District Court Holds Plan Administrator’s Second Voluntary Appeal Decision Is Subject to ERISA Procedural Requirements

In Ramos v. Schlumberger Group Welfare Benefits Plan, No. 22-CV-0061-CVE-JFJ, 2023 WL 8869239 (N.D. Okla. Dec. 22, 2023), Oklahoma Northern District Judge Claire V. Eagan remanded Plaintiff’s claim for short-term disability (“STD”) benefits to the Plan Administrator to address procedural errors and provide adequate factual findings and explanation of the grounds for its decision on Plaintiff’s second voluntary appeal.

Plaintiff, an environmental specialist at Schlumberger, stopped working due to major depressive disorder with suicidal ideation and submitted a claim to claims administrator, Cigna, for STD benefits. Cigna denied Plaintiff’s STD claim after a peer reviewer concluded, based on the medical records and neurocognitive testing, that the only supported condition was a mild case of depression that would not prevent Plaintiff from working. Plaintiff immediately appealed but chose not to submit any additional records. Cigna upheld the decision on first appeal after it obtained a second peer review again concluding Plaintiff had no psychiatric conditions that would cause functional limitations. In its letter denying the appeal, Cigna advised Plaintiff that he could file an ERISA action or submit a second voluntary appeal.

Plaintiff submitted a second voluntary appeal with additional medical records and arguments in support of his STD claim. As part of the second appeal Cigna requested Plaintiff undergo an IME, which found that Plaintiff’s lack of candor and overreporting of symptoms rendered testing invalid and was not useful in determining whether Plaintiff had any functional limitations. Cigna denied the second appeal in a single page letter which did not explain the rationale or reasoning for the decision. Plaintiff then filed suit arguing (1) that the Plan/Cigna failed to explain its rationale for denying his final appeal of the denial of his claim for STD benefits, and (2) that Cigna arbitrarily and capriciously rejected his evidence showing that he had serious mental limitations that prevent him from working.

The Plan/Cigna argued that Plaintiff failed to produce any credible evidence that he had any functional limitations, and it was not an abuse of discretion for the Plan to reject Plaintiff’s claim for disability benefits. The Plan/Cigna further argued that it was not obligated to comply with the procedural requirements of 29 U.S.C. § 1133 to provide a detailed explanation for rejecting Plaintiff’s voluntary appeal, because a voluntary appeal is not subject to ERISA regulations concerning notice of an adverse decision.

The Court noted that neither ERISA nor the regulations promulgated by the Department of Labor expressly state whether statutory or regulatory requirements applicable to a mandatory appeal also apply to a voluntary appeal of the denial of a benefits claim. However, the Court also noted that ERISA regulations (29 C.F.R. § 2560.503-1(c)) acknowledge that a benefits plan may provide a voluntary appeal, and a benefits plan may not punish a claimant for seeking a voluntary appeal or argue that the statute of limitations to file an ERISA claim expired while the voluntary appeal was pending. Further, the Court found that the Tenth Circuit has not considered whether a voluntary appeal of the denial of benefits is a binding decision that is subject to judicial review. Because the law was not clear that a voluntary appeal expressly permitted by a benefits plan is exempt from the requirements applicable to a mandatory statutory appeal, the Court considered the specific terms of the Plan and concluded that the parties intended for a second voluntary appeal to be subject to judicial review.

While the Plan was ambiguous as to whether the decision on Plaintiff’s second voluntary appeal was intended to be the final decision, the Court noted that the Plan clearly permitted a claimant to bring an ERISA claim after the denial of an initial appeal to Cigna, suggesting that the Plan intended for Cigna’s decision to be final. However, the Plan also permitted a voluntary appeal to the Plan Administrator after the denial of an initial appeal by Cigna. The Plan Administrator did not reserve the discretionary authority to decline to hear a voluntary appeal or limit the scope of a voluntary appeal, and the Plan clearly states that “the Plan Administrator will review all of the information you provide and give you a written decision on the appeal within a reasonable time ….” The Plan also states that a decision by the Plan Administrator on a second voluntary appeal is “final and binding.” Based on this analysis, the Court concluded that the decision on Plaintiff’s second voluntary appeal is the final decision that is subject to judicial review. As Plaintiff pointed out, based on the contents of Cigna’s denial letter on second appeal, the Court would have to speculate as to the basis for the Plan Administrator’s denial of Plaintiff’s claim for STD benefits. The Court found it appropriate to remand the matter to the Plan Administrator for clarification of its decision.

If Cigna or your insurance company has denied or terminated your disability claim, contact us for assistance.