Court Opinion

ID: 5129657
Source: CourtListenerOpinion
Date Created: 2021-11-26 18:00:27.295257+00
Date Added: 2024-06-11T08:23:13.162361
License: Public Domain

PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
                ____________

                     No. 19-3855
                       ______

                     LEO NOGA

                          v.

 FULTON FINANCIAL CORPORATION EMPLOYEE
              BENEFIT PLAN;
RELIANCE STANDARD LIFE INSURANCE COMPANY

      Reliance Standard Life Insurance Company,
                                          Appellant
                    ____________

    On Appeal from the United States District Court
        for the Eastern District of Pennsylvania
             (D.C. Civ. No. 5-18-cv-03455)
     District Judge: Honorable Jeffrey L. Schmehl
                     ____________

              Argued: January 12, 2021

Before: AMBRO, KRAUSE, and PHIPPS, Circuit Judges

             (Filed: November 26, 2021)
                    ____________
Joshua Bachrach     [ARGUED]
Wilson Elser Moskowitz Edelman & Dicker
2001 Market Street
Two Commerce Square, Suite 3100
Philadelphia, PA 19103

              Counsel for Appellant

Tybe A. Brett      [ARGUED]
Feinstein Doyle Payne & Kravec
429 Fourth Avenue
Law & Finance Building, Suite 1300
Pittsburgh, PA 15219

              Counsel for Appellee
                       ____________

                 OPINION OF THE COURT
                      ____________

PHIPPS, Circuit Judge.

    In this suit under the Employee Retirement Income
Security Act, see 29 U.S.C. § 1132(a)(1)(B), a plan participant
claims that an insurance-company fiduciary wrongfully
terminated his benefits. The participant enrolled in his former
employer’s welfare benefit plan, which provided long-term
disability and life insurance benefits through group insurance
policies. When his health deteriorated to the point that he could
no longer do his job, the participant claimed benefits under
both policies.

                               2
    The insurance company, which funded and administered
those policies, initially determined that the participant was
totally disabled and authorized benefits under both policies. Its
in-house medical professionals reaffirmed that conclusion for
about two years. But then, with no recent change to the
participant’s medical condition, the insurance company used a
third-party vendor to select and retain an outside physician to
evaluate the participant. After an in-person examination, that
physician concluded that the participant was not totally
disabled, and on that basis, the insurance company terminated
benefits under both policies.

    The participant administratively appealed, and the cycle
repeated.    The insurance company’s in-house medical
professionals once again found the participant to be totally
disabled, and the insurance company reinstated benefits. But
it then used the same third-party vendor to arrange for a
reevaluation of that assessment. This time, two outside
medical professionals performed paper reviews of the file.
Both made findings against total disability. Citing those
reports along with the prior report from the other outside
physician retained by the third-party vendor, the insurance
company terminated the participant’s benefits – again.

   Those multiple requests for additional outside medical
reviews were irregular in their timing and prompting. To
explain the requests made on administrative appeal – which
were also irregular in their scope – the insurance company
submitted an affidavit from one of its analysts. But in
evaluating the parties’ cross-motions for summary judgment,
the District Court did not consider that affidavit. Instead, it
analyzed the participant’s claim based on the administrative
record, which the insurance company had filed. On that record,

                               3
the District Court concluded that the termination of benefits
was arbitrary and capricious, and it ordered their retroactive
reinstatement.

    In reviewing that order de novo, see Viera v. Life Ins. Co.
of N. Am., 642 F.3d 407, 413 (3d Cir. 2011), we will affirm. A
combination of structural and procedural factors compels that
conclusion. The insurance company performed two functions
that are in financial tension with each other: it determined
eligibility for benefits, and it funded benefits. That creates a
structural conflict of interest, which, by itself, is not a breach
of fiduciary duty. But here, based on only the administrative
record – not the proffered supplemental affidavit, which was
properly excluded – the insurance company also deviated
significantly from its normal eligibility-review processes,
primarily through its anomalous requests for outside
reevaluation of the participant. Those procedural irregularities
aligned closely with the insurance company’s structural
conflict of interest, so much so that the financial incentives at
the core of the insurance company’s structural conflict
influenced its fiduciary decision-making. For these reasons, as
elaborated below, the insurance company abused its discretion
in terminating the participant’s benefits, and the District Court
properly ordered their retroactive reinstatement.

                      I. BACKGROUND

       A. Leo Noga and the Insurance Policies
          Administered and Funded by Reliance
          Standard.

   Leo Noga began working as a financial advisor for Fulton
Financial Corporation in 2009. As an employee, he elected to

                                4
participate in the long-term disability and life insurance
benefits that Fulton Financial offered through group insurance
policies with Reliance Standard Life Insurance Company. See
generally 29 U.S.C. § 1002(7) (defining “participant” to
include employees or former employees who are eligible to
receive a benefit of any type from the employer’s employee
benefit plan). Those policies qualify as benefit plans subject
to ERISA. See generally id. §§ 1002(1) (defining “employee
welfare benefit plan”), 1003(a) (subjecting employee benefit
plans to ERISA).

    Both policies grant discretionary authority to Reliance
Standard to determine eligibility for benefits. See Reliance
Standard Long Term Disability Policy at 6.0 (App. 92)
(“Reliance Standard Life Insurance Company . . . has the
discretionary authority to interpret the Plan and the insurance
policy and to determine eligibility for benefits.”); Reliance
Standard Life Insurance Policy at 11.0 (App. 1756) (same); see
also Luby v. Teamsters Health, Welfare, & Pension Tr. Funds,
944 F.2d 1176, 1180 (3d Cir. 1991) (“Whether a plan
administrator’s exercise of power is mandatory or
discretionary depends upon the terms of the plan.”). Due to
that discretionary authority, Reliance Standard is a fiduciary
with respect to those plans. See Metro. Life Ins. Co. v. Glenn,
554 U.S. 105, 111 (2008) (explaining that a benefit
determination is a fiduciary act); see also 29 U.S.C. § 1002(21)
(identifying persons who qualify as ERISA fiduciaries). But
Reliance Standard also funded the long-term disability and life
insurance policies and paid for benefits under those policies.

                               5
       B. Noga’s Benefit Claims and Reliance
          Standard’s Initial Approval of Those Claims.

   In 2014, after working over five years for Fulton Financial,
Noga began experiencing pain and numbness in his feet and
legs. His symptoms progressed over the next several months,
and he started having difficulty standing, walking, and driving.
By early 2015, he could no longer work as a financial advisor
for Fulton Financial. After appointments with various
specialists, Noga was eventually diagnosed with neurogenic
muscular atrophy and diabetic polyneuropathy.

    At that point, Noga applied for benefits under the long-term
disability insurance policy with Reliance Standard. That
policy provides benefits for employees who are “Totally
Disabled,” defined as those who “cannot perform the material
duties of his/her Regular Occupation.” Reliance Standard
Long Term Disability Policy at 2.1, 9.0 (App. 88, 96). In
support of his claim, Noga submitted records from numerous
treating physicians, including his primary care physician, a
physiatrist, two neurologists, a neurosurgeon, a
rheumatologist, and an orthopedic surgeon.

   Reliance Standard assigned an in-house registered nurse to
review Noga’s medical records. That nurse certified that Noga
was “precluded from stand[ing] and walk[ing] on greater than
an occasional basis” and that he “lack[ed] consistent work
function.” Reliance Standard Claim Notes (July 23, 2015)
(App. 201). And, in August 2015, Reliance Standard approved
Noga’s claim for long-term disability benefits, finding that he
was totally disabled under the policy.

                               6
    With that favorable disability-benefits determination, Noga
then sought an extension of his life insurance and a waiver of
his premiums through a complementary provision in Fulton
Financial’s group life insurance policy with Reliance Standard.
That provision required Reliance Standard to extend an
employee’s life insurance and waive any premiums owed
“during a period of Total Disability.” Reliance Standard Life
Insurance Policy at 9.0 (App. 1754).

   Following a separate review process, Reliance Standard
approved Noga’s life insurance claim in January 2016.

      C. Reliance Standard’s Periodic Reevaluation
         of Noga’s Disability Between October 2015
         and September 2017.

    Over the next two years, Reliance Standard periodically
reviewed Noga’s updated medical records to assess his
ongoing eligibility for long-term disability and life insurance
benefits.   Noga’s physicians continually reaffirmed his
diagnoses of neurogenic muscular atrophy and diabetic
polyneuropathy – conditions that his endocrinologist described
as “permanent” and “irreversible.”                Letter from
Endocrinologist to Primary Care Physician (Aug. 11, 2016)
(App. 903). But beginning in mid-2016 and continuing into
2017, Noga indicated during appointments with his primary
care physician and his physiatrist that his legs were improving
and feeling stronger, that he could walk up to one mile in the
pool each day, and that he no longer needed leg braces while
walking, though he still sometimes used a cane. During that
same period, however, Noga also reported that he continued to
feel pain and numbness in his feet and legs, struggled to walk
and balance, and suffered from chronic fatigue.

                              7
    As it received updated medical records, Reliance Standard
assigned its own registered nurses to review them. Four
different nurses – on six separate occasions between October
2015 and September 2017 – recertified Noga’s eligibility for
benefits.

       D. Reliance Standard’s October 2017 Decision
          to Conduct an Independent Medical
          Examination and Its Later Termination of
          Noga’s Benefits.

    In October 2017 – despite having recertified Noga’s
benefits less than a month prior – Reliance Standard requested
that Noga undergo an independent medical examination, which
is commonly referred to as an ‘IME.’ Reliance Standard used
a third-party vendor to select a doctor who was not Noga’s
treating physician or one of its in-house medical professionals.
The chosen doctor, a physiatrist, examined Noga in November,
and determined that the numbness and pain that Noga
experienced were consistent with a diagnosis of diabetic
polyneuropathy and that the impairment was “permanent in
nature.” Physiatrist IME Report at 8 (Nov. 28, 2017) (App.
1268). Still, the physiatrist found that Noga “demonstrated a
high degree of symptom exaggeration or inappropriate pain
behavior” and that he “was able to move about the room freely
without any significant difficulty.” Id. at 5, 7 (App. 1265,
1267). The physiatrist’s conclusion was that Noga was
“capable of gainful employment.” Id. at 8 (App. 1268).

   Reliance Standard adopted that conclusion.            After
reviewing the IME report, it determined that Noga was no
longer totally disabled from performing his regular occupation.

                               8
Reliance Standard then terminated Noga’s benefits under both
the long-term disability and the life insurance policies in
December 2017.

       E. Noga’s Administrative Appeal and the
          Reinstatement of Benefits.

    Noga administratively appealed that decision to Reliance
Standard’s Quality Review Unit. As part of his appeal, he
submitted updated medical records from his primary care
physician and his physiatrist. His treating physicians noted
that Noga continued to struggle with walking and balancing –
often tripping or falling – and that he suffered from fatigue as
well as decreased feeling in his feet.

    Reliance Standard then tasked another registered nurse with
reviewing Noga’s appeal. In March 2018, that nurse
determined that Noga’s medical records supported an ongoing
“lack of consistent work function at any level.” Reliance
Standard Claim Notes (Mar. 19, 2018) (App. 208). Based on
the nurse’s opinion, the senior benefits analyst assigned to the
administrative appeal overturned the decision to terminate
Noga’s benefits on March 22, 2018.

       F. Reliance     Standard’s     Self-Initiated
          Reevaluation and Eventual Termination of
          Benefits.

   The next day, that same analyst changed course. Despite
the decision to reinstate Noga’s benefits – which was
apparently made with awareness of both the nurse’s opinion
and the report of the outside physiatrist – the analyst requested
two more peer reviews from outside medical professionals.

                               9
The same third-party vendor that secured the IME also selected
an endocrinologist and an occupational medicine specialist to
perform those peer reviews.

   The endocrinologist did not examine Noga but performed a
paper review of his records. Based only on that review of
Noga’s file, the endocrinologist concluded that Noga’s
diabetes was well controlled and that – solely from an
endocrinology perspective – he could work on a full-time
basis.

   The occupational medicine specialist conducted the second
peer review, again without examining Noga personally but
reviewing only his medical records. Based solely on that paper
review, the occupational medicine specialist concluded that
Noga was capable of full-time work but noted that Noga’s
neurogenic muscular atrophy and diabetic polyneuropathy
were “disease processes which [would] wax and wane over
time.” Occupational Medicine Specialist Peer Review at 11
(Apr. 6, 2018) (App. 1415).

    In May 2018, relying on the prior physiatrist’s IME report
and the two new peer paper reviews, Reliance Standard
reversed its reinstatement of Noga’s benefits and upheld its
initial termination decision. With that determination, Noga
had no further recourse under the plan, and because the
administrative remedies were exhausted, Reliance Standard
notified Noga that he had a right to bring a civil action under
29 U.S.C. § 1132(a). See Weldon v. Kraft, Inc., 896 F.2d 793,
800 (3d Cir. 1990) (“Except in limited circumstances . . . a
federal court will not entertain an ERISA claim unless the
plaintiff has exhausted the remedies available under the

                              10
plan.”); see also Harrow v. Prudential Ins. Co. of Am.,
279 F.3d 244, 249 (3d Cir. 2002).

II. PROCEDURAL HISTORY AND JURISDICTIONAL ANALYSIS

    Consistent with the termination notice from Reliance
Standard, Noga filed suit in the Court of Common Pleas of
Lancaster County, Pennsylvania. He asserted that the
termination of his benefits was arbitrary and capricious, and he
brought a claim under 29 U.S.C. § 1132(a)(1)(B) to reinstate
his long-term disability and life insurance benefits. Noga sued
two defendants in their official capacities: Reliance Standard
as a fiduciary and Fulton Financial Corporation Employee
Benefit Plan as the employee welfare benefit plan. See Larson
v. United Healthcare Ins. Co., 723 F.3d 905, 913 (7th Cir.
2013) (allowing a suit against an insurance company under
§ 1132(a)(1)(B) when the insurance company “decides
contractual eligibility and benefits questions and pays the
claims”); Cyr v. Reliance Standard Life Ins. Co., 642 F.3d
1202, 1207 (9th Cir. 2011) (en banc) (same); Graden v.
Conexant Sys. Inc., 496 F.3d 291, 301 (3d Cir. 2007)
(recognizing that a plan and a plan administrator may be sued
under § 1132(a)(1)(B)).1

1
  In creating a federal cause of action, § 1132(a)(1)(B) contains
no textual limitation as to who may be sued. See 29 U.S.C.
§ 1132(a)(1)(B); Cyr, 642 F.3d at 1205 (“There are no limits
stated anywhere in § 1132(a) about who can be sued . . . .”).
This Circuit has interpreted § 1132(a)(1)(B) as authorizing
official-capacity claims but not individual-capacity claims.
See Graden, 496 F.3d at 301.

                               11
    Reliance Standard then filed a notice to remove the case to
the United States District Court for the Eastern District of
Pennsylvania. See 28 U.S.C. § 1441(a). ERISA grants
concurrent original jurisdiction over § 1132(a)(1)(B) claims to
state and federal courts. See 29 U.S.C. § 1132(e)(1). Thus, by
bringing claims under § 1132(a)(1)(B), Noga’s suit was within
the original jurisdiction of the District Court, and it could be
removed on that basis – if the other defendant, the Plan, joined
in or consented to the notice of removal. See 28 U.S.C.
§§ 1441(a), 1446(b)(2)(A). The Plan consented, and the case
was removed to the District Court.

    Once in federal court, Noga sought to proceed against only
Reliance Standard. He twice invoked Federal Rule of Civil
Procedure 41(a) to voluntarily dismiss the Plan. Dismissals
under Rule 41(a) may be effectuated by stipulation or by
notice, and a proper dismissal using either method is self-
executing.2 Noga first filed a stipulated dismissal before the
Plan had entered an appearance in the case. The only other
party that had entered an appearance, Reliance Standard,
joined the stipulation, which did not state whether it was with

2
  See State Nat’l Ins. Co. v. Cnty. of Camden, 824 F.3d 399,
406–07 (3d Cir. 2016) (“Every court to have considered the
nature of a voluntary stipulation of dismissal under
Rule 41(a)(1)(A)(ii) has come to the conclusion that it is
immediately self-executing. No separate entry or order is
required to effectuate the dismissal.” (citations and footnote
omitted)); In re Bath & Kitchen Fixtures Antitrust Litig.,
535 F.3d 161, 165 (3d Cir. 2008) (“[A] filing under
[Rule 41(a)(1)(A)(i)] is a notice, not a motion. Its effect is
automatic: the defendant does not file a response, and no order
of the district court is needed to end the action.”).

                              12
or without prejudice. See Fed. R. Civ. P. 41(a)(1)(A)(ii).
Because that first voluntary dismissal lacked an indication
either way, it functioned as a dismissal without prejudice. See
id. R. 41(a)(1)(B).

    About four months later, without the Plan filing an answer
or moving for summary judgment in the interim, Noga filed a
notice of dismissal, again to dismiss the Plan voluntarily. See
id. R. 41(a)(1)(A)(i). Like its predecessor, that voluntary
dismissal did not state whether it was with or without
prejudice. But under Rule 41, a second voluntary dismissal
“operates as an adjudication on the merits,” and thus that notice
dismissed the Plan with prejudice. Id. R. 41(a)(1)(B).

    The two remaining parties, Noga and Reliance Standard,
then moved for summary judgment. In connection with its
motion, Reliance Standard submitted the administrative
record. Considering only that record – and not a later-filed
affidavit from the senior benefits analyst who oversaw Noga’s
administrative appeal – the District Court determined that the
termination of Noga’s benefits was arbitrary and capricious.
That conclusion resulted from the combined effect of two
factors: Reliance Standard’s structural conflict of interest (that
it both determined eligibility for benefits and paid for benefits)
and the procedural irregularities in Reliance Standard’s
termination of benefits. The District Court granted summary
judgment in Noga’s favor and ordered the retroactive
reinstatement of his benefits. After an unsuccessful motion for
reconsideration, Reliance Standard timely appealed.

   The District Court’s summary-judgment order is a final,
appealable decision. See 28 U.S.C. § 1291. Through Noga’s
Rule 41(a) voluntary dismissals, all claims against the Plan

                               13
were dismissed with prejudice.3 Therefore, the District Court’s
summary-judgment order against the only other defendant,
Reliance Standard, “ends the litigation on the merits,” and
constitutes a final decision sufficient for this Court’s appellate
jurisdiction. Catlin v. United States, 324 U.S. 229, 233 (1945);
see Camesi v. Univ. of Pittsburgh Med. Ctr., 729 F.3d 239, 244
(3d Cir. 2013) (“Generally, a dismissal with prejudice
constitutes an appealable final order under § 1291.” (citation
omitted)).

    On appeal, Reliance Standard argues that the District Court
erred in two respects. First, it contends that the District Court
should have considered the analyst’s affidavit. Second, it
submits that the District Court erred in concluding that the
termination of Noga’s benefits was arbitrary and capricious.

3
  Rule 41(a) provides a mechanism for a plaintiff to voluntarily
dismiss an entire lawsuit, and this Circuit also recognizes that
the rule allows a party to voluntarily dismiss all of its claims
against a particular party. See Young v. Wilky Carrier Corp.,
150 F.2d 764, 764 (3d Cir. 1945); see also 9 Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure
§ 2362 (4th ed. 2020) (explaining that “the sounder view and
the weight of judicial authority” are that Rule 41(a) permits
dismissal of all claims against one party and does not require
dismissal of all claims against all parties).

                               14
                     III. DISCUSSION

       A. The District Court Did Not Err by Excluding
          Reliance Standard’s Proffered Affidavit.

          1. The ERISA Record Rule and the
             Structural-Conflict Exception.

     Under the ERISA record rule, judicial review of an ERISA
fiduciary’s discretionary adverse benefit decision is confined
to the information contained in the administrative record. See
Howley v. Mellon Fin. Corp., 625 F.3d 788, 793 (3d Cir. 2010)
(explaining that, “under most circumstances,” the
administrative record “cannot be supplemented during
litigation” (quoting Kosiba v. Merck & Co., 384 F.3d 58, 67
n.5 (3d Cir. 2004))); Mitchell v. Eastman Kodak Co., 113 F.3d
433, 440 (3d Cir. 1997) (evaluating a claim for long-term
disability benefits based on the “whole record” (internal
quotation marks omitted)), abrogated on other grounds by
Miller v. Am. Airlines, Inc., 632 F.3d 837, 847 (3d Cir. 2011).
The administrative record consists of the materials before the
fiduciary who makes the benefit decisions on internal review,
and it typically contains relevant plan documents (such as an
insurance policy), the claim file (the claim, supporting
information supplied by the claimant, as well as information
related to the claim that was considered, collected, or generated
by the fiduciary), and the fiduciary’s final determination with
respect to the claim. See Howley, 625 F.3d at 793 (“[C]ourts
generally must base their review of an administrator’s decision
on the materials that were before the administrator when it
made the challenged decision.”); Mitchell, 113 F.3d at 440
(explaining that for an adverse benefit determination, the
“‘whole’ record consists of that evidence that was before the

                               15
administrator when he made the decision being reviewed”
(citations omitted)); see also 29 C.F.R. § 2560.503-1(m)(8)
(identifying categories of information relevant to a benefit
determination).

    Despite the clarity of the ERISA record rule, its origin is
somewhat convoluted. Statutory text does not conflict with the
rule, but it does not compel a court to evaluate adverse benefit
determinations based solely on the administrative record.
ERISA requires adequate written notice of an adverse benefit
determination that “set[s] forth the specific reasons for such
denial.” 29 U.S.C. § 1133(1). It also demands that any
participant who receives an adverse benefit determination be
afforded “a reasonable opportunity . . . for a full and fair review
by the appropriate named fiduciary of the decision denying the
claim.” Id. § 1133(2). But nowhere does ERISA state that
review of an adverse benefit determination is limited to the
‘whole record’ before the benefits decision-maker. Cf.
5 U.S.C. § 706 (requiring judicial review of agency action
based on the “whole record”); 42 U.S.C. § 405(g) (requiring
judicial review of Social Security benefit determinations based
on a “transcript of the record including the evidence upon
which the findings and decision complained of are based”).

    That is not the only instance of statutory silence in ERISA.
It also omits the standard of judicial review for adverse benefit
determinations. The Supreme Court resolved that statutorily
open question by holding that the standard depends on whether
a plan grants discretion to the fiduciary who makes benefits
decisions. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 115 (1989). If a plan does not do so, then a court reviews
an adverse benefit determination de novo. See id. But if a plan
does confer discretionary authority on a fiduciary decision-

                                16
maker, then a court reviews an adverse benefit determination
for an abuse of discretion under the arbitrary-and-capricious
standard. See id.; McCann v. Unum Provident, 907 F.3d 130,
147 (3d Cir. 2018).

    That standard bears heavily on the ERISA record rule. That
is so because, pursuant to their ability to develop federal
common law for ERISA regulated plans, see Firestone,
489 U.S. at 110, federal courts have imported several
administrative-law principles into ERISA litigation.4 And
administrative law associates the arbitrary-and-capricious
standard with a record-review requirement. See 5 U.S.C. § 706

4
  See, e.g., Glenn, 554 U.S. at 117 (referencing administrative
law for the proposition that courts may conduct a combination-
of-factors analysis while reviewing ERISA adverse benefits
determinations under the arbitrary-and-capricious standard);
Wolf v. Nat’l Shopmen Pension Fund, 728 F.2d 182, 185–86
(3d Cir. 1984) (incorporating the administrative exhaustion
requirement into ERISA civil enforcement actions); Amato v.
Bernard, 618 F.2d 559, 566–67 (9th Cir. 1980) (recognizing
that “the text of ERISA nowhere mentions the exhaustion
doctrine,” but that “sound policy requires the application of the
exhaustion doctrine in suits under the Act”). But see
Borntrager v. Cent. States, Se. & Sw. Areas Pension Fund,
425 F.3d 1087, 1092 (8th Cir. 2005) (eschewing the
importation of administrative-law principles in assessing
whether an order remanding to an ERISA plan administrator
was a final, appealable decision); Mark D. DeBofsky, The
Paradox of the Misuse of Administrative Law in ERISA Benefit
Claims, 37 J. MARSHALL L. REV. 727, 730 (2004) (arguing that
“federal courts have mistakenly incorporated administrative
law principles into ERISA benefit decisions”).

                               17
(authorizing courts to set aside agency action that is “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law” based on a review of the “whole record
or those parts of it cited by a party”).

    Drawing on administrative-law principles to fashion the
common law for ERISA, this Circuit has linked the arbitrary-
and-capricious standard to record review. See Mitchell,
113 F.3d at 440 (applying the whole-record requirement from
the Social Security Act to arbitrary-and-capricious review
under ERISA). Specifically, because discretionary adverse
benefit determinations are reviewed under the arbitrary-and-
capricious standard, those decisions are bound by the ERISA
record rule. See id.; see also Heimeshoff v. Hartford Life &
Accident Ins. Co., 571 U.S. 99, 111 (2013) (“The Courts of
Appeals have generally limited the record for judicial review
to the administrative record compiled during internal review.”
(citing Fleisher v. Standard Ins. Co., 679 F.3d 116, 121 (3d
Cir. 2012)) (other citations omitted)). Conversely, this Circuit
has held that the ERISA record rule does not apply to adverse
benefit determinations subject to de novo review. See Luby,
944 F.2d at 1185 (holding that “de novo review over an ERISA
determination between beneficiary claimants is not limited to
the evidence before the [plan administrator]”). Thus, a plan
that grants discretion to a fiduciary to make benefit
determinations, by that same choice, elects to have those
benefit decisions governed by the ERISA record rule.

    That rule is not absolute, however. The administrative
record focuses on a specific benefit claim, and for that reason,
the record may lack information about a fiduciary’s “potential
biases and conflicts of interest.” Kosiba, 384 F.3d at 67 n.5;
see also Howley, 625 F.3d at 794 (“[A] conflicted

                               18
administrator, especially one whose decision-making has been
affected by that conflict, is not at all likely to volunteer that
information.”). But any such structural conflict may be
relevant to an adverse benefit determination. See Glenn,
554 U.S. at 111 (recognizing that a factor in determining
whether a plan administrator abused its discretion is whether
the administrator acted under a conflict of interest); Firestone,
489 U.S. at 115 (same). Despite its potential relevance,
information regarding a structural conflict may be omitted
from the administrative record due to the combination of
information asymmetry and financial incentives: the
participant may not know of the conflict, and the fiduciary has
no financial incentive to disclose it. See Howley, 625 F.3d at
794 (“To allow an administrator the benefit of a conflict merely
because it managed to successfully keep that conflict hidden
during the administrative process would be absurd.”). To
account for the potential omission of that evidence, as a limited
exception to the ERISA record rule, the administrative record
may be supplemented to prove or disprove a structural conflict
of interest or its severity. See id. (“[C]ourts plainly must be
willing to consider evidence relating to ‘the nature, extent, and
effect on the decision-making process of any conflict of
interest’ revealed during the litigation process.” (quoting Burke
v. Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d
1016, 1028 (9th Cir. 2008))); Kosiba, 384 F.3d at 67 n.5, 68
(allowing either party on remand to supplement the record with
evidence of the plan’s “actual funding mechanism” to prove
whether the administrator “acted under a financial conflict of
interest”).

   The exception to the ERISA record rule for structural
conflicts is narrow and does not allow supplementation of the
record with information related to the claim or the review

                               19
process. See, e.g., Post v. Hartford Ins. Co., 501 F.3d 154,
168–69 (3d Cir. 2007) (rejecting a participant’s reliance on
medical reports that were not submitted to the plan
administrator or made part of the record), abrogated on other
grounds by Miller, 632 F.3d at 847; Abnathya v. Hoffmann-La
Roche, Inc., 2 F.3d 40, 48 & n.8 (3d Cir. 1993) (declining to
consider “three additional medical evaluations” submitted by a
participant to “support her claim of continued total disability”
after the plan administrator’s final decision), abrogated on
other grounds by Miller, 632 F.3d at 847. That is so because
the justifications for the structural-conflict exception –
information asymmetry and financial incentives – do not
similarly apply to information about the claim or the review
process. Both the participant, who claims benefits, and the
fiduciary, who evaluates the benefit claim, have incentives to
develop the administrative record with respect to the benefit
claim. See Jebian v. Hewlett Packard Co. Emp. Benefits Org.
Income Prot. Plan, 349 F.3d 1098, 1107 (9th Cir. 2003)
(“ERISA is designed to promote a good-faith bilateral
exchange of information on the merits of claims . . . .”). If the
participant does not explain the claim or does not provide
supporting information, then it is more likely that the fiduciary
will deny the claim. See Heimeshoff, 571 U.S. at 111 (“[T]o
the extent participants fail to develop evidence during internal
review, they risk forfeiting the use of that evidence in district
court.”). Similarly, the fiduciary may insulate an adverse
benefit determination from reversal by including in the record
supporting rationales and evidence for its decision. As both
parties have adequate incentives to develop the record about a
claim and its processing, the ERISA record rule prohibits
supplementation of the administrative record with post hoc
explanations for adverse benefit determinations.

                               20
          2. Reliance Standard’s Proffered Affidavit
             Cannot Be Considered.

   Because the relevant insurance policies grant discretion
over adverse benefit determinations to Reliance Standard, the
ERISA record rule governs this controversy. Nonetheless,
Reliance Standard seeks to supplement the administrative
record with an affidavit from the senior benefits analyst
responsible for Noga’s administrative appeal.

   The affidavit contextualizes and augments information in
the claim file. In that sworn written testimony, the analyst
explained that in reevaluating Noga’s claim on administrative
appeal, he originally sent it to an in-house nurse who had not
previously worked on the claim, and that based on that nurse’s
review, he entered a claim note to reinstate benefits.5 The
analyst further averred that he later sought two peer reviews of
Noga’s medical records because “[w]hen an independent
physician has performed a review, Reliance [Standard] does
not rely on a nurse for a second opinion.” Jackson Aff. ¶ 24
(App. 1991).

   The proffered explanation for the two outside referrals
could have been contemporaneously memorialized in the claim

5
  Perhaps suggestive of a desire to remove the initial claim note
recommending reinstatement, the analyst also explained that
the claims system did not permit him to delete that note. See
Jackson Aff. ¶ 25 (App. 1991) (“[T]he claim system we use did
not allow me to remove my March 22, 2018 claim note.”); see
also id. ¶ 22 (the March 22, 2018 claim note states, “Decision
to terminate benefits overturned and reinstated effective
12/27/2017”).

                               21
file. But it was not. And because it was not included in the
administrative record, the ERISA record rule bars its
consideration.

    Nor does that proffered explanation qualify for the
structural-conflict exception to the ERISA record rule. That
exception permits supplementation of the administrative
record only for information that tends to prove or disprove a
structural conflict of interest or its severity. See, e.g., Howley,
625 F.3d at 793–94 (endorsing consideration of extrinsic
evidence of a plan administrator’s conflict of interest). And
here, Reliance Standard does not offer the analyst’s affidavit to
disprove or mitigate Reliance Standard’s structural conflict of
interest, which arises from its dual roles of determining
eligibility for benefits and funding them. See Glenn, 554 U.S.
at 112, 114; Miller, 632 F.3d at 847. Instead, Reliance
Standard seeks to use the affidavit to provide context for
procedural anomalies in the handling of Noga’s claim. But an
ERISA administrative record may not be supplemented with
post hoc explanations for procedural irregularities. It makes
no difference that Reliance Standard offers the affidavit in
partial rebuttal to Noga’s procedural-irregularity argument.
Because procedural anomalies impugn a fiduciary’s
impartiality, a benefits decision-maker has an incentive to
include in the administrative record information that explains
procedural irregularities. Reliance Standard did not do so, and
it may not augment the administrative record with such
information in litigation.

                                22
       B. Due to the Combined Effect of a Structural
          Conflict of Interest and Two Significant
          Procedural      Irregularities,    Reliance
          Standard’s Decision to Terminate Noga’s
          Benefits Was an Abuse of Discretion.

    As explained above, Reliance Standard has discretionary
authority over the disputed benefits decisions, and therefore its
adverse benefit determinations are reviewed under the
arbitrary-and-capricious standard. See Glenn, 554 U.S. at 111;
Firestone, 489 U.S. at 115; McCann, 907 F.3d at 147. This
standard is nominally deferential: a fiduciary’s decision “will
not be disturbed if reasonable.” Conkright v. Frommert,
559 U.S. 506, 521 (2010) (quoting Firestone, 489 U.S. at 111).

    Nonetheless, there are several ways in which a fiduciary
who makes benefits decisions may fail the arbitrary-and-
capricious standard. An adverse benefit determination made
“without reason, unsupported by substantial evidence or
erroneous as a matter of law” qualifies as arbitrary and
capricious. Abnathya, 2 F.3d at 45 (quoting Adamo v. Anchor
Hocking Corp., 720 F. Supp. 491, 500 (W.D. Pa. 1989)); see
also Grossmuller v. Int’l Union, United Auto. Workers, Loc.
813, 715 F.2d 853, 858 n.5 (3d Cir. 1983) (requiring a plan
administrator to “consider the position of both sides before
rendering a decision” (emphasis and citation omitted)). In
addition, a combination of case-specific structural and
procedural factors may demonstrate that a fiduciary abused its
discretion in making an adverse benefit determination, and
such a decision would likewise fail arbitrary-and-capricious
review. See Glenn, 554 U.S. at 116–17; Est. of Schwing v. Lilly
Health Plan, 562 F.3d 522, 526 (3d Cir. 2009); see also Miller,
632 F.3d at 845 n.2 (“In the ERISA context, the arbitrary and

                               23
capricious and abuse of discretion standards of review are
essentially identical.” (citation omitted)).

    The structural consideration under the combination-of-
factors analysis focuses on the role of financial incentives in
the plan’s administration. See Post, 501 F.3d at 162. When
the same entity administers a plan and pays the benefits due
under the plan, it has a structural conflict of interest. See
Glenn, 554 U.S. at 112, 114; see also Miller, 632 F.3d at 847
(“[A] conflict arises where an employer both funds and
evaluates claims.” (citation omitted)). But that conflict alone
does not render a fiduciary’s adverse benefit determination an
abuse of discretion. See Glenn, 554 U.S. at 117–18; Dowling
v. Pension Plan for Salaried Emps. of Union Pac. Corp. &
Affiliates, 871 F.3d 239, 250–51 (3d Cir. 2017); Fleisher,
679 F.3d at 122 n.3 (stating that a conflict of interest “is not . . .
inherently a determinative factor” (citation omitted)). Rather,
“that conflict must be weighed as [one] factor,” Firestone,
489 U.S. at 115 (internal quotation marks and alteration
omitted), along with “the process . . . used in denying benefits,”
Miller, 632 F.3d at 845. See Glenn, 554 U.S. at 111, 118–19.

    The procedural factor examines the presence or absence of
irregularities in the handling of benefit claims. Not every
anomaly carries great weight; a fiduciary, even one with a
structural conflict of interest, need not maintain a procedurally
immaculate claim file to avoid an abuse-of-discretion finding.
But critically, under the combination-of-factors analysis,
procedural irregularities gain significance the more closely that
they align with the financial incentives that create a structural
conflict of interest. See Glenn, 554 U.S. at 117. In that vein,
caselaw has identified several procedural irregularities that
bear directly on the financial incentives at the core of a

                                 24
structural conflict. See Miller, 632 F.3d at 848–55; Post,
501 F.3d at 166–68; Kosiba, 384 F.3d at 67–68; Pinto v.
Reliance Standard Life Ins. Co., 214 F.3d 377, 393–94 (3d Cir.
2000), abrogated on other grounds by Miller, 632 F.3d at 847;
see also Glenn, 554 U.S. at 118. As explained below, this case
involves one such procedural irregularity: requests for outside
examination or review that are unusual in their timing, impetus,
or scope.

          1. Reliance Standard Has a Structural
             Conflict of Interest.

    No one disputes that Reliance Standard has a structural
conflict of interest. The group insurance policies, which were
included in the administrative record, state that Reliance
Standard both makes benefits eligibility decisions and funds
those benefits. For an ERISA fiduciary, such a dual role
constitutes a conflict of interest. See Glenn, 554 U.S. at 112,
114; Miller, 632 F.3d at 847.

    Under the structural-conflict exception to the ERISA record
rule, a court may consider extra-record evidence that would
affect the weight afforded to a structural conflict of interest.
Neither party offers such evidence. Noga does not submit
evidence, such as “a history of biased claims administration,”
that would enhance the weight given to Reliance Standard’s
structural conflict of interest. Glenn, 554 U.S. at 117 (citation
omitted). Reliance Standard likewise offers no evidence to
contextualize or mitigate its structural conflict of interest.
Although evidence that a conflicted plan administrator “has
taken active steps to reduce potential bias and to promote
accuracy” may minimize the effect of a structural conflict of
interest “perhaps to the vanishing point,” Reliance Standard

                               25
did not seek to demonstrate, for example, that it “wall[ed] off
claims administrators from those interested in firm finances”
or “impos[ed] management checks that penalize inaccurate
decisionmaking irrespective of whom the inaccuracy benefits.”
Id. Instead, as explained above, the affidavit proffered by
Reliance Standard attempted to explain only a procedural
irregularity. Thus, here, neither party provides a basis for
affording the structural conflict-of-interest factor either
enhanced or diminished weight.6

6
  Reliance Standard’s use of a third-party vendor to select and
retain outside medical professionals to perform examinations
and reviews may superficially appear to enhance the structural
integrity of its claim-review process. But Reliance Standard
does not make that argument, and on closer inspection, such
outsourcing may exacerbate the underlying structural conflict
because it allows omission of several potentially relevant
pieces of information from the administrative record. For
instance, the administrative record lacks information regarding
important aspects of the third-party vendor’s decision-making,
such as the criteria that the vendor used to select the examiners
and reviewers; the universe of candidates it considered for
those roles; the frequency with which the vendor selected these
reviewers and examiners; and the compensation that each
received. Perhaps more significantly, the administrative record
lacks information on Reliance Standard’s methodology for
selecting the third-party vendor and the terms of its
arrangement with that vendor. Noga did not seek any of this
extra-record information. Yet due to the combined effect of
his inability to access that information and the potential
alignment of those unknown facts with Reliance Standard’s
financial incentives, such information may fall within the
structural-conflict exception.

                               26
          2. Two Procedural Irregularities Stand Out
             in Reliance Standard’s Handling of
             Noga’s Benefit Claims.

   Noga identifies two procedural irregularities related to the
termination of his benefit claims: one in the initial benefit
termination decision and the other on administrative appeal.

    The first procedural anomaly relates to the unusual timing
of and impetus for the IME request. According to Reliance
Standard, that decision was prompted by indications from
Noga’s treating physicians that his legs were improving, that
he no longer needed leg braces, and that he could walk up to a
mile in the pool. But Reliance Standard had that information
since August and September of 2016 – more than a year earlier.
And during that intervening year, three different in-house
nurses considered those facts, and each time they recertified
that Noga remained totally disabled, with the latter two
certifications occurring in August and September of 2017. Yet
less than a month after the latest nurse review – and “without
receiving any new medical information,” Miller, 632 F.3d at
848 – Reliance Standard referred Noga for an IME. Although
fiduciary decision-makers should not be “penalize[d] . . . for
seeking independent medical examinations at appropriate
stages of the claims determination process,” Kosiba, 384 F.3d
at 68, the timing of and professed need for the IME were
irregular.

    The second procedural anomaly concerns a request for
outside examination that is unusual in its timing, impetus, and
scope. On administrative appeal, a Reliance Standard senior
benefits analyst overturned his initial termination decision and
reinstated Noga’s benefits based on the recommendation of an

                              27
in-house nurse who had not previously worked on Noga’s
claim. But the day after he reinstated Noga’s benefits, the same
analyst reversed course: he put a hold on the reinstatement of
Noga’s benefits and requested two peer reviews of Noga’s
medical records. That request for outside examination is
unusual in its timing (a day after reinstating benefits), its
impetus (the administrative record does not explain the reason
for this change of course), and its scope (seeking paper reviews
from two additional outside medical professionals). See Post,
501 F.3d at 166 (noting that “courts must . . . consider the
circumstances that surround an administrator ordering a paper
review”).

          3. In Combination, the Structural and
             Procedural Factors Demonstrate that
             Reliance Standard Abused Its Discretion
             in Terminating Noga’s Benefits.

   Both of those procedural irregularities have a significant
connection to the financial incentives at the core of Reliance
Standard’s structural conflict of interest.

    The first procedural irregularity – the unusual timing of and
impetus for the IME – directly led to Reliance Standard’s
initial termination of benefits. Two months after that IME
request, once the IME report was completed, and without any
other updates to Noga’s medical files, Reliance Standard
reversed its finding of total disability. The request for the IME
by itself suggests “procedural bias,” Kosiba, 384 F.3d at 67,
because it constituted “[i]nconsistent treatment of the same
facts” that Reliance Standard’s in-house nurse considered less
than a month before the IME request, Pinto, 214 F.3d at 393.
And because that unusual decision resulted in the termination

                               28
of benefits, it strongly suggests that Reliance Standard was
acting not as a “disinterested fiduciary” but as a financially
motivated actor seeking to pay less money out in benefit
claims. Kosiba, 384 F.3d at 67.

    The second procedural irregularity – the unusual timing of,
impetus for, and scope of requests for outside review – is
similarly tied to Reliance Standard’s financial interests. In a
near-immediate backtracking of his decision to reinstate
Noga’s benefits on administrative appeal, a Reliance Standard
analyst requested two paper reviews of Noga’s medical file
from outside medical professionals. Relying on those reviews
and the IME report from the physiatrist retained by the third-
party vendor, the analyst reversed the reinstatement of benefits
and denied Noga’s benefit claims. The sudden request for
those reviews directly changed the financial outcome – again
in Reliance Standard’s favor.

    Taken together, the structural and procedural factors
demonstrate an abuse of discretion. Though its own nurses
consistently recertified Noga’s eligibility for benefits, Reliance
Standard disregarded those recommendations and sought an
IME and two peer reviews – questionable choices that led
directly to the termination of Noga’s benefits. Those decisions
look no better from a distance: in an eight-month period,
Reliance Standard sustained benefits, terminated benefits,
reversed the termination, and then reversed the reversal – with
the end result that Reliance Standard no longer had to fund
either Noga’s long-term disability or his life insurance. See
Glenn, 554 U.S. at 118 (sustaining the conclusion that a
conflicted plan administrator abused its discretion where the
procedural irregularities were “financially advantageous” for
the plan).

                               29
    Nor is this an instance in which an abundance of evidence
supporting the denial of the benefits claim overcomes the
combination of a structural conflict of interest and procedural
irregularities. See Miller, 632 F.3d at 846 (recognizing that
neither a structural conflict of interest nor procedural
irregularities may “tip the scales in favor of finding that the
administrator abused its discretion” if there is an abundance of
evidence of a claimant’s misconduct (alterations omitted)
(quoting Est. of Schwing, 562 F.3d at 526)). Without the three
procedurally irregular outside reports, the record evidence,
which includes reports from Noga’s treating physicians as well
as multiple assessments by Reliance Standard’s in-house
nurses, favors the continued award of benefits to Noga.

   In sum, the close alignment of the procedural irregularities
with the financial incentives creating the structural conflict
demonstrates that Reliance Standard abused its discretion: its
conflict “actually infected” its decision to terminate Noga’s
benefits. Dowling, 871 F.3d at 251.

                            * * *

    For these reasons, the District Court properly ordered the
retroactive reinstatement of Noga’s benefits. See Miller,
632 F.3d at 856–57. We will affirm.

                              30