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Remand to Insurer Ordered Where Application for SSDI Benefits Was Required but Award Was Not Considered

Remand to Insurer Ordered Where Application for SSDI Benefits Was Required but Award Was Not Considered

Melech v. Life Ins. Co. of N. Am., 739 F.3d 663 (11th Cir. 2014)

ERISA and Life Insurance News
(May 30, 2014)

Melech stopped working in May 2007, claiming to be disabled due to degenerative cervical disc disease and tendonitis. She submitted a claim for long-term disability benefits in October 2007.

As required by her employer’s ERISA plan and at LINA’s insistence, she applied for Social Security Disability Income benefits. The plan allowed LINA to offset SSDI benefits from LTD benefits payable under the plan.

LINA denied Melech’s claim in November 2007, while her SSDI application was pending. Melech appealed the denial of her LTD claim. Melech was awarded SSDI benefits in February 2008, while her appeal was still pending, and she so informed LINA.

LINA then upheld its adverse LTD decision without obtaining or considering the Social Security Administration’s decision or any evidence before the SSA. Melech likewise did not submit any evidence from the SSA in support of her appeal.

Melech brought suit under ERISA, arguing that LINA was unreasonable in (1) requiring her to apply for SSDI benefits, and (2) then refusing to consider SSDI evidence during the LTD appeal. The district court granted summary judgment to LINA, concluding that its decision to deny benefits was correct, based on the administrative record in LINA’s possession at the time it made its decision – a record that did not contain any information from Melech’s SSDI claim.

On appeal, the Eleventh Circuit did not reach the merits of LINA’s benefits decision, but rather, in a split decision, held that LINA was obliged to consider the evidence presented to the SSA. Because LINA did not have this evidence when it denied Melech’s last appeal, and could not have had it when it initially denied her claim, the court vacated the district court’s judgment and remanded Melech’s claim to LINA for consideration of the evidence presented to the SSA.

The court emphasized that “as a matter of common sense,” it could not evaluate LINA’s benefits decision without first considering whether the record before LINA was complete. The court acknowledged that it was Melech’s burden to provide medical support for her LTD claim, and further that neither ERISA nor the plan required LINA to ferret out evidence in Melech’s or the SSA’s possession. The court also found nothing necessarily troubling in the terms of the plan allowing LINA to benefit from the SSA’s alternative compensation mechanism, and it did not take issue with LINA’s requirement that claimants apply for SSDI, or LINA’s right to second guess an SSA decision.

Nevertheless, in light of LINA’s “openly self-interested efforts,” the court was “troubled” that LINA seemingly “ignored [Melech’s] SSDI application and the evidence generated by the SSA’s investigation once it no longer had a financial stake in the outcome.” The court was “struck by the procedural unfairness created by LINA’s approach,” and held 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.”

District Judge Orinda Evans of the Northern District of Georgia, sitting by designation, dissented. Judge Evans observed that LINA complied with all ERISA regulations, including notifying Melech that she should submit medical documentation to support her appeal. Yet, Melech failed to submit the SSDI information, and LINA could not have independently obtained medical opinions from the Social Security Administration.

Judge Evans wrote that the district court correctly ruled that it would not consider any materials which were not before the plan administrator at the time it made its decision to deny benefits, and emphasized that 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.”

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H. Sanders Carter
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Kenton J. Coppage
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Dorothy H. Cornwell
T (404) 962-1096
F (404) 962-1246

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