A recent 6th U.S. Circuit Court of Appeals ruling raises the question of who gets the last word in an ERISA claim appeal.

In Balmert v. Reliance Standard Life Ins.Co., 2010 U.S.App.LEXIS 2439 (6th Cir. Feb. 5, 2010), the plaintiff, Maribea Balmert, worked as an accountant-tax manager for Big Lots Inc. beginning in 2001. She had to cease working in 2004, however, due to symptoms that she believed were caused by rheumatoid arthritis, although there was a suggestion the symptoms were triggered by stress.

After undergoing psychotherapy aimed at stress management, and because her physical symptoms seemed to stabilize, Balmert's rheumatologist advised her she could return to work with limitations; and he suggested she explore a less stressful position or a position with greater flexibility that would allow her to perform some of her work at home. Although the notes from Balmert's rheumatologist were relatively benign, Balmert maintained she was unable to work and applied for long-term disability benefits. Reliance Standard denied the claim and also denied a pre-litigation appeal Balmert submitted even though it was accompanied by a functional capacity evaluation report finding the plaintiff incapable of participating in "any type of formal work setting." The physical therapist who conducted the evaluation cited as the basis for his opinion "a lack of sitting tolerance, lack of standing tolerance, severe deficits in upper extremity strength, severe deficits in fine motor skills, and chronic and intractable subjective pain rating."

Upon receipt of the FCE report, Reliance Standard arranged for Balmert to undergo an independent medical examination. The examiner found that while the diagnosis of rheumatoid arthritis appeared well-supported, there was little evidence of active disease. Consequently, the examiner found the condition well-controlled and suggested only minimal job limitations, which included consideration of Balmert's difficulty with keyboarding.

However, in a follow-up report, the doctor stated that "[b]ased on the records that were sent to me it would appear initially that [Balmert] would have difficulty keyboarding and other use of her hands. Based on what I see now this would be much less of a problem." Following receipt of that report, Reliance Standard approved a closed period of disability finding Balmert disabled from 2004 through the date of the examination, but not thereafter.

On appellate review, the court applied an arbitrary and capricious standard, but noted Reliance Standard's conflict of interest. The decision focused on the plaintiff's claim she had been denied a full and fair review because the final benefit determination was entirely different from the initial determination. Balmert asserted that until the final decision was rendered, Reliance Standard's position was that she was never disabled. The final decision, though, conceded she was disabled, but only for a closed period; and the plaintiff argued she was not given the opportunity to respond to that finding.

The court disagreed despite acknowledging comments made in Houston v. Unum Life Insurance Co. of America, 246 F. App'x 293 (6th Cir. 2007) (unpublished), which quoted earlier rulings stating, "the persistent core requirements of review intended to be full and fair include knowing what evidence the decision-maker relied upon, having an opportunity to address the accuracy and reliability of that evidence, and having the decision-maker consider the evidence presented by both parties prior to reaching and rendering his decision." Id. at 300 (emphasis in original) (quoting Halpin v. W. W. Grainger, Inc., 962 F.2d 685, 689 (7th Cir. 1992)). Reliance Standard responded by quoting Metzger v. Unum Life Insurance Co. of America, 476 F.3d 1161 (10th Cir. 2007), which held:

Permitting a claimant to receive and rebut medical opinion reports generated in the course of an administrative appeal-even when those reports contain no new factual information and deny benefits on the same basis as the initial decision-would set up an unnecessary cycle of submission, review, re-submission, and re-review. This would undoubtedly prolong the appeal process, which, under the regulations, should normally be completed within 45 days. Moreover, such repeating cycles of review within a single appeal would unnecessarily increase cost of appeals.

Id. at 1166-67 (internal citations omitted). The court ruled that it did not have to decisively resolve the issue, though, because Balmert did not attempt to rebut the independent examiner's findings. The court added, "A claimant's failure to fully explore and exercise her procedural rights does not undermine the fundamental fairness of an otherwise full and fair administrative review process." While the court agreed that Balmert had a right to the examiner's report, her argument was rejected because there was no evidence the examiner's report had been requested prior to a final determination being rendered. The court also determined the plaintiff "did not take the opportunity to request a copy of the report or otherwise attempt to address the accuracy and reliability of Dr. Thomas's medical findings."

The court nonetheless examined the complete record, but found no evidence in the record disputing the examiner's conclusions since the findings made by the treating rheumatologist were somewhat equivocal and indicated the plaintiff was capable of working despite certain limitations. Although the FCE results were more restrictive, the court characterized the treating doctor's comments on those findings as ambiguous and noted it was unclear whether he agreed with the identified restrictions. Thus, the court found nothing improper in the insurer giving more credibility to the examining doctor, particularly since his opinions resulted in an award of benefits for a closed period of disability. The court also suggested that since the record revealed that Balmert's symptoms were stress-related, it was not unreasonable for the insurer to conclude the symptoms may have been overstated or were unrelated to rheumatoid arthritis. And since the alleged disability was based solely on rheumatoid arthritis, there was insufficient record evidence to support a disability on another basis. Hence, the insurer's determination was affirmed.

Although there was no citation in the opinion to Richardson v. Perales, 402 U.S. 389 (1971), the parallels between the main issue discussed in Balmert and the Supreme Court's ruling are striking. Perales, which involved Social Security disability benefits, discussed whether a doctor's report was admissible in evidence without the doctor's live testimony. The Court concluded the report was admissible and could constitute substantial evidence supporting a benefit denial because the doctor had examined Perales and because Perales had the right to have a subpoena issued to cross-examine the doctor. However, Perales never requested a subpoena and thus waived his right to challenge the doctor's opinions. Here, too, while noting that fundamental due process requires that the benefit claimant have the right to address the accuracy and reliability of the evidence on which the benefit denial was based, the plaintiff apparently failed to make such a request before the claim record was closed.

But to close the discussion at this point would leave unexamined an essential issue that was apparently overlooked by the 6th Circuit. When Balmert appealed, her appeal was from a denial of benefits. The appeal resulted in an award of benefits followed by a second termination. That determination should have triggered a new right to appeal in accordance with the Department of Labor's interpretation of ERISA's requirements. The DOL issued a series of Frequently Asked Questions (and answers) which included the following:

C-18: If a plan conditions continuation of disability benefit payments on a periodic confirmation of the claimant's disability and, in conjunction with such a confirmation, determines that the claimant is no longer disabled and, accordingly, terminates payment of benefits, must the plan treat the termination as an adverse benefit determination under the regulation?

Yes. Under the regulation, an adverse benefit determination includes any denial, reduction, or termination of a benefit. Accordingly, where a plan terminates the payment of disability benefits under such circumstances, the plan is required to provide the claimant a notification of adverse benefit determination and the right to appeal that determination consistent with the regulation. See 29 CFR § 2560.503-1(m)(4), (g) and (h). If, on the other hand, a plan provides for the payment of disability benefits for a pre-determined, fixed period (e.g., a specified number of weeks or months or until a specified date), the termination of benefits at the end of the specified period would not constitute an adverse benefit determination under the regulation. Any request by a claimant for payment of disability benefits beyond the specified period, therefore, would constitute a new claim. See 29 CFR § 2560.503-1(f)(3). Also see 29 CFR § 2560.503-1(f)(2)(ii).

The last sentence of the FAQ indicates that what occurred here should have entitled Balmert to submit a new claim rather than have her future rights foreclosed. There is a fundamental unfairness where an individual brings a claim under a paternalistic statute that imposes fiduciary obligations on plan administrators, yet forecloses the claimant from having the opportunity to rebut adverse evidence.

And the situation in this case is even more striking since the new evidence entirely changed the dynamic of the claim. While no court wants to sanction an unending cycle of never-ending appeals, what occurred in this case gave rise to an entirely new claim that should have triggered an entirely new round of appeals.