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Full and Fair Claims Review

Full and Fair Claims Review

Insurers are required by federal statutory and case law to provide a “full and fair review” of disability claims, but what does a “full and fair review” require, and when is a claim review not “full and fair?”

On April 1, 2018, amended disability claims procedure regulations from the Department of Labor (DOL) became effective for ERISA disability plans that clarify this question. 29 C.F.R. § 2560.503-1.  They include the following:

Impartiality. Claims and appeals must be determined in a manner to assure independence and impartiality of the persons making the benefit decisions and their consultants.

New Evidence. On appeal of an adverse benefit determination, claimants must be given timely notice of any new evidence “considered, relied upon, or generated” by the entity making the benefit determination and an opportunity to respond before a final determination is rendered.

Thorough Discussion of Grounds for Denying Claim. Adverse-benefit determinations must contain a substantive discussion for a decision, including the basis for disagreeing with the views of health care professionals, vocational professionals, and with disability benefit determinations by the Social Security Administration.

Limitations Periods. Adverse-benefit determination letters must inform the claimant of the limitation periods on filing administrative appeals, and in the case of an adverse determination on review, of the calendar date on which any applicable contractual limitations period for filing a lawsuit expires.

With respect to “new evidence,” a “full and fair review” guaranteed by ERISA requires that the insurer provide the plaintiff an opportunity to respond to new evidence prior to issuing an adverse benefits determination on appeal.  Hughes v. Hartford Life & Accident Insurance Company, 368 F. Supp. 3d 386 (D. Conn. 2019).

In Hughes, after Hartford terminated Hughes' disability benefits and while her appeal was pending, Hartford sent Hughes to a physician for a medical examination and based on that physician's report, denied Hughes appeal. Hughes requested a copy of the medical report so she could respond before Hartford made a final determination, but Hartford refused to provide it and deprived Hughes of an opportunity to respond and rebut it.

The Hughes court observed that a “full and fair review” included “‘knowing what evidence the decision-maker relied upon, having an opportunity to address the accuracy and reliability of that evidence, and having the decision-maker consider the evidence presented by both parties prior to reaching and rendering his decision.'” Id. at 5.

The Hughes court enumerated three rights that a claimant has. (1) a right to submit information to the plan for consideration on appeal; (2) a right of access to obtain information from the plan at the appeal stage relevant to the claim for benefits; and (3) a right for the plan to consider the information submitted by the claimant at the appeal stage. Id. at 5-6.

These rights, the court concluded, formed the “essential components of what the regulation defines to be a full and fair review” and the reasons a benefit plan or fiduciary must allow a claimant the right of access to a report of the physician and to respond to the physician's report before the fiduciary makes a final determination. To hold otherwise, the Court reasoned, would make the regulations meaningless.

“Full and fair review suggests a review that is thorough, comprehensive and transparent - not one in which a plan may order up a doctor's report at the final hour and then deny the claimant access to this information until it is too late for the claimant to respond.” Id. at 9.

The plan had a “duty to disclose new evidence on appeal,” and its refusal to turn-over the physician's report violated Hughes' right to a “full and fair review.” Hughes, at 14.

Court decisions in the Eighth Circuit have held that not disclosing a report to a claimant amounted to “sandbagging” and that the insurer failed to provide a full and fair review. Abram v. Cargill, Inc., 395 F.3d 882, 886 (8th Cir. 2005).

The Ninth Circuit has taken a similar position that sharing relevant information fostered a full and fair review. Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 680 (9th Cir. 2011).

Courts in the Eighth, Tenth and Eleventh Circuits have ruled that medical reports do not need to be disclosed before making a final benefit determination  Midgett v. Wash. Group Int'l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009); Glazer v. Reliance Standard Life Ins. Co., 524 F.3d 1241 (11th Cir. 2008); Metzger v. UNUM Life Ins. Co. of Am., 476 F.3d 1161 (10th Cir. 2007). However, they appear to be inconsistent with the plain text of the regulations. 

Under 29 C.F.R. 2560.503-1(m)(8),the information required to be provided by the insurer includes all documents relevant to an applicant's claim for benefits.

A document is "relevant" under 29 U.S.C. § 1024(b)(4), if it: (1) Was relied upon in making the benefit determination; (2) Was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; (3) Demonstrates compliance with the administrative processes and safeguards required pursuant to paragraph (b)(5) of this section in making the benefit determination; or (4) In the case of a plan providing disability benefits, constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit for the claimant's diagnosis, without regard to whether such advice or statement was relied upon in making the benefit determination.

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