Extrinsic Evidence in ERISA Cases
The general rule in ERISA cases is that the administrative record, as it exists at the time the insurer issued its final claim denial, constitutes all of the admissible evidence the court will consider in adjudicating a claim for benefits.
This reasoning is based on Taft v. Equitable Life Assurance Society, 9 F.3d 1469, 1472 (9th Cir. 1993), which held that "nothing in the legislative history suggests that Congress intended that federal district courts would function as substitute plan administrators, a role they would inevitably assume if they received or considered evidence not presented to administrators concerning employees' entitlement to benefits."
Accordingly, discovery in ERISA cases is generally not allowed [but see below], as it would produce evidence outside of the administrative record, which courts should not consider in reviewing plan decisions. McKenzie v. General Telephone Co. of California, 41 F.3d 1310, 1316 (9th Cir. 1994).
However, there are three exceptions under which the court may consider "extrinsic evidence" in ERISA cases.
(1) De Novo Review. Extrinsic evidence may be considered in a de novo case "when circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefits decision.". Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 943-44 (9th Cir. 1995).
(2) Conflict of Interest. When there is a conflict of interest on the part of an insurer who, while denying benefits, is acting as decider and claims payer, then extrinsic evidence outside of the administrative record may be considered to determine bias and whether the insurer's dual role as decider and payer has unfairly influenced its fiduciary obligation to decide the claim fairly. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006).
(3) Procedural Irregularity. When the plan administrator has engaged in a procedural irregularity under ERISA, such as failing to provide a full and fair hearing as required by ERISA, 29 U.S.C. § 1133(2), then extrinsic evidence outside of the administrative record may be considered to complete the record. Id., at 972-973.
It should be noted that discovery in ERISA cases is not prohibited. Rule 26(b)(1) of the Federal Rules of Civil Procedure states that "any matter, not privileged, that is relevant to the claim or defense of any party," so long as it is "reasonably calculated to lead to the discovery of admissible evidence," is permitted under Rule 26. Discovery in ERISA is allowed within the scope of admissible evidence.
In Crosby v. Louisiana Health Service and Indemnity Co., 647 F.3d 258 (5th Cir. 2011), the insured sought evidence outside the administrative record to determine whether the record was complete, whether the insurer complied with ERISA's procedural requirements, and whether it had previously afforded coverage for the kind of claims presented by the insured. The court held that the discovery request was at least reasonably calculated to lead to the discovery of some admissible evidence and allowed the request.
In Barker v. Life Ins. Co. of North America, 265 F.R.D. 389 (S.D. Ind., 2009), the court observed that "relevant" matter, in the discovery context, is more than what would be admissible evidence at trial, and includes anything that "appears reasonably calculated to lead to the discovery of admissible evidence."
In ruling on a discovery request in ERISA cases, the court must determine what is "relevant" and whether it appears reasonably calculated to lead to the discovery of admissible evidence. Hogan-Cross v. Metropolitan Life Ins. Co., 568 F. Supp.2d 410, 414 (S.D.N.Y., 2008).
Therefore, the general rule is that the only admissible evidence in an ERISA benefit denial case is the administrative record. However, there are narrow exceptions both to discovery and extrinsic evidence that may be available to a claimant under some circumstances.
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