Opinion ID: 1027202
Heading Depth: 3
Heading Rank: 1

Heading: ERISA Violation

Text: 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 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.
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 Pre-Existing Conditions Limitation. 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.
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 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, 67 S.Ct. 677, 91 L.Ed. 884 (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.
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 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.