The First Circuit has held that the insurer of an employer's ERISA LTD plan was required, under the Department of Labor's (DOL's) claims regulations, to provide a claimant (on request) a doctor's report generated after the insurer's initial denial of LTD benefits (Jette v. United of Omaha Life Ins. Co, 18 F.4th 18 (1st Cir. 2021)). The court concluded that the insurer needed to furnish the report to the claimant before making its final benefits decision, give the claimant an opportunity to respond to the report, and consider the claimant's response in making its final benefits decision.

After undergoing spinal surgery, the claimant in this case sought disability benefits under an employer-sponsored LTD plan. The plan's insurer/claims administrator provided the claimant LTD benefits for several months but eventually terminated the benefits, after which the claimant filed an internal appeal. During the appeal process, the insurer hired a doctor to examine the claimant and provide the insurer a report of the doctor's findings. However, the insurer rejected the claimant's request for a copy of the doctor's report, and also did not allow her to respond to the report before issuing its final decision upholding the benefits termination.

The claimant sued the insurer and LTD plan in federal district court seeking reinstatement of LTD benefits and ERISA attorney's fees. The claimant argued that the insurer's internal claims procedures failed to provide a "full and fair review" as required under ERISA and the DOL's claims regulations. In particular, the claimant asserted that the insurer violated the claims regulations by not allowing her to review and rebut the doctor's report before its final decision on administrative appeal (29 C.F.R. § 2560.503-1(h) ("Subsection (h)")). Rejecting this argument, the district court concluded that the insurer was not required to disclose the doctor's report to the claimant unless it relied on the unshared report to find a new reason to deny coverage. The district court reasoned that because the insurer did not use the doctor's report to find new reasons for denying the claimant's claim, she was not entitled to review the report before the insurer made its final determination.

Vacating the district court's ruling on appeal, the First Circuit held that the claims regulations required the insurer to disclose the doctor's report to the claimant on request after the initial LTD denial. The court also concluded that the insurer failed to afford the claimant a full and fair review by not:

The First Circuit observed that the Subsection (h) regulation requires ERISA disability plans to provide a full and fair review of benefit denials by, among other requirements, providing claimants (on request and free of charge) reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's benefits claim (29 C.F.R. § 2560.503-1(h)(2)(iii); see Practice Note, Claims Procedure Requirements for Disability Claims and ERISA Litigation Toolkit). The insurer argued that Subsection (h) required disclosure of only those documents relevant to its initial benefits denial, and that it did not need to provide documents generated during the review process (such as the doctor's report) until after its final decision.

Rejecting the insurer's argument, the First Circuit reasoned that the plain language of Subsection (h) did not limit the documents to be produced to those relevant to the initial benefits denial. Rather, in the First Circuit's view, the provision required disclosure of all documents relevant to a claimant's claim for benefits. The initial benefit determination, the First Circuit observed, is only one event in the overall benefits claim process. The court added that the insurer's reading of Subsection (h) would unreasonably prevent claimants from responding to evidence—both at the administrative review state and on judicial review (which is typically based on the administrative record). Moreover, the court noted that claimants could not engage in a meaningful dialogue (as is envisioned under the claims regulations) if evidence was furnished to them only after a final decision is rendered—at which point it is too late for them to respond.

The First Circuit also concluded that Subsection (h) did not support the district court's view that documents created during the internal appeal process had to be provided to a claimant before an insurer's final decision on review only if the insurer relied on them to find a new reason to deny coverage. According to the First Circuit, the regulations contained no such condition.

The First Circuit noted that its interpretation of the claims regulation is consistent with the Ninth Circuit's interpretation (see Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 680 (9th Cir. 2011)).

In addition, the First Circuit concluded that the claimant was prejudiced by the insurer's procedural violation in that the insurer relied, at least in part, on the doctor's report to uphold its decision to terminate the claimant's LTD benefits. The First Circuit held that the record in this case was incomplete because the claimant did not have the opportunity to review the doctor's report and respond to it. Rather than review the insurer's substantive decision, the First Circuit remanded the case to the district court with instructions to remand the case to the insurer for a full and fair review of the claim.

(For a recent ruling addressing federal courts' remand authority in litigated ERISA disputes, see Legal Update, Sixth Circuit Addresses Remand Power in ERISA Claims Litigation.)

Insurers serving as claims administrators for ERISA LTD plans—particularly in the First and Ninth Circuits—will want to note this ruling in responding to claimants' requests for documents generated during the pendency of a disability claim. The First Circuit's decision strikes at a disclosure practice that would appear to be rather embedded in the claims context, at least for some insurers.