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Collier v. Lincoln Life Assurance Co. of Bos., No. 21-55465, __ F.4th __, 2022 WL 17087828 (9th Cir. Nov. 21, 2022) (Before Circuit Judges Paez and Watford, and District Judge Richard D. Bennett)

Kantor & Kantor received a victory on a notable decision in the Ninth Circuit that addressed what arguments ERISA plan administrators and judges are allowed to make in considering whether a benefit claim was decided properly.

The plaintiff is Vicki Collier, an insurance sales agent who started working for the Automobile Club of Southern California in 2013. Unfortunately, Ms. Collier experienced “persistent pain in her neck, shoulders, upper extremities, and lower back, which limited her ability to type and sit for long periods of time.”

Ms. Collier was eventually diagnosed with several orthopedic impairments which affected her mobility. She underwent a variety of treatments, including surgery, and tried ergonomic accommodations, but her pain continued, and she was forced to stop working in 2018.

Ms. Collier submitted a claim for benefits to Lincoln Life, the insurer of the Auto Club’s long-term disability benefit plan. Lincoln denied her claim based on a report by a reviewing physician that concluded she did not meet the plan’s definition of disability. Neither the report nor the denial letter mentioned Ms. Collier’s credibility or alleged that Ms. Collier had not submitted objective medical evidence.

Ms. Collier appealed and submitted additional evidence to support her claim. In response, Lincoln arranged for an independent medical examination by a physician who concluded that while Ms. Collier had limitations, she still had the capability to work full-time. Based on this report, Lincoln denied Ms. Collier’s appeal on the same ground as its original denial, i.e., that she did not satisfy the plan’s disability definition.

Lincoln added that “ergonomic equipment [was] readily available,” but “without specifying what equipment was available or how it would be implemented to accommodate Collier’s restrictions.”

Having exhausted her appeals, Ms. Collier brought this action. In court, Lincoln raised three arguments in support of the denial, all of which were accepted by the district court in ruling for Lincoln.

The district court “determined that Collier was not disabled for three intertwined reasons:

(1) Collier was not credible in her reporting of pain symptoms;

(2) Collier’s medical providers relied on her pain symptom reports, so their opinions were less credible and the remaining objective medical evidence did not support her allegations; and

(3) even if the court believed Collier’s reports of pain, her typing restrictions could be readily accommodated with ergonomic equipment, such as voice-activated software.”

Ms. Collier contended that the district court should reject Lincoln’s objective evidence and credibility arguments because Lincoln did not raise those arguments in its denial letters. However, the district court concluded that because “a court must ‘evaluate the persuasiveness of conflicting testimony and decide which is more likely true,’” credibility determinations were inherently part of its review. Ms. Collier appealed to the Ninth Circuit.

The Ninth Circuit began by reviewing the purpose of ERISA and its administrative procedures. The court noted that ERISA was “remedial legislation” designed to protect plan beneficiaries by giving them a “full and fair review” of their claims for benefits. As a result, ERISA has thorough claim administration rules that are “procedurally robust.”

Among these rules is a requirement that denial letters contain the “specific reason or reasons for the denial.” Furthermore, “[i]f a plan administrator relies on a new or additional rationale during the review process, the administrator must provide the rationale to the claimant and ‘give [her] a reasonable opportunity to respond.’”

Because of these rules, the Ninth Circuit observed that it had already held that “a plan administrator undermines ERISA and its implementing regulations when it presents a new rationale to the district court that was not presented to the claimant as a specific reason for denying benefits during the administrative process.”

The court also explained that it had previously “expressed disapproval of post hoc arguments advanced by a plan administrator for the first time in litigation.” (In doing so, the court cited three successful appeals litigated by Kantor & Kantor: Mitchell v. CB Richard Ellis Long Term Disability Plan (2010), Harlick v. Blue Shield of Cal. (2012), and Wolf v. Life Ins. Co. of N. America (2022), which ERISA Watch examined earlier this year.)

In response to Ms. Collier’s arguments that Lincoln violated these rules, the court concluded, “We agree.” The court noted that Lincoln “did not cite Collier’s lack of credibility or the lack of objective evidence when it denied her claim initially and on review.” Instead, it only argued in its denial letters that she did not meet the plan’s definition of disability. “Lincoln did not specify that it found Collier not credible, that she failed to present objective medical evidence, or that such evidence was required under the Plan.” Instead, Lincoln waited until litigation to make these arguments, which “effectively ‘sandbagged’ Collier with new rationales at a stage in the proceedings where she could not meaningfully respond.”

The Ninth Circuit noted that it had tackled the issues raised above before, but this case presented a new wrinkle: “Although we have held that a plan administrator may not hold in reserve a new rationale to present in litigation, we have not clarified whether the district court clearly errs by adopting a newly presented rationale when applying de novo review. We do so now.”

The Ninth Circuit emphasized that when a court is conducting a de novo review of a benefit denial, “it evaluates the plan administrator’s reasons for denying benefits without giving deference to its conclusions or opinions.” This meant that if Lincoln had questioned Ms. Collier’s credibility in its denial letters, “the district court would have been within its province to review the administrative record and determine whether the evidence supported that decision.”

However, a district court “cannot adopt post-hoc rationalizations that were not presented to the claimant, including credibility-based rationalizations, during the administrative process.” The Ninth Circuit rejected the idea that credibility determinations are “inherently part of the de novo review…. If the denial was not based on the claimant’s credibility, the district court has no reason to make a credibility determination.” In short, “[t]he court must refrain from fashioning entirely new rationales to support the administrator’s decision.”

The Ninth Circuit noted that a contrary conclusion “would evade ERISA’s protections for the same reasons a plan administrator undermines ERISA’s protections when asserting new arguments for the first time in litigation.” A contrary conclusion would also undermine the goals of ERISA to “reduce the number of frivolous lawsuits under ERISA; to promote the consistent treatment of claims for benefits; to provide a non-adversarial method of claims settlement, and to minimize the costs of claims settlement for all concerned.”

The only remaining question was what remedy was appropriate. Ms. Collier urged the court to reach the merits of her benefit claim, but the Ninth Circuit demurred and remanded to the district court “with directions to reconsider its decision in light of our opinion.” This meant “review[ing] the administrative record afresh to determine whether Lincoln correctly denied Collier’s claim,” without “rely[ing] on rationales that Lincoln did not raise in the administrative process to deny benefits.”

This published decision is important because it clarifies the scope of a trial court’s authority in reviewing a benefit denial. Ultimately, the Ninth Circuit concluded that “[t]he district court’s task is to determine whether the plan administrator’s decision is supported by the record, not to engage in a new determination of whether the claimant is disabled.”

It is also a big victory for plan participants, who too often are surprised at trial with arguments the plan administrator never raised – and sometimes never even considered – during the claim process. It sends a message to plan administrators to be more careful and thorough when deciding claims, which of course is their duty as fiduciaries.

Ms. Collier was represented by Kantor & Kantor attorneys Glenn Kantor, Sally Mermelstein, and Zoya Yarnykh. Thanksgiving has come early here in the Ninth Circuit. If you or someone you know is needing legal assistance with an ERISA matter, get started with Kantor & Kantor today by completing our contact form. Our lawyers understand and can help.