Remand Versus Reinstatement Under ERISA
What is a Remand?
A court, in deciding a long-term disability (LTD) benefits claim under ERISA, can find for the defendant, find for the claimant and reinstate benefits due under the policy, or remand the case back to the insurer to consider an issue anew as opposed to the court deciding the issue itself. The issue of remand often arises when the policy definition of “disability” changes (usually at 24 months) from “own occupation” to “any occupation,” which allows the insurer to argue that even though the claimant may have been disabled under the “own occupation” standard, the insurer never had an opportunity to determine whether the claimant was disabled under the “any occupation” standard.
A claim may be remanded during the “own occupation” period, or after the “any occupation” transition has occurred. Nagy v. Grp. LTD Plan for Employees of Oracle Am. Inc., 183 F. Supp. 3d 1015-1032 (N.D. Cal. 2016), aff'd 735 F. App'x 366 (9th Cir. 2018).
While ERISA does not explicitly authorize administrative remand, 29 U.S.C. 1132(a)(1)(B), and courts have held that “remand should be used sparingly,” Quesinberry v. Life Ins. Co. of America, 987 F.2d 1017, 1025 (4th Cir. 1993), remand may be an appropriate remedy, as in Taylor v. Reliance Standard Life Ins. Co., 837 F. Supp. 2d 1194 (W.D. Wash. 2011), where the court limited its award to a reinstatement of benefits for the “own occupation” term of the claim, while remanding the case to determine entitlement to benefits under the “any occupation” standard.
When Are Remand and Reinstatement Appropriate Remedies?
Reinstatement of benefits, rather than a remand, is appropriate when an insurer's arbitrary and capricious conduct caused a termination of benefits (“but for the insurer's improper conduct, the insured would have continued to receive benefits”) and when there was no evidence in the record to support a termination. Grosz-Salomon v. Paul Revere Life Insurance, Co., 237 F.3d 1154, 1163 (9th Cir. 2001). (“[A] plan administrator will not get a second bite at the apple when its first decision was simply contrary to the facts.”); Cook v. Liberty Life Assur. Co. of Boston, 320 F.3d 11, 24 (1st Cir. 2003); Watson v. Unum Provident Corp., 185 F Supp. 2d 579, 587 (D. Md. 2002).
The court in Caldwell v. Life Ins. Co. of N. Am., 287 F.3d 1276, 1288-89 (10th Cir. 2002), explained that remand is unnecessary when the evidence clearly shows the administrator's actions were arbitrary and capricious, and it would be unreasonable for the plan administrator to deny benefits on any ground.
Thus, when no new evidence in the form of an independent medical evaluation (IME) or a Functional Capacity Evaluation (FCE) could produce a reasonable conclusion permitting a non-arbitrary denial of a claim, or when the insurer had ample time and opportunity to obtain an IME or an FCE and chose not to do so, remand is not appropriate.
In Paese v. Hartford Life and Acc. Ins. Co., 449 F.3d 435, 449 (2nd Cir. 2006), the court addressed the question whether “to grant Paese permanent long term disability benefits under the any occupation standard because he had not exhausted his administrative remedies and had not given Hartford the opportunity, in the first instance, to decide the issue.” The court found that Paese had argued for benefits under both the “own occupation” and the “any occupation” standard, and held that remand was unnecessary if the insurer was unwilling to consider the “any occupation” disability standard in denying his claim and failed to notify Paese accordingly.
Where a plan administrator had an opportunity to review all the evidence (including “any occupation” evidence) in the medical record and failed to do that, or did so in a manner that was arbitrary and capricious, benefits are properly reinstated and remand is not required. Williams v. Int'l Paper Co., 227 F.3d 706 (6th Cir. 2000). Under such circumstances, administrative remand is not only not required, but it is improper and can rightly be criticized as giving an insurer a “second bite at the apple.” Cooper v. Life Ins. Co. of North America, 486 F.3d 157 (6th Cir. 2007) (“Plan administrators should not be given two bites at the proverbial apple.”)
Exhaustion of Remedies Doctrine
Remand is predicated on the Exhaustion of Remedies Doctrine. The Exhaustion of Remedies Doctrine requires a remand for the parties to exhaust all available administrative remedies prior to filing a lawsuit. Vega v. National Life Ins. Serv's Inc., 188 F.3d 287,302 n. 13 (5th Cir. 1999) (“parties must make their full records before coming to federal courts and not allow the case to oscillate between the courts and the administrative process.”).
Exhausting a plan's internal claims procedures is not strictly required under ERISA, but courts generally have imposed this requirement. Amato v. Bernard, 618 F. 2d 559, 568 (9th Cir. 1980); that a plaintiff must first exhaust a plan's administrative remedies under the plan (“exhaustion doctrine”) before resorting to federal court. Perrino v. S. Bell & Tel. Co., 209 F.3d 1309, 1315 (11th Cir. 2000) (“[A]s a general rule, plaintiffs in ERISA actions must exhaust available administrative remedies before suing in federal court.”)
In Mason v. Continental Group, Inc., 763 F.2d 1219, 1227 (11th Cir. 1985), the court concluded that “imposing an exhaustion requirement in the ERISA context appears to be consistent with the intent of Congress ...”, cert. denied, 474 U.S. 1087, 106 S. Ct. 863, 88 L. Ed. 2d 902 (1986).
Courts Have Discretion
However, courts have discretion to determine when a remand or reinstatement of benefits is appropriate, and deference to the plan administrator under ERISA does not deprive the court of its discretion to formulate an appropriate remedy.
In fact, the decision of a district court to apply the exhaustion doctrine is a highly discretionary decision, which a reviewing court reviews “only for a clear abuse of discretion,” and excusal of the exhaustion requirement is proper “when resort to the administrative remedies would be futile or the remedy inadequate.” Counts v. Am. Gen. Life & Accident Ins. Co., 111 F.3d 105, 108 (11th Cir. 1997; Glover v. St. Louis-San Francisco Railway Co., 393 U.S. 324, 330-31, 89 S. Ct. 548, 551-52, 21 L. Ed. 2d 519 (1969). (While “application of the administrative exhaustion requirement in an ERISA case is committed to the sound discretion of the district court,” that discretion must be exercised “to excuse non-exhaustion where resorting to the plan's administrative procedure would simply be futile.”) See also: Fallick v. Nationwide Mutual Ins. Co., 162 F.3d 410, 418 (6th Cir. 1998) (“[W]hen resort to the administrative review process would be an exercise in futility, the exhaustion of remedies doctrine shall not apply.”)
Excusal of the Exhaustion Doctrine
While remand to an insurer to consider the “any occupation” standard is required by the Exhaustion Doctrine, exhaustion is excused when it would be nothing more than a useless “formality,” such as when a claimant's entitlement to disability benefits was well supported by the current record and an exhaustion of remedies would be futile. Reetz v. Hartford Life & Acc. Ins. Co., 294 F. Supp. 3d 1068, 1084 (W.D. Wash. 2018); Oliver v. Coca Cola Co., 497 F.3d 1181, 1199-1201 (11th Cir. 2007); Smith v. Metro Life Ins. Co., 274 F. App'x 251-257-58 (4th Cir. 2003).
Excusal of the exhaustion requirement is proper, as In Curry v. Contract Fabricators Profit Sharing Plan, 741 F. Supp. 1061 (M.D. Ala 1988), where the court held that exhaustion of administrative remedies is excused if resort to the procedures would be futile, or if the claimant is “wrongfully denied meaningful access” to the administrative procedures. Lieske v. Morlock, 570 F. Supp. 1426, 1429 (N.D. Ill., 1988) (Although § 502, 29 U.S.C. § 1132, does not expressly require a plaintiff to exhaust administrative remedies before bringing suit, it is within the trial court's discretion to apply the exhaustion doctrine in ERISA cases. ... However, ... exhaustion will be excused when resort to such procedures would be futile ...)
Summary
After a lengthy litigation, a plaintiff can be justifiably disappointed when a judge grants LTD benefits for the “own occupation” period but remands a claim back to the plan administrator for a determination on the “any occupation” period. It's like giving the insurer a second bite at the apple, and there is little reason to believe that the insurer will be any fairer the second time around. Moreover, remand lengthens the litigation process and adds further delay and expense to a plaintiff who is already burdened by being unable to work and may be disadvantaged even more by the delay.
However, a remand may be avoided when it would be futile or unjust, and courts have discretion not to remand but to reinstate benefits under both the “own occupation” and the “any occupation” provisions of the policy.
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