Sometimes an ERISA-governed disability benefit claim is denied on a specific issue that precludes the need for a full development of the record on the merits of the claim. E.g., claimant was not eligible for benefits because he was not a full-time employee at the time of disability.

But when should courts order remand, after determining the claimant may be eligible for benefits?  This new decision provides some helpful guidance.

Here’s the case of Newsom v. Reliance Standard Life Ins. Co., 2022 WL 500403, __ F.4^th __ (5^th Cir. February 18, 2022)(“‘[I]t is unnecessary for plans to hedge their bets on a possible reversal on appeal by requiring that, after a plan has already found that an employee does not qualify for disability benefits under the ‘own occupation’ standard, it also must determine whether the employee is disabled from  ‘any occupation.’’”)

FACTS: Newsom sought ERISA-governed short and long term disability benefits, claiming he had chronic fatigue syndrome, depression, and other ailments. Reliance denied benefits because, by the time Newsom filed his claim he was part-time and not eligible for LTD benefits. The District Court concluded, however, that Newsom was eligible for benefits but refused to remand the claim and then “summarily awarded $194,290.72”.  Reliance appealed.

ISSUE: Whether the district court should have remanded the claim back to the claims administrator after concluding Plaintiff was eligible as a full-time worker.

FIFTH CIRCUIT COURT OF APPEALS REVERSES, HOLDING: YES.

1. Plaintiff was eligible for long term benefits because plaintiff was “full-time” as defined under the policy. Op. at 7.
2. The District Court erred in failing to remand so Reliance could develop a full factual record on the merits of his benefits claim. Op. at 12-13.
3. Plaintiff argued that court precedent suggests remand should be denied because Reliance should have made “their record prior to coming to federal court” and “allow[ing] the administrator another opportunity to make a record discourages this effort.”  Op. at 12.
4. The Court of Appeals stated that remand in this case would be appropriate because the record on remand would be focused on a merits determination whether Newsom was entitled to benefits, which is different from the record developed to assess whether Newsom was a full-time worker. Op. at 12.
5. “‘Because Defendants denied that coverage ever existed until the matter was before the district court, the administrator never had occasion to exercise discretion to interpret the terms of the Plan.’” Op. at 13.
6. “Remand was proper because ‘the disability issue did not ripen into an apple ready to be bitten until after an initial finding of eligibility.’” Op. at 13.
7. “‘[I]t is unnecessary for plans to hedge their bets on a possible reversal on appeal by requiring that, after a plan has already found that an employee does not qualify for disability benefits under the ‘own occupation’ standard, it also must determine whether the employee is disabled under from ‘any occupation.’’” Op. at 14 (citing Pakovich v. Broadspire Svcs. Inc., 535 F.3d 601, 605 (7^th Cir. 2008)).
8. The district court “provided no explanation for how it reached the amount of disability that Newsom should be awarded beyond noting ‘there is no evidence of any offset or reduction to which Reliance is entitled.’…An administrative record answering these questions was simply not before the district court, irrespective of de novo review.”’ Op. at 15.
9. “Once the district court determined that Newsom was in fact eligible for LTD benefits, and the date on which his eligibility began, it should have stopped as well and remanded the case for Reliance to make the separate disability determination.” Op. at 16.