Ninth Circuit: In De Novo Review of ERISA Benefit Decision, District Court Clearly Errs by Adopting Newly Presented Rationale

In Collier v. Lincoln Life Assurance Company of Boston, No. 21-55465, __F.4th__, 2022 WL 17087828 (9th Cir. Nov. 21, 2022), a dispute involving a denial of long-term disability (“LTD”) benefits by Defendant Lincoln Life Assurance Company of Boston, the Ninth Circuit held that when a district court reviews de novo an ERISA plan administrator’s denial of benefits, the district court must examine the administrative record without deference to the administrator’s conclusions to determine whether the administrator erred in denying benefits. Further, a district court must decide whether the plan administrator’s decision is supported by the record and cannot engage in a new determination of whether a claimant is disabled. A district court’s review is limited to the plan administrator’s reasoning for denying benefits that it gave during the administrative process. A district court cannot consider new rationales argued for the first time in litigation, where the claimant did not have the opportunity to respond to the rationales during the administrative process, unless the claimant waives any objection to the reason being advanced for the first time in litigation.

Plaintiff-Appellant Vicki Collier worked as an insurance sales agent for Automobile Club of Southern California (“AAA”) until a variety of physical impairments limiting her ability to type or sit for long periods forced her to stop working. Collier applied for LTD benefits under AAA’s disability plan, which was insured and administered by Lincoln Life. Lincoln denied Collier’s claim, relying primarily on a paper medical review which Lincoln cited in its denial letter. The denial letter said nothing about Collier’s credibility or lack of objective medical evidence as grounds for denying the claim. Collier appealed the decision to Lincoln and then Lincoln had Collier evaluated in person by another doctor. That doctor concluded that Collier could work full-time with limitations, including the ability to type on an occasional basis. She also recommended voice-activated software. Lincoln denied Collier’s appeal, concluding that she did not provide sufficient proof of her disability and that ergonomic equipment was readily available.

Collier then filed suit for benefits under ERISA § 502(a)(1)(B). The district court held a bench trial and Lincoln for the first time in its trial briefs argued that Collier was not credible and because her doctors relied mainly on her subjective reports of pain, their conclusions were not supported and did not constitute objective evidence of her disability. Lincoln also argued that even if Collier were disabled, her typing restriction could be accommodated with ergonomic equipment. The district court issued findings of fact and conclusions of law affirming Lincoln’s denial of benefits. In so doing, it adopted the reasoning in Lincoln’s trial brief. “[T]he 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.” Even though Lincoln made no issue of Collier’s lack of objective medical evidence or lack of credibility when it denied her claim, the district court relied on these rationales to conclude that Lincoln’s decision was proper. The district court explained that a court must evaluate the persuasiveness of conflicting testimony and decide which is more likely true. Thus, on de novo review, credibility determinations are inherently part of a court’s review. Collier appealed.

The Ninth Circuit reversed and remanded the decision of the district court. It reiterated that a plan administrator undermines ERISA and its 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 cited past decisions, as well as decisions from other circuits, which have expressed disapproval of post hoc arguments advanced by a plan administrator for the first time in litigation. The district court in this case erred when it relied on rationales that Lincoln did not raise as grounds for denying Collier’s claim for benefits. The court explained: “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.” On remand, the district court must review the administrative record afresh to determine whether Lincoln correctly denied benefits.