Ass’n, 278 F.3d 801, 806 (8th Cir. 2002), we first note that it was not properly preserved for appeal. In the district court, Prezioso moved to exclude documents generated after he filed this lawsuit as not properly part of the ERISA administrative record. Resolution of that issue very much depended on whether judicial review of Prudential’s decision would be conducted under the abuse of discretion or the de novo standard of review. Compare, e.g., Donatelli v. Home Ins. Co., 992 F.2d 763, 765 (8th Cir. 1993) (“[i]f it is necessary for adequate de novo review of the fiduciary’s decision, the district court may allow the parties to present [additional] evidence”), with Bounds v. Bell Atl. Enter. Flexible Long-Term Disability Plan, 32 F.3d 337, 339 (8th Cir. 1994). In response, Prudential advised that “the sole issue is whether Prudential abused its discretion when, based on the evidence in the administrative record, it denied Plaintiff’s claim for disability benefits.” In his Reply memorandum, Prezioso did not challenge this description of the applicable standard of review, thus either conceding the issue or leading the trial court into error in granting the motion to exclude. Turning to the merits of this issue out of an abundance of caution, we find it is governed by controlling Eighth Circuit precedent. The LTD plan expressly provided that, in considering a claim for LTD benefits, Prudential “may request . . . proof of continuing disability, satisfactory to Prudential.” Another provision stated -7- that benefits, if granted, will cease on the date “you fail to submit proof of continuing disability satisfactory to Prudential.” In Ferrari, we held that a plan requiring that the employee submit “written proof of continued total disability . . . satisfactory to [the plan administrator]” was sufficient to trigger abuse of discretion review. 278 F.3d at 806; accord Clapp v. Citibank N.A. Disability Plan (501), 262 F.3d 820, 823, 826-27 (8th Cir. 2001). Prezioso urges us to instead follow contrary decisions of other circuits. See Cosey v. Prudential Ins. Co. of Am., 735 F.3d 161, 166-68 & n.3 (4th Cir. 2012), and cases cited. As a panel, we may not do so. In any event, we find the reasoning in those decisions unpersuasive. Prezioso further argues that this case should be governed by our decisions noting that ambiguous language in an insurance policy does not confer discretion. See Rittenhouse v. UnitedHealth Group Long Term Disability Ins. Plan, 476 F.3d 626, 629 (8th Cir. 2007), citing Walke v. Group Long Term Disability Ins., 256 F.3d 835, 840 (8th Cir. 2001). But, contrary to this contention, the phrasing in Prudential’s LTD plan -- “satisfactory to Prudential” -- eliminated the ambiguity that prompted our decision in Walke. See 256 F.3d at 839-40. Moreover, there is far more in this case than the above-quoted policy provisions. As the district court noted, the LTD plan’s SPD clearly explained to plan participants that Prudential “has the sole discretion to interpret the terms of the Group Contract, to make factual findings, and to determine eligibility for benefits,” and that Prudential’s decisions as claims administrator “shall not be overturned unless arbitrary and capricious.” Prezioso argues the district court erred in relying on the SPD, citing cases holding that discretion-conferring language found only in the SPD is ineffective because “there would . . . be little need to follow formal [ERISA plan] amendment procedures if key terms could be changed by a summary plan description.” Ringwald v. Prudential Ins. Co. of Am., 609 F.3d 946, 949 (8th Cir. 2010) (quotation omitted). But this principle does not apply if the plan has language conferring discretion that is ambiguous, rather than absent altogether. To disregard SPD language clarifying a plan’s arguably ambiguous grant of discretion would be contrary to Department of Labor regulations requiring that SPDs -8- clearly describe “all claims procedures.” 29 C.F.R. § 2560.503-1(b)(2), crossreferencing § 2520.102-3. The district court correctly concluded that the plan language as confirmed by the SPD explicitly granted Prudential discretion to interpret the plan and to determine eligibility for benefits. B. Prezioso further argues that, even if the plan granted Prudential discretion, he is nonetheless entitled to de novo review because, when a plan administrator fails to act on a claimant’s appeal that “raises serious doubts about the administrator’s [initial] decision,” the initial decision “is subject to judicial review, and the standard of review will be de novo.” Seman v. FMC Corp. Ret. Plan for Hourly Emps., 334 F.3d 728, 733 (8th Cir. 2003). We reject this contention because it misconstrues the applicable ERISA statute and regulations. The statute provides that every plan must provide participants with adequate notice of claim denials and “a reasonable opportunity . . . for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” 29 U.S.C. § 1133(2). Claimants “must exhaust this procedure before bringing claims for wrongful denial to court.” Galman v. Prudential Ins. Co. of Am., 254 F.3d 768, 770 (8th Cir. 2001). Implementing § 1133(2), the Department of Labor’s regulations provide that every plan must establish a procedure “under which there will be a full and fair review of the claim and the adverse benefit determination.” 29 C.F.R. § 2560.503-1(h)(1).3 For group health plan disability claims, the plan must notify the claimant of its determination of the mandatory appeal within 45 days, subject to one 45-day extension for “special circumstances.” § 2560.503-1(i)(1), (3)(i). If the plan fails to follow this procedure, “a claimant shall be deemed to have exhausted the administrative remedies available under the plan” and may seek judicial review. 3 The LTD plan’s SPD incorporated the substance of 29 C.F.R. § 2560.503-1(h), providing that the first mandatory appeal will be a “full review of the information in the claim file and any new information submitted to support the appeal.” -9- § 2560.503-1(l). That was the circumstance in Seman, where the plan denied the claimant full and fair review by failing to decide his mandatory appeal for more than 18 months. 334 F.3d at 731.4 We had no administrative appeal decision to review, and the claimant, having exhausted his plan remedies, was entitled to judicial review of the adverse initial decision. Thus, we saw no alternative but to conduct that review de novo. We explicitly noted the district court’s discretion to base this de novo review “on evidence beyond that presented to the administrator.” Id. at 734. This case is far different because Prudential conducted a full and fair review of Prezioso’s mandatory appeal and issued a timely decision. At that point, his plan remedies were exhausted. The regulations allow for a voluntary second appeal but expressly provide that the claimant need not exhaust this procedure before seeking judicial review. 29 C.F.R. § 2560.503-1(c)(3). The regulations do not provide that a voluntary appeal procedure is part of the plan’s statutory obligation to provide “full and fair review” of the initial decision. See DaCosta v. Prudential Ins. Co. of Am., No. 10-CV-720 (JS)(ARL), 2010 WL 4722393, at -5 (E.D.N.Y Nov. 12, 2010). Thus, when Prezioso filed his voluntary second appeal in December 2011, his right to seek judicial review of the adverse determination of his mandatory appeal under the abuse-of-discretion standard of review was established. In these circumstances, we agree with the Eleventh Circuit that Prudential’s subsequent handling of the voluntary appeal did not change the standard of review. See Harvey v. Standard Ins. Co., 503 F. App’x 845, 848-49 (11th Cir. 2013) (per curiam) (unpublished). Of course, in a particular case, how the plan administrator responded to a claimant’s voluntary second appeal may “be weighed as a factor in determining whether there is an abuse of discretion.” Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 115 (2008), quoting Bruch, 489 U.S. at 115. 4 Likewise, McGarrah v. Hartford Life Ins. Co., 234 F.3d 1026, 1031 (8th Cir. 2000), involved a plan administrator’s failure to provide the written decision required by 29 C.F.R. § 2560.503-1(h)(3). -10- Determining that the abuse-of-discretion standard of review applies when a voluntary second appeal was available, but either was not pursued by the claimant or was not completed by the plan administrator, does not resolve an important, related question -- in such a case, what is the ERISA administrative record to be reviewed? In some cases, if the claimant elects to sue without waiting for the plan’s response to a voluntary appeal, it may be proper to limit the administrative record to the record before the plan administrator when the prior, mandatory appeal was decided, as in Harvey, 503 F. App’x at 849. But in other cases, such as this case, determining the proper record to be reviewed for abuse of the plan administrator’s discretion may require careful examination of the claim’s complete procedural history. One thing seems clear: neither the statute, the regulations, nor any persuasive judicial authority warranted the magistrate judge’s decision to keep the record open until Prezioso filed his lawsuit, thus including his additional supporting materials but not Prudential’s final response to those materials, without a finding that Prudential’s delay was unreasonable and prejudicial, or that the litigation would otherwise be unreasonably prolonged. Fortunately, the district court’s careful review of the arbitrarily truncated administrative record under the abuse-of-discretion standard of review made this initial procedural error harmless.