Federal Court Applies De Novo Review, Awards ERISA Mental Health Benefits After Plan Fails to Delegate Discretion to Its Reviewer

In Doe v. The Signature Benefits Plan and the Disney Severance Pay Plan, No. SA CV 24-2230 DMG (DFMx), 2026 WL 2790684 (C.D. Cal. Sept. 17, 2026), Chief United States District Judge Dolly M. Gee, following a half-day bench trial, held that a mother was entitled to reimbursement of residential mental health treatment benefits for her dependent child under an ERISA-governed, self-funded welfare benefit plan. The court reviewed the denial de novo and found that Plaintiff had proven by a preponderance of the evidence that the treatment at issue was medically necessary.

The claim arose from residential treatment provided to Plaintiff’s 13-year-old child, S.J., who had a history of major depressive disorder, generalized anxiety disorder, suicidal ideation, and multiple inpatient psychiatric hospitalizations. After a series of denials, Plaintiff sought coverage under Section 502(a)(1)(B) of ERISA for residential treatment provided at Compass Behavioral Health from March 28, 2024 to May 4, 2024.

What standard of review applied, and why did the Plan’s discretionary language not control?

The Plan granted The Walt Disney Company “full discretion” to interpret the Plan and determine eligibility, and it stated that Cigna, the claims administrator, “determines medical necessity.” Applying Kearney v. Standard Insurance Co. and Abatie v. Alta Health & Life Insurance Co., the court explained that a plan alters the default de novo standard only where it unambiguously confers discretionary authority on the administrator or fiduciary. The court found that the Plan did not show Disney had delegated its discretionary authority to Cigna to construe Plan terms and make final benefits determinations; the Plan merely assigned Cigna the task of determining medical necessity, which the court held was insufficient under Sandy v. Reliance Standard Life Insurance Co. to invoke abuse-of-discretion review.

The court further observed that the entity that actually made the benefit determination, Evernorth Behavioral Health, Inc., was not mentioned anywhere in the Plan documents. Relying on the Ninth Circuit’s reasoning in Dan C. v. Directors Guild of America – Producer Health Plan, the court concluded that neither Cigna nor EBH was unambiguously granted authority to construe the Plan and make final benefits determinations. The court therefore reviewed the denial de novo, placing the burden on Plaintiff to prove entitlement to benefits by a preponderance of the evidence.

Did the court consider the external review record, and how did it define the scope of review?

The parties disputed whether the court could consider documents Plaintiff submitted in connection with the independent external review conducted by MCMC Services, LLC, or whether review was limited to what was before EBH at the time of its March 21, 2024 appeal decision. The court held it would review the entire Administrative Record. It reasoned that the Plan explicitly provided for a final, binding independent external review of medical necessity determinations, that EBH’s own letter stated it “must accept” the external reviewer’s decision, and that the claim was therefore not final until after the external review. Consistent with Alexandra H. v. Oxford Health Insurance Inc. Freedom Access Plan, the court considered the external review materials as part of the record it evaluated.

How did the court weigh the treating providers against the Plan’s reviewers?

Applying de novo review, the court evaluated the persuasiveness of the conflicting medical evidence. It credited the opinions of the providers who examined and treated S.J., including Dr. Handler, a supervising attending psychiatrist at UCI Health who oversaw S.J.’s inpatient care and made an “unequivocal recommendation” for residential treatment at Compass; Dr. Cooper and Dr. Cox, who recommended residential over partial hospitalization at discharge; and Dr. Motakef, S.J.’s treating physician at Compass, who opined that S.J. required highly structured residential treatment. The court noted that courts generally give greater weight to providers who examine the claimant than to those who only review the file, particularly in mental health cases lacking objective imaging or laboratory tests.

The court afforded less weight to the Plan’s reviewers. It found that EBH reviewer Dr. Volpe relied on a peer-to-peer review conducted weeks before the determination and did not engage with the more recent treating-physician recommendation or with evidence that S.J.’s condition had changed. It found that EBH reviewer Dr. Misir applied criteria not required under the governing MCG Behavioral Criteria Guidelines and did not identify specific supporting evidence. It found that the MCMC external reviewer applied a definition of medical necessity that appeared nowhere in the Administrative Record, did not apply the MCG Guidelines, and cited journal articles not in the record without explaining their relevance.

What did the court conclude on medical necessity?

The court concluded that Plaintiff had carried her burden of showing that S.J.’s residential treatment at Compass from March 28, 2024 to May 4, 2024 was medically necessary under the MCG Guidelines. It found ample evidence that S.J. presented a danger to himself through persistent suicidal thoughts and self-harm, and that the record supported the conclusion that residential treatment was necessary, appropriate, and not feasible at a lower level of care.

What relief did the court grant?

The court granted Plaintiff’s motion for judgment and denied Defendant’s cross-motion. It held that Plaintiff was entitled to approval of benefits and reimbursement of out-of-pocket costs for the residential treatment paid pursuant to a single case agreement, together with prejudgment interest. The court directed the parties to meet and confer on the amount of unpaid benefits and to submit a proposed judgment, and it identified Plaintiff as the prevailing party for purposes of a fee motion under ERISA.