A divided panel on the Eleventh Circuit has imposed on plan administrators “an obligation to consider the evidence presented to the SSA” by the claimant. While it is not particularly novel to hold that an SSDI award must be considered – most circuits require disability claim administrators to consider an SSDI award, or at least to explain why it is not relevant – the Eleventh Circuit seems to have taken the requirement a step further, requiring the administrator to seek out the evidence the SSDI award was based on, and perhaps even delay an adverse decision until the SSDI process is completed.

Melech v. Life Insurance Co. of N. America, — F.3d –,  2014 WL 31276 (11^th Cir. Jan. 6, 2014), involved a rather mundane claim of disability due to degenerative disc disease and tendonitis. Melech submitted a claim for disability benefits in 2007, and, “[a]t LINA’s direction,” she also applied for SSDI benefits that same month. LINA denied the claim in November 2007, while her SSDI application was still pending. Melech administratively appealed LINA’s decision, and, while the appeal was pending, the SSA sent her to two physicians for independent assessments and then granted her SSDI claim. Melech told LINA her SSDI claim had been approved, but did not provide the independent medical assessments or any of the other evidence the SSA had considered. LINA then upheld the claim determination. The district court upheld the determination, but the Eleventh Circuit reversed because LINA had acted “without considering or even asking Melech for the SSA’s decision, the two SSA physicians’ assessments, or any other evidence before the SSA.”

In explaining its ruling, the court placed great emphasis on the coordination between LINA’s policy and a SSDI claim, discussing LINA’s right to require a claimant to file an SSDI claim and appeal an adverse determination; and its right to offset estimated benefits. Though such provisions are entirely ordinary, the court’s description of them is filled with language suggesting impropriety, nowhere more apparent than its statement that “[t]he SSA deduction only remains relevant to LINA if LINA decides that the claimant is eligible for benefits under the Policy.” In contrast, the court continued, after LINA initially denied the claim: “[b]ecause it no longer needed to protect its SSDI deduction, LINA ignored the status of Melech’s SSDI application and the SSA’s eventual decision to award benefits.”

The facts show that LINA hardly ignored the SSDI claim. After Melech administratively appealed LINA’s denial, she “informed LINA that she was receiving SSDI and that the SSA had referred her to additional doctors for an independent assessment.” On several occasions in connection with the appeal, LINA asked Melech to submit any medical evidence supporting her claim, including “physical examination reports.” She did not provide any of the SSDI documentation. LINA also addressed the SSDI award itself, advising Melech (in the court’s words) that “the SSDI process was independent of its own.” Apparently, LINA’s sin was that it never specifically asked Melech to provide the SSDI file or the medical examination reports (and never sought that material directly from the SSA).

More specifically, the Eleventh Circuit held that the district court had erred in not allowing Melech to introduce the SSDI file into evidence. The Eleventh Circuit considered the issue not one of adding to the administrative record, but one of determining whether it was complete: “As a matter of common sense, we cannot evaluate LINA’s ultimate decision to deny Melech’s claim without first considering whether the record LINA had before it was complete.”

It is common for litigation between a claimant and the claim administrator to include disputes over evidence that both sides knew about (or should have known about), but which the claimant did not submit and the administrator did not obtain. The dispute could be whether the evidence is admissible. Or the dispute could be whether the administrator abused its discretion in not obtaining the evidence on administrative review. Though there is hardly a clear, universally applied rule, courts will often find that the burden is on the claimant to submit the evidence, and that the administrator is not obligated to seek out evidence on its own. See, e.g., Truitt v. Unum Life Ins. Co. of America, 729 F.3d 497 (5th Cir. 2013) (“Unum did not violate its duty to investigate because no such duty exists”); Sahulka v. Lucent Technologies, Inc., 206 F.3d 763, 769 (8th Cir. 2000) (“the claimant cannot shift the burden of investigation to the plan administrator. …  [A] rule compelling plan administrators to independently investigate and verify the information that claimants submit would add substantial and unnecessary costs to the administration of ERISA plans.” [citations omitted]); Locher v. Unum Life Ins. Co. of America, 389 F.3d 288, 295 (2d Cir. 2004) (courts must provide “the appropriate incentive for a claimant to submit all available evidence regarding the claimant’s condition to the insurance company”).

The Eleventh Circuit appeared to adopt that general rule, because it observed that Melech had the “burden of producing evidence to show” that she qualified for benefits. And it stated that, if she did not provide all available medical evidence, “she bore the risk of having her claim denied if the (incomplete) body of evidence before LINA did not support a disability finding.” The court even confirmed that “neither ERISA nor the Policy required LINA to ferret out evidence in Melech’s or the SSA’s possession.” So far, so good.

But then the court ruled that the SSDI offset provisions changed that general rule:

Notwithstanding the normal operation of this burden of proof, the Policy terms that required Melech to apply for SSDI and LINA’s seemingly self-interested disregard for her SSDI application give us pause. We find nothing necessarily troubling in the terms of LINA’s Policy that allow it to benefit from the SSA’s alternative compensation mechanism. Nor do we take issue with the lengths LINA has gone to to ensure that its claimants apply for SSDI, or even LINA’s right to second guess an SSA denial. However, in light of these openly self-interested efforts, we are troubled by the implication of LINA’s actions in Melech’s case, where it ignored her SSDI application and the evidence generated by the SSA’s investigation once it no longer had a financial stake in the outcome.

It went on to explained that it viewed the offset provisions as creating a double standard:

[O]nce LINA decided at first blush that Melech had not provided enough medical evidence to support her claim, it treated the SSA process and the evidence generated by it as irrelevant and unavailable. This treatment is internally inconsistent with LINA’s mode of evaluating claims. If LINA had been inclined to pay Melech’s claim, it would have withheld its own determination regarding the amount of benefits due until the SSA reached a decision on her SSDI application—in the process, potentially requiring Melech to pursue administrative appeals. As explained above, this process would have allowed LINA to consider the evidence in the SSA’s possession. But because LINA was initially inclined to deny her claim based on the evidence available to it at the time, LINA did not wait for the conclusion of the SSA process, notwithstanding the fact that the evidence generated by the SSA’s investigation might prove useful in determining whether Melech was eligible for benefits under the Policy.

Because of this, the court then essentially placed the burden on LINA to obtain any evidence underlying the SSDI award:

We conclude that LINA’s treatment of Melech’s SSA application is inconsistent with the fundamental requirement that an administrator’s decision to deny benefits must be based on a complete administrative record that is the product of a fair claim-evaluation process. Because LINA’s decision to deny benefits here was based on an administrative record that did not contain the information from Melech’s SSA file, the proper course of action is to remand Melech’s claim to LINA[.]

Dissenting Opinion

The dissent stated that LINA had complied with ERISA regulations by repeatedly asking Melech to submit any medical documentation that supported her appeal, and by giving her additional time to do so. The dissent also highlighted the essential contradiction in the majority opinion, which held both that LINA did not have to gather evidence, but that the administrative record was incomplete unless LINA gathered more evidence:

While the majority’s opinion explicitly says “neither ERISA nor the Policy required LINA to ferret out evidence in Melech’s or the SSA’s possession,” I think that will be the perceived message of the majority opinion. I am concerned that the majority opinion promotes uncertainty in the already confusing law which surrounds ERISA disability cases.

Indeed, it is not obvious how else one could interpret Melech.

Impact on Administration

So what is a claim administrator to do?  At the very least, Melech appears to require an administrator to specifically ask the claimant to submit the SSA file when it knows of an SSDI award. But must the administrator go further, and obtain the documentation directly from the SSA if the claimant does not submit it?

Perhaps even more troubling, the majority opinion in Melech contains several references to the notion that LINA could have (and perhaps should have) delayed its initial claim determination until the SSA proceedings had ended. For example:

When LINA initially denied Melech’s claim, it knew that her SSDI application was still pending. The clear inference from the timing of this initial denial is that LINA’s decision would have been the same, regardless of what the SSA decided or what information came out of the SSA investigation.

And:

In Melech’s case, LINA refused to wait for the SSA evidence, even though it could have relied on that same evidence to protect its SSDI deduction had it decided to pay Melech’s claim.

Obviously, ERISA regulations require administrators to make a determination in far less time than a typical SSDI claim. But Melech suggests that an administrator is rushing to judgment if it adheres to those timelines and makes its determination before the SSDI claim process is completed. Certainly, though, a practice of delaying claim determinations pending an SSDI determination would harm innumerable claimants, by delaying approval of otherwise meritorious claims. And, it would no doubt be seen as improper by other courts, who would accuse administrators of unfairly delaying a claim determination.

Perhaps Melech “only” held that an administrator can approve a claim before the SSDI process is completed, but cannot deny a claim until after the SSDI decision is final.

However Melech ends up being interpreted, it certainly will engender some head-scratching by administrators insuring participants who might sue in the Eleventh Circuit.