Rhodes v. First Reliance Standard Life Insurance Company

Background

William Rhodes brought an action under the Employee Retirement Income Security Act of 1974 (ERISA) seeking long-term disability benefits from First Reliance Standard Life Insurance Company. Rhodes was a former employee of Union Bank, which issued the long-term disability plan. First Reliance was the plan’s claims administrator and fiduciary.

After Rhodes suffered a traumatic brain injury, First Reliance initially approved his claim on March 27, 2019. It terminated his benefits on November 17, 2020, finding that he no longer met the plan’s definition of “Total Disability.” Rhodes sent First Reliance letters challenging that decision, including a May 13, 2021 letter expressly describing itself as a formal appeal. First Reliance received that letter on May 19, 2021.

First Reliance told Rhodes on June 7, 2021 that it would require an independent medical examination and purported to extend the time for deciding the appeal. It obtained a report from Kristjan Olafsson, a neuropsychologist, and later obtained an addendum after asking Olafsson to review additional medical records. First Reliance did not provide Rhodes the addendum before upholding the denial of benefits on January 7, 2022.

Issues and Parties’ Arguments

ERISA benefit denials ordinarily receive de novo review, meaning the court independently reviews the claim. If the plan gives the administrator discretionary authority, courts generally apply the more deferential “arbitrary and capricious” standard. Under Second Circuit precedent discussed in the opinion, however, a plan’s failure to follow federal claims-procedure regulations generally requires de novo review unless the plan’s procedures otherwise fully comply and the violation was inadvertent and harmless.

Rhodes alleged three procedural violations:

First Reliance argued that Olafsson was qualified, that the addendum did not contain new or additional evidence because it did not change his opinions, and that its June 7 letter properly paused or extended the appeal deadline.

Court’s Analysis

The court held that First Reliance violated the full-and-fair-review requirement by failing to consult a medical doctor. The court emphasized that Rhodes’s records included physical head-injury records, brain scans showing physical abnormalities, abnormal physical examinations, treatment by doctors in neurological and physical-rehabilitation specialties, and symptoms such as visual disturbances, headaches, balance impairment, and deficient fine-motor coordination. The court noted that First Reliance identified cases involving reviewers who were board-certified medical doctors but provided no supporting precedent holding that a non-medical doctor, such as a neuropsychologist, satisfied the requirement in these circumstances.

The court also held that the addendum was new or additional evidence within the meaning of the regulation. First Reliance had obtained it so Olafsson could review additional medical records, including an MRI, physician progress notes, and medical tests. Because the addendum was a medical opinion about new evidence and was considered and generated by First Reliance, the company was required to provide it to Rhodes and allow him a reasonable opportunity to respond before deciding the appeal.

On the deadline issue, the court did not decide whether Rhodes’s March 2 letter or May 13 letter started the 45-day period. It held that First Reliance violated the regulations even if the period began when it received the May 13 letter. The court found that awaiting the independent medical examination did not provide a valid basis for pausing the deadline. It also found that the June 7 letter merely told Rhodes that he could submit additional information; it did not request information in a way that permitted tolling, or pausing, the deadline. Finally, the court found that First Reliance did not properly invoke a 45-day extension because it did not identify special circumstances or state the expected decision date.

Disposition and Effect

The court granted Rhodes’s motion for de novo review of his application for benefits. It ordered that the court use that standard in reviewing the benefits claim. The court did not decide in this order whether Rhodes is entitled to long-term disability benefits. It directed the Clerk to terminate ECF No. 14 and ordered the parties to appear for a status conference on May 5, 2023, to address further proceedings.

Classification

This is a procedural order because the court decided the standard of review based on alleged claim-processing violations without deciding the underlying entitlement to benefits.

Topics

The ruling concerns ERISA benefit procedures and the standard of judicial review.