How do you defeat two arguments frequently used to challenge an ERISA-governed disability claim denial?

Argument (1) the rationale for the claim denial changed, or

Argument (2) the denial letter failed to tell claimant what additional information is needed for the claim.

Here’s a nice new case that highlights how to defeat those arguments.  Fite v. Bayer Corporation, __ Fed. Appx. __, 2014 WL 407339 (10th Cir. February 4, 2014) (claim denial affirmed).

FACTS: Fite, a pharmaceutical representative, was denied ERISA-governed short term disability benefits, and decided to fight on in court. The plan contained discretionary language, but there was an inherent conflict of interest because Bayer was both the “decider and the payor of the benefits.”

Fite claimed, among other things, that Bayer abused its discretion because Bayer (1) “changed the rationale for it denial” and (2) the appeal denial letter failed to tell her what additional information she could submit to address the Committee’s adverse decision.

10th Circuit HELD:

1. Conflict of Interest Standard of Review.  The conflict of interest factor was given only limited weight on whether Bayer abused discretion because “Bayer took active steps to reduce any potential bias and to promote accuracy” by seeking an independent review of medical records by four different psychiatrists. Op. at 8-9.
2. Changing Rationale for Denial Decision Was Not Abuse of Discretion. Bayer changed the rationale for denial of benefits between the initial and final decisions. That was ok. “The change is readily explained by the new evidence that came to light only during Ms. Fite’s appeal….” This is not like the case where a plan administrator “asserts an entirely new rationale…during the litigation that it did not rely on in the administrative process.” Op. at 9-10.
3. Appeal Denial Letters Do Not Need to Tell Claimant What Additional Information is Needed. That is because different regulations govern what needs to be in an appeal denial letter versus the initial denial letter. “Ms. Fite’s complaint that the Committee’s letter…did not tell her what additional information she could submit to address the Committee’s adverse decision relies on a regulation that does not apply to a final decision following an administrative appeal. Compare 29 CFR 2560.503-1(g)(iii) (requiring that initial adverse determination include ‘[a] description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary’), with id. 2560.503-1(h)(2) (setting forth requirements for full and fair review of adverse benefit determination).”  Op. at 10.