REVISED March 24, 2009
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
March 23, 2009
No. 08-30091
Charles R. Fulbruge III
Clerk
RICHARD LAFLEUR
Plaintiff-Appellant
v.
LOUISIANA HEALTH SERVICE AND INDEMNITY COMPANY, doing
business as Blue Cross Blue Shield of Louisiana
Defendant-Appellee
Appeal from the United States District Court
for the Western District of Louisiana
Before WIENER, GARZA, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:
Plaintiff-Appellant Dr. Richard Lafleur sued Defendant-Appellee
Louisiana Health Service and Indemnity Company (Blue Cross) under the
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §
1132(a)(1)(B), for recovery of wrongfully denied health insurance benefits. The
district court granted summary judgment in favor of Blue Cross. Because Blue
Cross failed to substantially comply with ERISA’s procedural requirements, the
judgment of the district court is vacated, and the case is remanded for entry of
an order remanding the case to the plan administrator for a full and fair review
No. 08-30091
regarding the denial of benefits. We express no opinion on whether Blue Cross
abused its discretion in denying benefits because its substantial compliance with
ERISA procedural regulations is a threshold issue in this case.
I. Factual and Procedural Background
A. Facts
Lafleur received health insurance benefits through his employer, The
Family Clinic, Inc. Lafleur’s group health insurance policy (the Plan), which was
issued by Blue Cross, is an “employee welfare benefit plan” within the meaning
of ERISA. See 29 U.S.C. § 1002(1).
On May 7, 2001, Lafleur underwent a cardiovascular bypass operation.
During surgery, he suffered an anoxic event and never regained consciousness.
On August 9, 2001, Blue Cross agreed to pay the cost of Lafleur’s care at Eunice
Manor Nursing Home (Eunice Manor) pursuant to the Plan’s “Alternative
Benefits” provision. Alternative Benefits are “[b]enefits for services not
routinely covered under the Benefit Plan but which may be provided by
agreement through Case Management.” In turn, “Case Management” permits
for payment of Alternative Benefits at Blue Cross’s discretion, and such benefits
“are provided in lieu of the Benefits to which [members] are entitled under the
Benefit Plan.” According to the Plan, the provision of Alternative Benefits
should not be construed as a waiver of Blue Cross’s right to enforce the Plan in
accordance with its express terms, and Alternative Benefits can be terminated
if the patient is no longer covered under the terms of the Plan. The August 9
letter stated that “[r]eimbursement for skilled nursing care ordered by Dr. Tate[,
Lafleur’s treating physician,] has been approved per a special agreement under
the Individual Case Management Program.” On August 20, 2001, Lafleur was
transferred from an acute care hospital to Eunice Manor.
The issue on appeal revolves around whether Lafleur’s care at Eunice
Manor qualifies as Skilled Nursing Care, which is covered, or Custodial Care,
2
No. 08-30091
which is not. In its motion for summary judgment, Blue Cross stated that “[t]he
alternative benefits arrangement that had been entered with Eunice Manor
allowed it to be paid by Blue Cross as though it was a SNF (Skilled Nursing
Facility) rather than a nursing home during the time that skilled nursing
services were required.” A SNF is defined by the Plan as a facility other than a
nursing home that provides (1) inpatient medical care, treatment and skilled
nursing care as defined by Medicare, (2) full-time supervision by at least one
Physician or Registered Nurse, (3) twenty-four hour nursing services by
Registered Nurses or Licensed Practical Nurses, and (4) utilization review plans
for all patients. Article IV(A)(3) of the Plan states that “Inpatient Bed, Board
and General Nursing Service” are covered “[i]n a Skilled Nursing Facility or Unit
or while receiving skilled nursing services in a Hospital for the maximum
number of days per Benefit Period shown in the Schedule of Benefits.”1
Blue Cross initially agreed to cover costs of $516 per day for bed rental,
24-hour sitter service, supplies, nursing care, room, and board. On December 8,
2002, Blue Cross decreased this amount to $392 per day. On March 4, 2003,
Blue Cross’s Case Management department wrote to Eunice Manor indicating
that it would reduce payments to $202 per day as “alternative care” for “all
inclusive” room and board expenses. Both the December 8 letter and the March
4 letter described the per diem payments as “[r]eimbursement for skilled
nursing.”
On May 16, 2003, Blue Cross’s Dr. William Weldon, after consulting with
Blue Cross’s Dr. Dwight Brower and an unidentified board certified urologist,
determined that the nursing home’s services provided to Lafleur constituted
“Custodial Care,” and that, pursuant to the Plan, Blue Cross would no longer
1
We question, but do not resolve, Blue Cross’s contention that Lafleur was not entitled
to any benefits that he received at Eunice Manor pursuant to the Alternative Benefits section
of the Plan.
3
No. 08-30091
approve reimbursement. Dr. Weldon and Dr. Brower did not consult with either
of Lafleur’s treating physicians, Dr. Tate or Dr. Heinen. In his deposition, Dr.
Brower testified that he contacted the urologist via telephone to inquire whether
continuous bladder irrigation (CBI) was a skilled nursing service and whether
there were non-skilled alternatives to that procedure. Because CBI is not a
common procedure, Dr. Brower and Dr. Weldon “opted to get some specialty
input over that service and get more information regarding it.” Dr. Brower
described his consultation with the urologist as “entirely an informal telephonic
conversation done anonymously relative to this patient” to determine whether
CBI was “standard procedure done by urologists for recurrent infections in
someone with a chronic and dwelling foley catheter.” The May 16 denial letter
did not elaborate on the specific reason for the denial beyond the following:
“Contractual Exclusion for Custodial Care per Medical Director.” Dr. Weldon
made the following entry in the administrative record the day before the denial:
Deny further days. Reimbursement has continued to this point due
to the continued CBI. Review with a board certified urologist
indicates that this is neither necessary nor appropriate and that the
same purpose could be accomplished with a condom catheter or, if
an indwelling catheter is necessary, low dose of fluoroquinolones
(i.e. Cipro 500 mg/day). Denial is based on contractual exclusion for
custodial care.2
Under the Plan, excluded “Custodial Care” refers to treatment or services
“that could be rendered safely and reasonably by a person not medically skilled,
or that are designed mainly to help the patient with daily living activities.” On
May 29, 2003, in preparation for administrative appeal, Lafleur requested from
2
On May 15, 2003, Blue Cross’s Shelly Martinez, a registered nurse, made an entry in
the administrative record suggesting that the urologist’s CBI opinion was the exclusive reason
for the initial denial.
4
No. 08-30091
Blue Cross the complete administrative record and the names of all persons Blue
Cross consulted “whether the consultant’s opinion was relied upon or not.”3
B. Procedural Background
Lafleur administratively appealed Blue Cross’s determination twice (the
“Level I Appeal” and the “Level II Appeal”). Dr. Brower conducted the Level I
Appeal, and an appeals committee conducted the Level II Appeal. As part of the
Level I Appeal, Dr. Brower made the following entry in the administrative
record on June 9, 2003: “Will uphold the denial of continued skilled nursing unit
coverage as the patient’s care is now primarily custodial and therefore excluded
by this policy. Care can be provided in a regular nursing home bed.”4 Lafleur
received the Level I denial letter on July 24, 2003. The July 24 letter, which was
drafted by an attorney in Blue Cross’s Legal Affairs Department, provided a
more detailed explanation of the reason for denial than the May 16 letter:
Our records indicate that in December 2002, pursuant to a special
agreement under the Individual Case Management Program, we
approved reimbursement of skilled nursing care at Eunice Manor
Nursing Home for Richard Lafleur for services ordered by Dr. Tate.
As is customary, our Case Management Department continuously
monitored the services being rendered to Dr. Lafleur to ensure that
3
Eunice Manor sent Blue Cross a letter on May 23, 2003, requesting “informal
reconsideration” of the denial on behalf of Lafleur. The May 23 letter stated that “[i]t is the
opinion of both Richard Lafleur’s physician, Dr. Richard Tate and our facility medical director,
Dr. Brian Heinen, that the resident / patient requires skilled nursing medical services on a
continuous basis.” Eunice Manor observed that Lafleur had been hospitalized nine times since
his admission on August 20, 2001, and that he consistently required medical attention for
routine care and complications related to his tracheotomy tube. Blue Cross apparently treated
Eunice Manor’s request as a separate appeal and rejected it by letter dated July 11, 2003,
citing the Custodial Care exclusion.
4
Lafleur argues that the Custodial Care exclusion does not apply because Dr. Weldon
described his care as “near custodial” and Dr. Brower described it as “primarily custodial.” We
will let the parties explore this issue on remand. See Wegner v. Standard Ins. Co., 129 F.3d
814, 818 (5th Cir. 1997) (“Only if the [ERISA] plan terms remain ambiguous after applying
ordinary principles of contract interpretation are we compelled to apply the rule of contra
proferentum and construe the terms strictly in favor of the insured.”) (emphasis in original).
5
No. 08-30091
the care being received was eligible for reimbursement under the
contract and in accordance with the Case Management Agreement.
Eventually, the medical information we received indicated that the
care being rendered to Dr. Lafleur was custodial in nature, and that
skilled nursing care was not needed. For this reason, we advised
the hospital and patient on May 16, 2003 that subsequent days
would not be covered if hospitalization continued beyond that date
as Dr. Lafleur’s contract does not provide benefits for custodial care.
At his deposition, Dr. Brower testified that he did not consult with any other
health care professional in conducting the Level I Appeal.
On September 15, 2003, as part of the Level II Appeal, Lafleur submitted
a letter from his treating physician, Dr. Tate, which stated that Lafleur’s
“condition is very fragile and his long term survival is dependent on good skilled
nursing rather than custodial care.” Dr. Tate stated that Lafleur needed skilled
nursing to monitor his vital signs, fluid intake, diabetes, nourishment status,
skin care, trache care, foley care, peg tube care, and to observe for pulmonary
infiltrates and mucus plugs that could result in severe hypoxia.5 In affirming
the denial based on the Custodial Care exclusion, the Level II appeals committee
consulted with Dr. Brower and found that “the clinical issues are the
tracheotomy and . . . tube feeding. Patient is stable so the extent of the care
doesn’t have to be skilled nursing.”6 (emphasis in original). Apparently, the
Level II appeals committee only consulted with Dr. Brower before making its
final determination, and Dr. Brower did not produce any written report that was
responsive to the concerns raised by Dr. Tate. By letter dated October 1, 2003,
5
At oral argument, Lafleur’s counsel stated that a medical director at Blue Cross visited
Lafleur at Eunice Manor in October 2002, concurred in Dr. Tate’s assessment, and sustained
the continuation of benefits at that time.
6
On February 27, 2003, Martinez made the following entry in the administrative
record: “Patient has been stable for months[.] [S]till frequent suctioning but will continue to
pay for snf [Skilled Nursing Facility]. [S]till has cbi’s [Continuous Bladder Irrigations] and
frequent suctioning.” Martinez made a similar entry on April 16, 2003.
6
No. 08-30091
the Level II Appeals Committee cited the Custodial Care exclusion and denied
Lafleur’s claim.
On June 10, 2004, Lafleur, having exhausted the Blue Cross
administrative review procedure, filed suit in district court alleging that (1) Blue
Cross’s appeal proceedings did not adhere to mandatory ERISA procedures, and
(2) Blue Cross’s interpretation of the Plan as to Lafleur constituted an abuse of
discretion. During the pendency of the district court proceedings, Lafleur died
in November 2005. The parties filed cross-motions for summary judgment, and
on December 18, 2007, the district judge granted Blue Cross’s motion and denied
Lafleur’s motion. The district court did not address Lafleur’s argument that
Blue Cross failed to substantially comply with the procedural requirements of
ERISA. Lafleur timely appealed.
II. Analysis
A. Summary Judgment Standard
“We review a district court’s grant of summary judgment in ERISA cases
de novo, applying the same standard as the district court.” Wade v. Hewlett-
Packard Dev. Co. LP Short Term Disability Plan, 493 F.3d 533, 537 (5th Cir.
2007). A grant of summary judgment is proper if there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law.
FED. R. CIV. P. 56(c). “In evaluating the existence of a genuine issue of material
fact, we review the evidence and inferences drawn from that evidence in the
light most favorable to the non-moving party.” Wade, 493 F.3d at 537.
B. Procedural Violations
1. Substantial Compliance
Lafleur alleges that Blue Cross violated several ERISA procedural
requirements when processing his administrative appeal. “These procedures are
set forth in [29 U.S.C.] § 1133 of ERISA and in the Department of Labor
7
No. 08-30091
regulations promulgated pursuant to that section.”7 Schadler v. Anthem Life
Ins. Co., 147 F.3d 388, 393 (5th Cir. 1998). In the Fifth Circuit, we evaluate
Lafleur’s procedural claims as follows:
Challenges to ERISA procedures are evaluated under the
substantial compliance standard. Lacy v. Fulbright & Jaworski,
405 F.3d 254, 256-57 & n. 5 (5th Cir. 2005). This means that the
“technical noncompliance with ERISA procedures will be excused so
long as the purpose of section 1133 has been fulfilled.” Robinson v.
Aetna Life Ins., 443 F.3d 389, 393 (5th Cir. 2006). The purpose of
section 1133 is “to afford the beneficiary an explanation of the denial
of benefits that is adequate to ensure meaningful review of that
denial.” Schneider v. Sentry Long Term Disability, 422 F.3d 621,
627-28 (7th Cir. 2005). The “substantial compliance” test also
“considers all communications between an administrator and plan
participant to determine whether the information provided was
sufficient under the circumstances.” Moore v. LaFayette Life Ins.
Co., 458 F.3d 416, 436 (6th Cir. 2006). “All communications” may
include oral communications. White v. Aetna Life Ins. Co., 210 F.3d
412, 417 (D.C. Cir. 2000) (citing Heller v. Fortis Benefits Ins. Co.,
142 F.3d 487, 493 (D.C. Cir.1998)).
Wade, 493 F.3d at 539.
In interpreting “full and fair review,” we have looked favorably upon
decisions that require “‘knowing what evidence the decision-maker relied upon,
having an opportunity to address the accuracy and reliability of the evidence,
and having the decision-maker consider the evidence presented by both parties
7
Under 29 U.S.C. § 1133, every employee benefit plan must:
(1) provide adequate notice in writing to any participant or beneficiary whose
claim for benefits under the plan has been denied, setting forth the specific
reasons for such denial, written in a manner calculated to be understood by the
participant, and
(2) afford a reasonable opportunity to any participant whose claim for benefits
has been denied for a full and fair review by the appropriate named fiduciary of
the decision denying the claim.
8
No. 08-30091
prior to reaching and rendering his decision.’” Sweatman v. Commercial Union
Ins. Co., 39 F.3d 594, 598 (5th Cir. 1994) (quoting Sage v. Automation, Inc.
Pension Plan & Trust, 845 F.2d 885, 893–94 (10th Cir. 1988)). Substantial
compliance requires “meaningful dialogue” between the beneficiary and
administrator. See Wade, 493 F.3d at 540.
ERISA regulations provide insight into what constitutes full and fair
review. Applicable regulations dictate that procedures “will not be deemed to
provide a claimant with a reasonable opportunity for a full and fair review of a
claim and adverse benefit determination”unless several procedural requirements
are met, four of which are relevant to this appeal: (1) review must “not afford
deference to the initial adverse benefit determination” and may not be
“conducted” by the same person who made the initial determination;8 (2) when
an “adverse benefit determination . . . is based in whole or in part on a medical
judgment,” the appeal must include consultation “with a health care professional
who has appropriate training and experience in the field of medicine involved in
the medical judgment”;9 (3) the claims procedure must “[p]rovide for the
identification of medical or vocational experts whose advice was obtained on
behalf of the plan in connection with a claimant’s adverse benefit determination,
without regard to whether the advice was relied upon in making the benefit
determination”;10 and (4) the healthcare professional consulted in an appeal may
not be the same individual who was consulted in connection with the original
determination.11
8
29 C.F.R. § 2560.503-1(h)(3)(ii).
9
Id. § 2560.503-1(h)(3)(iii).
10
Id. § 2560.503-1(h)(3)(iv).
11
Id. § 2560.503-1(h)(3)(v).
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No. 08-30091
We find that Blue Cross did not substantially comply with the procedural
requirements of ERISA because (1) it raised new grounds for denial in the
federal courts that were not raised at the administrative level; (2) it did not
identify the board certified urologist, despite Lafleur’s request for this
information; (3) it relied on the same urologist’s opinion in the initial denial and
in the administrative appeals; (4) to the extent it did not rely on the urologist’s
opinion in the administrative appeals, it relied on Dr. Brower’s opinion even
though he did not possess appropriate training and experience in the field of
urology;12 and (5) it effectively gave deference to the initial denial.
At the administrative level, Blue Cross consistently maintained that
Lafleur’s care changed from skilled nursing to custodial during his extended stay
at Eunice Manor, and by May 2003, “skilled nursing care was not needed.”13
Central to this conclusion was the opinion of the board certified urologist, who
opined that there were non-skilled alternatives to the CBI procedure. However,
for the first time in the district court and on appeal, Blue Cross argued that
continued payment of Alternative Benefits was an act of charity that could be
suspended at any time because Lafleur was never entitled to those benefits in
the first place.14 In other words, rather than changing from skilled nursing to
12
Dr. Weldon, who conducted the initial review resulting in a denial of benefits, was a
surgeon. Dr. Brower, who conducted the Level I Appeal, was a family practitioner.
13
Blue Cross reiterated this position in its motion for summary judgment, stating that
“Dr. Lafleur’s care had devolved to the extent that it constituted ‘Custodial Care’ under the
terms of the Plan . . . . When it was determined that skilled nursing services were not required,
that regular nursing home services were what was needed, Blue Cross concluded the
arrangement . . . .” (emphasis added).
14
In its brief, Blue Cross stated that “Dr. Lafleur’s health plan did not provide benefits
for [nursing home] care. However, in recognition of the tragedy of the situation, and based on
the outside chance that he might improve, Blue Cross agreed to provide ‘Alternative Benefit
Care’ for Dr. Lafleur.”
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No. 08-30091
custodial, Lafleur’s care was always custodial.15 Blue Cross also argued that the
denial was justified based on a different phrase within the Custodial Care
exclusion: “long-term treatment for a condition in a patient who is not expected
to improve or recover.”16 According to Blue Cross, Lafleur’s condition had
consistently deteriorated rather than improved between August 2001 and May
2003, making recovery highly improbable. These alternative reasons for denial
may or may not be legitimate, but the fact remains that these were not the
reasons for denial given at the administrative level.17 To ensure the full and fair
review contemplated by ERISA, the specific reason or reasons for denial must
be clearly identified at the administrative level in order to give the parties an
opportunity for meaningful dialogue. See Robinson, 443 F.3d at 393. Although
these various reasons for denial are all generally based on the Custodial Care
exclusion, the lack of specificity in the denial letters did not give Lafleur the fair
notice contemplated by the ERISA regulations. See 29 C.F.R. § 2560.503-1(g)(i);
15
This argument seems intuitive because Lafleur was receiving care in a nursing home,
which is traditionally associated with custodial care. However, it appears undisputed that
Eunice Manor was receiving “[r]eimbursement for skilled nursing services,” which are covered,
to some extent, under the terms of the Plan. On February 26, 2003, Dr. Weldon made an entry
in the administrative record stating that “the nursing home is being reimbursed at a skilled
level and the patient is at a near custodial level of care.” The administrative record is replete
with medical records suggesting that Lafleur suffered from various complications and medical
conditions requiring skilled nursing on an ongoing basis.
16
Blue Cross states that its provision of Alternative Benefits “does not estop Blue Cross
from subsequently denying custodial care benefits 19 months later when it became abundantly
clear that Dr. Lafleur had not and would not recover.” A significant portion of Blue Cross’s
brief and oral argument was dedicated to this position. If Lafleur was adequately informed
about this basis for denial, he could have introduced medical evidence into the administrative
record related to his long-term prognosis. See 29 C.F.R. § 2560.503-1(h)(2)(ii). Blue Cross does
not directly identify any medical evidence in the administrative record supporting its prognosis.
17
In its order affirming the denial of benefits, the district court relied on both of these
alternative reasons for denial. It noted that “Blue Cross initially agreed to pay alternative
benefits that were ordinarily not covered by the Plan” and that “long-term treatment for a
condition in a patient who is not expected to improve or recover” falls within the Custodial
Care exclusion.
11
No. 08-30091
see also McCartha v. Nat’l City Corp., 419 F.3d 437, 446 (6th Cir. 2005)
(“[D]efendants were not in substantial compliance with the requirements of §
1133 because McCartha was never timely informed that the failure to provide
current medical opinions as to her long-term disability would be one of the bases
for the termination of her benefits.”) (emphasis added).
Blue Cross failed to comply with 29 C.F.R. § 2560.503-1(h)(3)(iv) when it
did not identify the board certified urologist “whose advice was obtained on
behalf of the plan in connection with [Lafleur’s] adverse benefit determination.”18
Notably, Lafleur specifically requested this information in his May 29 letter to
Blue Cross. The urologist’s opinion that there were non-skilled alternatives to
the CBI procedure appears to be the primary, if not exclusive, basis for denial
of benefits in both the initial determination and the Level I Appeal.
Because the adverse benefit determination was based on the medical
judgment that Lafleur’s care was custodial, Blue Cross was required to “consult
with a health care professional who has appropriate training and experience in
the field of medicine involved in the medical judgment” when deciding the
administrative appeal.19 29 C.F.R. § 2560.503-1(h)(3)(iii). Dr. Brower and Dr.
Weldon were not urologists, and the only expert consulted with experience in
that field was the unidentified board certified urologist that Dr. Brower
contacted before the initial denial. Under 29 C.F.R. § 2560.503-1(h)(3)(iii), Blue
18
At oral argument, Lafleur’s counsel indicated that Lafleur did not know that a
urologist had been contacted by Blue Cross. Thus, as opposed to lack of knowledge of the
urologist’s name, Lafleur did not even know the substance of the urologist’s opinion.
19
The conclusion that there are non-skilled alternatives to CBI or that CBI can be
performed by a non-skilled individual are “medical judgment[s]” for purposes of §
2560.503-1(h)(3)(iii). Blue Cross argues that Dr. Brower’s brief consultation with the urologist
was similar to review of a “medical textbook,” which does not trigger the disclosure
requirement. Assuming arguendo that this is true, we have previously required that excerpts
from authoritative treatises be included in the administrative record if they are relied upon by
the administrator to deny benefits. See Robinson, 443 F.3d at 394-95. Under ERISA
regulations, the administrator must turn over this material when requested by the claimant,
which was not done in this case. 29 C.F.R. § 2560.503-1(h)(2)(iii).
12
No. 08-30091
Cross could not rely on the same urologist’s opinion in the initial determination
and in the administrative appeals. To the extent that the Level I Appeal and the
Level II Appeal only relied on the opinion of Dr. Brower, he did not have the
appropriate training and experience to render an opinion regarding the CBI
procedure. See id. Finally, although Dr. Brower arguably only “conducted” the
Level I Appeal, his presence as the primary consultant in both the initial denial
and the Level II Appeal effectively gave deference to the initial adverse benefit
determination in violation of 29 C.F.R. § 2560.503-1(h)(3)(ii). Dr. Brower did not
consult any other doctor during the Level I Appeal, and the Level II appeals
committee appears to have relied exclusively on Dr. Brower’s analysis and
medical assessment.20 While the same doctor can participate in (rather than
conduct) both administrative appeals,21 exclusive reliance on the opinion of the
same doctor in both appeals runs afoul of § 2560.503-1(h)(3)(ii). We hold that
Blue Cross’s procedural violations constituted more than “technical
noncompliance” and prejudiced Lafleur. See Robinson, 443 F.3d at 394.
2. Remedy
Because we rarely find that an administrator failed to substantially
comply with the procedural requirements of ERISA, we have not fully identified
the scope of available remedies. We have previously stated the following
regarding remedies: “Even were we to decide [that an administrator failed to
substantially comply with ERISA and its accompanying regulations], ‘[f]ailure
to fulfill procedural requirements generally does not give rise to a substantive
20
At oral argument, Blue Cross’s counsel conceded that every member of the Level II
appeals committee was a lay person. Consequently, the members of the appeals committee
were unable to form their own independent medical judgments and were reliant upon Dr.
Brower’s opinion. Based on the unique facts of this case, Dr. Brower’s role in the Level II
Appeal effectively gave deference to his denial in the Level I Appeal because he was the only
doctor that participated in the Level II Appeal.
21
Group health plans cannot require a claimant to file more than two administrative
appeals. 29 C.F.R. § 2560.503-1(c)(2).
13
No. 08-30091
damage remedy.’” Wade, 493 F.3d at 540 (quoting Hines v. Mass. Mut. Life Ins.
Co., 43 F.3d 207, 211 (5th Cir. 1995)). Substantive damages would be permitted
only “when the violations are continuous and amount to substantive harm.”
Hines, 43 F.3d at 211 (citing Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th
Cir. 1985), abrogated on other grounds by Dytrt v. Mountain States Tel. & Tel.
Co., 921 F.2d 889, 894 n.4 (9th Cir. 1990)). Substantive damages would include
a retroactive reinstatement of benefits. McKenzie v. Gen. Tel. Co. of Cal., 41
F.3d 1310, 1315 n.4 (9th Cir. 1994), abrogated on other grounds by Abatie v. Alta
Health & Life Ins. Co., 458 F.3d 955, 973 (9th Cir. 2006) (en banc). Although we
recited the Blau standard in Hines, we have not elaborated on it or applied it.
Based on the particular facts of this case, we believe that remand, rather than
substantive damages, is the appropriate remedy.
a. Remand
Remand to the plan administrator for full and fair review is usually the
appropriate remedy when the administrator fails to substantially comply with
the procedural requirements of ERISA. See Krauss v. Oxford Health Plans, Inc.,
517 F.3d 614, 630 (2d Cir. 2008); Gagliano v. Reliance Standard Life Ins. Co.,
547 F.3d 230, 240 (4th Cir. 2008); Chuck v. Hewlett Packard Co., 455 F.3d 1026,
1035 (9th Cir. 2006); Caldwell v. Life Ins. Co of N. Am., 287 F.3d 1276, 1288-89
(10th Cir. 2002); Syed v. Hercules Inc., 214 F.3d 155, 162 (3d Cir. 2000) (Alito,
J.); VanderKlok v. Provident Life & Accident Ins. Co., 956 F.2d 610, 616-17 (6th
Cir. 1992); Wolfe v. J.C. Penney Co., 710 F.2d 388, 393-94 (7th Cir. 1983),
overruled on other grounds by Casey v. Uddeholm Corp., 32 F.3d 1094, 1099 n.4
(7th Cir. 1994). This position is consistent with the default rule of other circuits
and our pronouncement in Wade that procedural violations of ERISA generally
do not give rise to a substantive damages remedy. When the procedural
violations are non-flagrant, remand is typically preferred over a substantive
14
No. 08-30091
remedy to which the claimant might not otherwise be entitled under the terms
of the plan. See Gagliano, 547 F.3d at 240; see also Firestone Tire & Rubber Co.
v. Bruch, 489 U.S. 101, 113 (1989) (“ERISA was enacted to promote the interests
of employees and their beneficiaries in employee benefit plans and to protect
contractually defined benefits.”) (emphasis added) (citation omitted).
Rather than remand, Lafleur argues that we should grant summary
judgment in favor of him and award benefits. This exception to the remand rule
applies “where the record establishes that the plan administrator’s denial of the
claim was an abuse of discretion as a matter of law.” Gagliano, 547 F.3d at 240.
Our opinion in Robinson v. Aetna Life Insurance Co. falls within this category.
See 443 F.3d 389, 397 (5th Cir. 2006) (“[T]here is no genuine issue of material
fact here. We have concluded both that Aetna failed to substantially comply
with ERISA procedures and that Aetna abused its discretion by terminating
Robinson’s benefits.”) (emphasis added). “A remand for further action is
unnecessary only if the evidence clearly shows that the administrator’s actions
were arbitrary and capricious, or the case is so clear cut that it would be
unreasonable for the plan administrator to deny the application for benefits on
any ground.” Caldwell, 287 F.3d at 1289 (internal citations and quotation marks
omitted). If the administrative record reflects, at minimum, a colorable claim for
upholding the denial of benefits, remand is usually the appropriate remedy. See
Gagliano, 547 F.3d at 240. The court must make this determination on a case-
by-case basis. See Robinson, 443 F.3d at 497 & n.5. Based on the administrative
record before us, we do not believe that Lafleur is entitled to judgment as a
matter of law.22
22
Another exception that might apply is where remand would be a useless formality.
An administrator’s failure to substantially comply with the procedural requirements of ERISA
will usually prevent a plaintiff from adequately developing the administrative record and
presenting his arguments, so this futility exception should be narrowly construed and sparingly
applied. The court might find that remand would be a useless formality where “much, if not
15
No. 08-30091
b. Modifying the Standard of Review
“When the ERISA plan vests the fiduciary with discretionary authority to
determine eligibility for benefits under the plan or to interpret the plan’s
provisions, our standard of review is abuse of discretion.”23 Ellis v. Liberty Life
Assurance Co. of Boston, 394 F.3d 262, 269 (5th Cir. 2004) (internal quotation
marks omitted). The administrator’s factual determinations are also reviewed
for abuse of discretion. Wade, 493 F.3d at 537. Lafleur argues that we should
modify this deferential standard of review based on the administrator’s failure
to substantially comply with the procedural requirements of ERISA. Although
we have never definitively rejected the availability of this remedy, we have
previously refused to apply it. Id. at 538 (“Wade has cited no direct authority by
the Supreme Court or the Fifth Circuit dictating a change in the standard of
review based upon procedural irregularities alone, and we see no reason to
impose one.”).
The Ninth Circuit, sitting en banc, has held that flagrant procedural
violations can alter the standard of review from abuse of discretion to de novo.
all, the objective [] evidence supports the conclusion that [the] plaintiff [is not covered under
the terms of the policy].” See Kent v. United of Omaha Life Ins. Co., 96 F.3d 803, 807 (6th Cir.
1996). In making this determination, the court should consider not only the evidence in the
administrative record, but also the evidence that the plaintiff would have submitted but for
the administrator’s procedural violations. The administrator should not be allowed to hinder
the development of the administrative record through its procedural violations, and then
invoke the futility exception based solely on the limited evidence contained within that record.
The court might also find that remand would be a useless formality where the death of the
plaintiff makes the presentation of additional evidence impossible and where the existing
evidence is legally insufficient to establish entitlement to benefits. See Schleibaum v. Kmart
Corp., 153 F.3d 496, 503-04 (7th Cir. 1998). Even assuming the plaintiff died, however,
remand is still appropriate if the procedural violations prevented the administrator from
adequately considering all available evidence supporting the plaintiff’s claim for benefits.
Remand would not be a useless formality in this case because the available evidence suggests
that Lafleur’s care might require skilled nursing.
23
Article XXI(A)(4) of the Plan states the following: “We [Blue Cross] have full
discretionary authority to determine eligibility for Benefits and/or to construe the terms of this
Benefit Plan.”
16
No. 08-30091
“When an administrator engages in wholesale and flagrant violations of the
procedural requirements of ERISA, and thus acts in utter disregard of the
underlying purpose of the plan as well, [the court will] review de novo the
administrator’s decision to deny benefits,” even if the abuse of discretion
standard would apply otherwise.24 Abatie, 458 F.3d at 971. All other non-
flagrant procedural irregularities should be “weighed in deciding whether an
administrator’s decision was an abuse of discretion.” Id. at 972. “A more serious
procedural irregularity may weigh more heavily.” Id. When the administrator
has failed to follow the procedural requirements of ERISA, the district court may
take additional evidence when irregularities have prevented full development
of the administrative record. Id. at 973.
Although Blue Cross failed to substantially comply with the procedural
requirements of ERISA, these violations were not flagrant, so the de novo
standard of review discussed in Abatie is not implicated in this case. Because
the issue is not before us, we express no opinion on whether flagrant procedural
violations of ERISA can alter the standard of review. “Instead, we face the more
ordinary situation in which a plan administrator has exercised discretion but,
in doing so, has made procedural errors.” Id. at 972. Based on the facts of this
case, we find that remand to the administrator is warranted, rather than
remand to the district court for consideration of evidence outside the
administrative record.25
24
Blau provides the paradigmatic example of flagrant procedural violations: “The
undisputed facts show that defendants failed to comply with virtually every applicable
mandate of ERISA . . . . Here, there was no summary plan description, no claims procedure,
and no provision to inform participants in writing of anything. Del Monte’s claims procedure
fails simply because there was none.” 748 F.2d at 1353.
25
Pre-Abatie, the Ninth Circuit cited approvingly to authority from the Third Circuit
holding that “the usual remedy for a violation of § 1133 is ‘to remand to the plan administrator
so the claimant gets the benefit of a full and fair review.’” See Chuck, 455 F.3d at 1035
(quoting Syed, 214 F.3d at 162). Furthermore, several district courts within the Ninth Circuit
have remedied procedural violations by remanding the claim to the administrator for a full and
17
No. 08-30091
c. Striking Evidence or Retroactively Reinstating Benefits
As an alternative to modifying the standard of review, Lafleur urges us to
strike the urologist’s opinion or retroactively reinstate his benefits in order to
remedy the administrator’s procedural violations. The availability of these two
remedies is supported by persuasive precedent. In Bard v. Boston Shipping
Association, the First Circuit addressed a situation where the “procedural
irregularities [] were serious, had a connection to the substantive decision
reached, and call[ed] into question the integrity of the benefits-denial decision
itself.” 471 F.3d 229, 244 (1st Cir. 2006). After observing that the
administrator’s procedural violations had the effect of “sandbagging” the
plaintiff, the First Circuit struck the evidence supporting the denial and
awarded benefits to the plaintiff based on the remaining evidence. Id. at 244-45.
The First Circuit recognized that “[i]n other circumstances, it might be an
appropriate remedy to remand to a plan administrator for reconsideration,” see
id. at 245-46, but declined to do so based on the rather egregious facts of the
case. See id. at 246. In cases where the administrator terminated benefits that
were already granted (rather than initially denying benefits), the Sixth and
Seventh Circuits have held that retroactive reinstatement of benefits is an
appropriate remedy for procedural violations in order to return the plaintiff to
the status quo ante. See Wenner v. Sun Life Assurance Co. of Canada, 482 F.3d
878, 883-84 (6th Cir. 2007); Schneider v. Sentry Group Long Term Disability
Plan, 422 F.3d 621, 629-30 (7th Cir. 2005).
We decline to strike the urologist’s opinion because the procedural
violations were not as serious as those in Bard. Although Blue Cross
fair review. See, e.g., Murch v. Prudential Welfare Benefit Plan, No. C05-0992P, 2006 WL
1418677, at *9 (W.D. Wash. May 23, 2006) (unpublished); Teen Help, Inc. v. Operating Eng’rs
Health & Welfare Trust Fund, No. C 98-2084 VRW, 1999 WL 1069756, at *6 (N.D. Cal. Aug.
24, 1999) (unpublished); Jenkinson v. Chevron Corp., 634 F. Supp. 375, 380 (N.D. Cal. 1986).
18
No. 08-30091
discontinued benefits that Lafleur was already receiving, we do not believe that
retroactive reinstatement of benefits is appropriate because Lafleur is not in
continuing need of these benefits, and his death makes a return to the status quo
ante impossible. The fact that Lafleur received his benefits pursuant to the
“Alternative Benefits” section of his Plan also counsels against the use of these
two potent remedies. We express no opinion on whether these two remedies
would be appropriate in other factual circumstances. On remand, the
administrator can determine whether Lafleur is entitled to a lump sum payment
for wrongfully denied benefits between May 2003 and November 2005.26
III. Conclusion
Because Blue Cross failed to substantially comply with ERISA’s
procedural requirements, the judgment of the district court is VACATED, and
the case is REMANDED for entry of an order remanding the case to the plan
administrator for a full and fair review regarding the denial of benefits. This
remand pretermits the necessity of reviewing Blue Cross’s denial on the merits.
If Blue Cross denies benefits again after full and fair review, the district court
can review that decision under the appropriate standard, with the benefit of a
fully developed administrative record.27
26
At oral argument, Lafleur’s counsel stated that this amount is approximately
$200,000. Blue Cross noted that Lafleur began to receive Medicare benefits several months
after May 2003. Blue Cross’s entitlement to an offset, if any, can be addressed on remand if
necessary.
27
Other than the unidentified urologist’s opinion that there were non-skilled
alternatives to CBI, we were unable to locate any competent medical evidence in the
administrative record (i.e., a written expert report) that refuted Dr. Tate’s and Dr. Heinen’s
opinions that Lafleur’s specific medical conditions required skilled nursing. CBI was used to
treat one of Lafleur’s many conditions. Blue Cross did not even attempt to rebut the specific
contentions made in Dr. Tate’s letter dated September 15, 2003. Because Blue Cross is both
the plan administrator and the insurer, this conflict “should be weighed as a factor in
determining whether there is an abuse of discretion.” Metro. Life Ins. Co. v. Glenn, 128 S. Ct.
2343, 2350 (2008) (citation and internal quotation marks omitted). The weight of this factor
will depend upon the facts of the case. Id. at 2351. However, Blue Cross’s conclusory opinion
that Lafleur’s care is custodial, without supporting medical evidence, is insufficient to carry
19
No. 08-30091
VACATED AND REMANDED.
its burden. See Vega v. Nat’l Life Ins. Servs., Inc., 188 F.3d 287, 302 (5th Cir. 1999) (en banc).
Blue Cross is not required to defer to the opinions of Lafleur’s treating physicians, see Black
& Decker Disability Plan v. Nord, 538 U.S. 822, 834 (2003), but if it does not, then it must
specifically identify other medical evidence that supports its determination.
20