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“Three Strikes Are Enough”: Fourth Circuit Upholds Decision Finding Health Plan Abused Its Discretion in Denying Benefits

Garner v. Central States, No. 21-1602, __ F.4th __, 2022 WL 1160386 (4th Cir. Apr. 20, 2022) (Before Circuit Judges Wilkinson, Diaz, and Floyd)

Dorothy Garner suffered from back and neck pain, and although she tried medication and postural exercises such as yoga, her pain worsened. After an MRI, her doctor recommended surgery, which she underwent in 2019.

However, when she submitted a claim under her husband’s ERISA-governed employee health benefit plan, of which she was a beneficiary, defendant Central States denied it on the ground that her surgery was not “medically necessary” under the terms and conditions of the plan. Central States arrived at this conclusion even though it did not have the MRI results, or the notes from Ms. Garner’s doctor explaining his surgery recommendation.

Ms. Garner appealed, and this time Central States’ second reviewing physician had access to Ms. Garner’s entire file. However, Central States upheld its decision, relying “in part on a lack of documented abnormalities on a neurologic exam and in part on the fact that Garner had not taken ‘any conservative measures other than medication.’” Central States denied a second appeal as well, relying on both doctors in arriving at its final decision.

Ms. Garner then filed this action under ERISA seeking payment of plan benefits. The district court ruled in her favor, determining that Central States “had not engaged in a ‘reasoned and principled’ decision-making process.” Specifically, the district court found that (1) Central States had not provided its first doctor with the “critically important” MRI records, (2) “nothing in the plan required covered individuals to exhaust conservative treatment options before undergoing surgery,” and (3) it was undisputed that Garner had unsuccessfully tried postural exercises to relieve her pain. Central States appealed to the Fourth Circuit.

The Fourth Circuit acknowledged that the plan vested the administrators with discretionary authority and thus it reviewed Central States’ decision for abuse of discretion. However, even under this deferential standard of review the Fourth Circuit agreed with the district court that Central States’ denials were arbitrary and unreasonable.

The court first noted that Central States “utterly failed to disclose” to their first reviewing physician pertinent medical records, including both the MRI and Ms. Garner’s doctor’s notes. These documents “were critical” because the MRI established the underlying medical basis for her surgery, and the notes explained why the surgery was recommended. Furthermore, Central States did not follow up with the first reviewing physician or provide him with the relevant documentation after he completed his report, even though he complained of a lack of information.

The Fourth Circuit stressed that it was not concluding that Central States had “acted in bad faith or deliberately withheld documentation,” but under ERISA Central States owed Ms. Garner a “deliberate, principled reasoning process,” which she “manifestly did not receive.”

Central States contended that even if its first denial was improper, it cured that error with the report of its second reviewing physician, who reviewed all the relevant information concerning Ms. Garner’s treatment. However, the Fourth Circuit rejected this argument because Central States repeatedly indicated that it relied on both doctors’ reports in upholding its decision. Because it continued to rely on the first faulty report in denying Ms. Garner’s claim, its denial was not “a reasoned determination.”

The Fourth Circuit did not stop there, however, and noted a second problem with Central States’ denial. Central States complained that Ms. Garner had not tried conservative treatment prior to her surgery, but the record contradicted this because Ms. Garner “had tried postural exercises such as yoga without relief.” Ms. Garner’s doctor had also specifically noted that he recommended an MRI because her pain had continued “despite her efforts at conservative treatment over the past several months.”

Furthermore, the Fourth Circuit ruled that Central States “erred to the extent that they imposed a requirement of conservative treatment as a precondition to finding that Garner’s surgery was medically necessary.” While a history of such treatment may be “a useful factor” in determining whether a procedure is medically necessary, Central States was not allowed to require it “as an absolute condition.” In doing so, Central States effectively “add[ed] a new term to the plan, a term for which Garner did not bargain, and about which she lacked any notice.”

Finally, the Fourth Circuit agreed with the district court that payment of benefits was the proper remedy. Central States contended that the case should be remanded for further review by its claim administrators, but the court observed that Central States “repeatedly failed to handle Garner’s claim in a sensitive and fair-minded manner.” After “no fewer than three opportunities to give Garner’s claim the reasoned consideration that it deserved…[i]t would neither encourage the careful and efficient resolution of benefits claims, nor would it be fair to Garner, to permit Central States a fourth opportunity. Three strikes are enough.”

Having struck out, Central States lost its appeal, and the district court’s judgment against it was affirmed in its entirety.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Breach of Fiduciary Duty

Second Circuit

Carrigan v. Xerox Corp., No. 3:21-CV-1085 (SVN), 2022 WL 1137230 (D. Conn. Apr. 18, 2022) (Judge Sarala V. Nagala). Participants of the Xerox Corporation Savings Plan brought this putative class action for breaches of fiduciary duties of prudence, loyalty, and failure to monitor against the Xerox Corporation, the Administrative Committee of the Plan, and other fiduciaries. Plaintiffs challenged defendants’ process and asserted that loyal and prudent administrators would have monitored the plan and subsequently lowered the recordkeeping fees of the plan, but that defendants failed to do so because the excessive recordkeeping fees were financially to their benefit as the Plan’s recordkeepers during the relevant time period were wholly-owned subsidiaries of Xerox. Plaintiffs pointed to the sharp rise in participant fees from $69 in 2016 to $123 the following year when the recordkeeper switched, all the way up to $136 per participant in 2019. In their complaint, plaintiffs alleged that during this same time period a plan of this size could have obtained recordkeeping services for as low as $30 per participant from recordkeepers such as Fidelity, Vanguard, Alight, and Empower. Defendants moved to dismiss for failure to state a claim. Accepting the allegations of the complaint as true, and “noting that the duties of loyalty and prudence imposed by ERISA are the most stringent duties of their kind under the law,” the court denied the motion, finding plaintiffs’ allegations of imprudence and disloyalty plausible. The court was persuaded that reasonably prudent and loyal fiduciaries would have investigated these excessive fees and would not have retained recordkeepers with whom they were financially affiliated.

Tenth Circuit

Matney v. Barrick Gold of N. Am., Inc., No. 2:20-cv-275-TC-CMR, 2022 WL 1186532 (D. Utah Apr. 21, 2022) (Judge Tena Campbell). Plaintiffs are participants in the Barrick Gold of North America, Inc. defined contribution retirement plan. They brought this putative class action for breaches of fiduciary duties of prudence and loyalty, and for failing to monitor, against the company, its board of directors, and its benefits committee. Plaintiffs alleged that defendants failed to ensure a prudent lineup of investment options in terms of costs and fees, and offered instead funds with poor performance histories and/or funds with excessive recordkeeping and administrative fees given the plan’s size. Plaintiffs asserted that circumstantial evidence in their possession at this stage of the case could lead the court to reasonably infer that defendants’ decision-making process was imprudent and disloyal. Defendants moved to dismiss for failure to state a claim and for lack of Article III standing. First, the court rejected defendants’ standing arguments. “That Plaintiffs did not invest in every option provided by the Plan is not relevant to the issue of standing.” Nevertheless, defendants were successful in persuading the court that plaintiffs’ fiduciary duty claims were based on inaccurate allegations, improper benchmarks, and unsupported inferences. According to the court, plaintiffs’ “lengthy Amended Complaint (was) filled with generalities, legal standards, generic descriptions of investment options available to consumers, industry-wide statistics and averages,” and thin on “specific factual allegations.” The court even held that a number of plaintiffs’ allegations contained incorrect information and numbers and relied on the numbers defendants provided as the correct ones. Plaintiffs’ breach of fiduciary duty of prudence claim was accordingly dismissed. Their duty of loyalty claim was also dismissed as being a repackaged prudence claim based on the same set of facts. Finally, the derivative failure to monitor claim was dismissed because plaintiffs did not adequately allege their prudence and loyalty claims. For these reasons defendants’ motion to dismiss was wholly granted.


Eighth Circuit

J.W. v. Cigna Health & Life Ins. Co., No. 4:21-cv-00324-SRC, 2022 WL 1185196 (E.D. Mo. Apr. 21, 2022) (Judge Stephen R. Clark). Plaintiff J.W. is a minor who filed this action through his legal guardian against Cigna Health & Life Insurance Company under ERISA Section 502(a)(1)(B) asserting Cigna wrongfully denied him benefits for medically necessary mental-health services he received at three residential treatment centers. The parties agreed that the abuse of discretion review standard will apply to this case. J.W. moved for discovery outside the administrative record, arguing that procedural irregularities and conflicts of interest warrant discovery. Specifically, J.W. sought the production of claims handling manuals and procedures, depositions of three Cigna employees, and production of compensation guidelines and information about bonuses for Cigna’s medical reviewers. The court held that J.W. failed to allege the existence of conflicts of interest to justify discovery outside the record. “Indeed, the administrative record establishes the absence of payor-administrator conflict because Barry-Wehmiller self-insures the plan and Cigna administers it.” Turning to the procedural irregularities, the court expressed that the administrative record contains the evidence it needs to determine if Cigna followed its own rules and whether it failed to follow ERISA regulations. For these reasons the court did not believe that good cause existed to permit discovery beyond the administrative record and therefore denied J.W.’s discovery motion.

Ninth Circuit

Smith v. Unum Life Ins. Co. of Am., No. CV-21-01858-PHX-DGC, 2022 WL 1136639 (D. Ariz. Apr. 18, 2022) (Judge David G. Campbell). In its decision, the court held that limited discovery pertaining to defendant Unum Life Insurance Company’s structural conflict of interest was warranted in this long-term disability case. Plaintiff Sally Smith moved to conduct discovery into the training and experience of Unum’s employees and reviewers involved in handling or supervising claims, as well as into the insurer’s reserves and related financial information. The court agreed with Ms. Smith that both topics had “more than a theoretical connection between the discovery she seeks and the effect of the conflict,” and were relevant to whether Unum’s decision-making process was influenced by financial motivations. However, some of Ms. Smith’s proposed discovery was insufficiently specific according to the court. Therefore, the court ordered Ms. Smith to submit the “particular interrogatories, requests for production, and requests for admission that she wishes to serve regarding reserves and employee training and experience,” so that the court may limit the discovery and promote ERISA’s goal of speedy resolution of benefit disputes.

D.C. Circuit

Wall v. Reliance Standard Life Ins. Co., No. 20-cv-2075 (EGS/GMH), 2022 WL 1145158 (D.D.C. Apr. 19, 2022) (Magistrate Judge G. Michael Harvey). Plaintiff Lucas Wall, proceeding pro se, asserts claims for medical malpractice and ERISA claims under Section 502 for interest on the six months during which his long-term disability benefits were withheld, for clarification of his rights to future benefits under the plan, and to enforce those rights. Defendants are his long-term disability benefit plan insurer, Reliance Standard Life Insurance Company, and one of its peer-reviewing doctors, Dr. Jiva. Before the court was Mr. Wall’s discovery motion to compel. Because Dr. Jiva filed a motion for judgment on the pleadings, which if granted will moot the motion to compel, the court chose to delay adjudication of the discovery motion as it pertains to Dr. Jiva. Thus, the court addressed Mr. Wall’s motion as directed at Reliance. The court was unable to connect what Mr. Wall’s request for production of documents, which seeks all peer reviews performed by Reliance in long-term disability claims from 2012 to present, including the decisions made as a result of the reviews, had to do with the interpretation of the ERISA benefits plan at issue. Simply put, Mr. Wall was not able to explain “how a decade’s-worth of information on Reliance’s use of peer reviews in other cases could be of any value in interpreting and otherwise construing the provisions of the benefits plan.” Furthermore, putting aside the issue of relevance, the court stressed that the discovery Mr. Wall sought was also not proportional to the needs of the case. Thus, the motion to compel with regard to Reliance was denied.

ERISA Preemption

Fourth Circuit

Porter v. First Bankshares, Inc., No. 3:21-0464, 2022 WL 1179412 (S.D.W.V. Apr. 20, 2022) (Judge Robert C. Chambers). Plaintiff Sherrie Porter is a retiree and plan participant in the First Bankshares, Inc. Employee Stock Ownership Plan (with 401(k) Provisions) (“KSOP”). Ms. Porter alleged in her complaint that while working at First Bankshares she sought to withdraw or transfer her retirement assets “in light of the fact the value of First Bankshare’s stock was known to be in significant decline.” She asserts these requests were ignored and declined. According to the complaint, Ms. Porter’s retirement portfolio in 2012 was valued at $243,055.61. By 2018, its value had plummeted to just $2,604.61. Ms. Porter originally filed her suit in West Virginia state court for breaches of fiduciary duties under state law, and claims of negligence, nonfeasance, misfeasance, and malfeasance. Defendants removed the case to federal court, asserting the claims are all preempted by ERISA. Defendants moved to dismiss. Ms. Porter moved to remand. Unsurprisingly, the court agreed with defendants that this case should have been brought as an ERISA suit, and that the state law claims were all preempted by ERISA. For this reason, Ms. Porter’s motion to remand was denied. However, the court granted in part and held in abeyance in part the motion to dismiss. The court requested additional briefing pertaining to whether Ms. Porter was eligible to diversify her account when she made her requests. As for the state law fiduciary breach claims, the court concluded, “Plaintiff’s state law claims related to corporate mismanagement are subject to conflict preemption and must be dismissed as she cannot bring such claims to recover any personal damages she experienced as an individual beneficiary and non-stockholder.” The court therefore granted defendants’ motion to dismiss the fiduciary duty claims.

Tenth Circuit

IHC Health Serv. v. Meritain Health, Inc., No. 2:19-cv-861, 2022 WL 1166085 (D. Utah Apr. 20, 2022) (Judge Howard C. Nielson, Jr.). Plaintiff IHC Health Services sued Meritain Health, Inc. for breach of contract and unjust enrichment for failing to pay for medical services the children’s hospital provided to an insured patient in violation of a Memorandum of Understanding the provider had entered into with Aetna Health Management, LLC, and its affiliates, including Meritain Health. IHC Health and Meritain filed cross-motions for summary judgment. The court first addressed Meritain’s argument that IHC Health’s claims were preempted by ERISA. Referring to Tenth Circuit precedent, the court concluded that although IHC Health’s claims referenced an ERISA plan, they did not seek to enforce rights under the plan, allege a breach of the plan, seek to modify the terms of the plan, or affect the relations between the principal ERISA entities, and thus they were not preempted by ERISA. Next, the court turned to the breach of contract claim, and granted judgment in favor of IHC Health. The court was satisfied that IHC’s complaint satisfied the elements of a breach of contract claim. First, the complaint included a copy of the Memorandum of Understanding, which the court examined and concluded was a binding contract between the parties. Next, the uncontested evidence proved that IHC performed its duties under the contract by providing medical service to the insured patient. It was also uncontested that Meritain did not pay for these services within 30 days of receiving the bill as it was required to do under the terms of the contract. Last, the court held that per the terms of the agreement Meritain was required to pay 89.6% of the billed amount, establishing that IHC suffered damages of just over $78,000.00 as a result of Meritain’s breach. Accordingly, the court granted IHC’s motion for judgment, and entered judgment against Meritain in the amount of damages plus prejudgment interest. Turning to unjust enrichment, because a prerequisite for a recovery of unjust enrichment under Utah law is the absence of an enforceable contract, and the court had already established the existence of a binding contract which governs this dispute, IHC’s claim for unjust enrichment failed. Thus, Meritain was granted summary judgment with respect to the unjust enrichment claim.

Exhaustion of Administrative Remedies

Third Circuit

Fuhrer v. The Hartford Life & Accident Ins. Co., No. 2:21-cv-05040-JDW, 2022 WL 1172971 (E.D. Pa. Apr. 20, 2022) (Judge Joshua D. Wolson). Plaintiff Katrina Fuhrer sued The Hartford Life & Accident Insurance Company after her claim under her late husband’s Accident Death & Dismemberment policy was denied. Hartford moved for summary judgment, arguing that Ms. Fuhrer failed to administratively exhaust her denial before bringing suit as required under the plan. The court agreed with Hartford that the terms of the plan unambiguously require exhausting administrative remedies before a participant or beneficiary pursues legal remedies. The court did not agree with Ms. Fuhrer that a letter she sent during her appeal constituted a request for “a review upon written application,” because the letter did not request a review or state that it was appealing the denial, and said instead that “once we’ve had an opportunity to review the complete terms of the policy, we will be in a position to provide you with a letter that sets forth our position.” In sum, the court interpreted this letter not as requesting an appeal but as requesting information in order to prepare for an appeal. Because Ms. Fuhrer did not file an appeal until almost two years past the deadline, the court agreed that the appeal, which was required to be submitted within 60 days of the date of the claim decision, was untimely. Therefore, the court granted summary judgment in favor of Hartford.

Medical Benefit Claims

Second Circuit

Fisher v. Aetna Life Ins. Co., No. 20-3148 20-3804 21-1, __ F. 4th __, 2022 WL 1193999 (2d Cir. Apr. 22, 2022) (Before Circuit Judges Calabresi and Pooler, and District Judge Edward R. Korman). Plaintiff Jacqueline Fisher appealed three judgments entered by the Southern District of New York granting judgment in favor of Aetna Life Insurance Company in cases involving an ERISA-governed welfare plan which included a “choose generic” clause. Ms. Fisher suffers from recurrent major depression and was prescribed the costly brand-name drug EffexorXR. A chemically-equivalent generic version of EffexorXR exists called venlafaxine. The cost difference between the drugs is significant, with the name-brand drug costing up to $500 for a 30-day supply and the generic costing only $35. The crux of the complaints was that the governing plan document did not include the “choose generic” clause, or in the alternative, that the Affordable Care Act (“ACA”) provides that Aetna must apply the individual out-of-pocket limit rather than the family out-of-pocket limit, and that the brand vs. generic cost differential Ms. Fisher paid for her medication should count toward her out-of-pocket limit. The Second Circuit found no clear error to the district court’s orders and affirmed the summary judgment orders. The court of appeals agreed that the plan document with the “choose generic” clause governed the contract of insurance and that Ms. Fisher was on notice of its terms. Additionally, the district court was correct, according to the Second Circuit, that Ms. Fisher is not entitled to judgment for her copay differential. The Second Circuit also agreed that the ACA is silent as to whether the individual or family out-of-pocket limit applies to an individual covered under a family policy, and therefore the plain text of the plan, which clearly states participants are obligated to meet family out-of-pocket limits, controls. Finally, the Second Circuit affirmed that neither the plan nor the ACA required Aetna to apply the brand-generic cost differential charge toward Ms. Fisher’s out-of-pocket limit.

Pleading Issues & Procedure

Third Circuit

Wright v. Elton Corp., No. 17-286-JFB, 2022 WL 1136733 (D. Del. Apr. 14, 2022) (Judge Joseph F. Bataillon). The court, in responding to this motion to reconsider, held firm on its previous decisions in this case involving the mismanagement of a pension. The third-party defendants, the grandchildren of Mary Chichester duPont, the woman who established the pension in the 1940s, moved the court to clarify that they are not fiduciaries and that the Trust “has not at any time after September 2, 1974, provided for employer contributions.” The third-party defendants once again stated that plaintiff Williams “intentionally and strategically decided not to include claims against (them) in her second amended complaint.” As before, the court rejected these positions and was averse to interrupting the bench trial currently underway in the case. Accordingly, the motion to reconsider was denied.

Provider Claims

Third Circuit

Dual Diagnosis Treatment Ctr. v. Horizon Blue Cross & Blue Shield of N.J., No. 20-15285 (SDW) (AME), 2022 WL 1156760 (D.N.J. Apr. 19, 2022) (Judge Susan D. Wigenton). The court granted defendant Horizon Blue Cross & Blue Shield’s motion to dismiss plaintiff Dual Diagnosis’ third amended complaint with prejudice. The court agreed with Horizon that plaintiffs’ Section 502 claims failed to plead a viable claim for relief under the terms of the plans, and failed to prove injury and standing. The court reiterated its earlier position that plaintiffs failed to demonstrate that they were authorized assignees for the patients, stating, “Plaintiffs quote language from the purported Assignments to support their claims that valid Assignments exist…However, the quoted language from Shreya, Medlink, and Satya Assignments does not reference any particular assignee, let alone any of the Plaintiffs in this matter.” The court also held that Dual Diagnosis Treatment Center failed to plausibly allege any injury in fact because the complaint’s exhibit which listed amounts billed to various patients from the providers did not include Dual Diagnosis or any information about its owed payments. Finally, the court expressed that even if plaintiffs had established standing, their complaint would have still been insufficiently pled because they cited no specific plan provisions suggesting that they are entitled to payments for their services beyond what Horizon already paid.

Standard of Review

Fourth Circuit

Balkin v. Unum Life Ins. Co., No. 21-1623, 2022 WL 1136887 (D. Md. Apr. 18, 2022) (Magistrate Judge Gina L. Simms). The court reviewed the parties’ Joint Status Report and found the parties disputed the applicable standard of review and whether discovery beyond the administrative record should be permitted. Plaintiff Kelly Balkin took the position that if the case is decided under the abuse of discretion standard of review, she is entitled to discovery regarding the financial conflict of interest defendant Unum Life Insurance Company has and the effect that conflict had on its handling of her claim. However, if de novo review applies, Ms. Balkin stated that she does not intend to pursue discovery in the case. In contrast, Unum argued that the plan confers discretionary decision-making authority on it, making abuse of discretion review applicable, and that extra-record discovery is prohibited in the case. The court agreed that the plan language expressly confers discretionary authority to Unum. However, the investigation into the review standard did not end there because the forum state, Maryland, has a law prohibiting discretionary clauses, and the plan itself contains a choice of law provision selecting the District of Columbia, which does not prohibit discretionary clauses. Whether the choice of law provision should or should not be enforced was a question the court could not answer at this juncture, especially because the Fourth Circuit has not addressed the issue. Thus, the court concluded that further briefing on the applicable review standard is necessary. This was true with regard to the discovery dispute as well. The court concluded that Ms. Balkin needs to provide more information if she wishes to explore the impact that Unum’s financial conflict of interest played in its decision-making via discovery. “The burden of proof is on Plaintiff. If the Plaintiff can make particularized allegations about the adjudication of her claim and show how the discovery she seeks is necessary for the Court to evaluate a potential conflict of interest, then she is entitled to that discovery.” Accordingly, the court requested more briefing on these issues in order to make a more informed final decision.

Note from the Your ERISA Watch editors:

Your ERISA Watch is written and edited by Elizabeth Hopkins and Peter Sessions, with the assistance of Emily Hopkins. Each week our goal is to provide you with the benefit of the expertise of knowledgeable ERISA litigators who are on the frontline of benefit claim and fiduciary breach litigation. Although our firm represents plaintiffs, we strive to provide objective and balanced summaries, so they are informative for the widest possible audience.

We include recent cases that have been picked up by Westlaw or sent to us by one of our readers. If you have a decision you'd like to see included in Your ERISA Watch, please send it to Elizabeth Hopkins at

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