“Second Bite at the Denial Apple”: How Remanding ERISA Actions to Plan Administrators Unduly Burdens Claimants

Illustration by Barbara Kelley on The Florida Bar

Jack Verner, Associate Member, University of Cincinnati Law Review

I. Introduction

The Employee Retirement Income Security Act (ERISA) empowers employees who have been denied private insurance plan benefits to bring a civil action to recover benefits.[1] Most private employment benefits plans fall under ERISA coverage. In 2021, the Employee Benefits Security Administration reported that ERISA extended coverage to 158 million workers and their dependents.[2]

In 2020, the United States Supreme Court issued four ERISA decisions, more than it had ever released in a single year since the statute was passed in the 1974.[3] The Supreme Court’s recent openness to weigh in on ERISA procedural issues raises the question: should courts remand a claim to insurance plan administrators for further deliberation? This note discusses whether putting the ball back in the court of the plan administrator for a second decision is fair to claimants. Part II of this note explains the background of ERISA and the remand practice. Part III of this note presents two challenges to the practice. Part IV concludes with a recommendation for courts reviewing ERISA decisions.

II. Background

Federal circuit courts frequently remand cases to district courts—to enforce circuit court mandates, or to explore specific questions of fact or law.[4] Congress has conferred to reviewing courts this power to remand cases to lower courts to “direct the entry of such appropriate judgment, decree, or order, or require such further proceedings to be had as may be just under the circumstances.”[5] However, the practice of remanding a case to one of the litigants emerges from significantly more narrow circumstances. Typically, courts will only remand a case to one of the litigants if that litigant is a federal agency governed by a statute that specifically authorizes this remand order.[6]

ERISA cases are unique in that if reviewing courts find benefits denial decisions to be “arbitrary and capricious,” these courts will regularly remand the case not to lower courts with further instructions, but to the defendant plan administrator for re-evaluation.[7] While this practice has never been endorsed by the Supreme Court, all circuit courts that have ruled on the matter have found justification to remand ERISA cases to plan administrators.[8] Some courts have started questioning the legal basis for this practice, often on grounds of statutory construction, precedent, and public policy.[9]

A recent Sixth Circuit decision, Card v. Principal Life Insurance, contains an instructive example.[10] In Card, the plaintiff, Card, brought an ERISA action against the defendant, Principal Life Insurance, after Principal denied her requests for short-term, long-term, and total disability benefits upon concluding that Card’s alleged fatigue brought on by her condition of chronic lymphocytic leukemia failed to meet the definition of “disability” under her plan.[11] The Sixth Circuit Court held Principal’s denial decision to be arbitrary and capricious, finding that Principal failed to consider “whether Card’s cancer prevented her from performing the tasks of her job or occupation.”[12]

As for Card’s remedy, the court decided that since it had “identified only procedural problems with Principal Life’s denial without resolving Card’s ultimate eligibility for benefits” that the case should be remanded to Principal for proper evaluation.[13] On remand, Principal did grant Card’s short-term benefits claim, but failed to issue a decision on her long-term and total disability claims within 45 days, prompting Card to file a motion to re-open the case with the district court.[14] After the district court dismissed the motions for want of jurisdiction, Card appealed and the Sixth Circuit reversed, ordering the district court to hear Card’s motion to re-open.[15] In his concurring opinion, Judge Murphy asked, “[w]hy do courts have any power to ‘remand’ a pending federal lawsuit to one of the private litigants?”[16]

III. Discussion

In ERISA cases, courts should exercise tremendous caution before ordering a remand to plan administrators. This power lacks strong statutory support; indeed, remands are notably absent from the enumerated remedies provided for in the ERISA statute.[17] The Supreme Court has historically taken a textualist approach to ERISA remedies, stating, “[t]he federal judiciary will not engraft a remedy on a statute, no matter how salutary, that Congress did not intend to provide.”[18] This does not per se mean that courts have no freedom to interpret the ERISA statute to support this remedy. After all, some courts have found that the legislative intent of the statute justifies relaxing certain procedural or jurisdictional matters.[19]

The First Circuit has relied on language from Congress which demonstrated the statute’s intent is “to provide the full range of legal and equitable remedies available in both state and federal courts and to remove jurisdictional and procedural obstacles which in the past appear to have hampered . . . recovery of benefits due to participants.”[20] This language, which the First Circuit used to broadly construe the ERISA standing requirements to include an injured claimant, could possibly justify broadly construing the remedies for some public policy reason.

However, public policy cuts against the remand practice. As the Ninth Circuit has observed, “[r]emanding a disability claim for further proceedings can delay much needed income for claimants who are unable to work and are entitled to benefits, often subjecting them to ‘tremendous financial difficulties while awaiting the outcome of their appeals and proceedings on remand.’”[21] Consider Plaintiff Card, who won her day in court and then had to wait 45 days before starting the lawsuit process all over again. Courts hearing ERISA matters certainly have the power to order a granting of benefits.[22] But when courts remand to plan administrators, too often claimants suffer severe emotional and financial stress while navigating the administrative process a second time, frequently only to have the plan administrator deny the claim again. Mindful of this potential harm to claimants, the Ninth Circuit has held that “a plan administrator will not get a second bite at the apple when its first decision was simply contrary to the facts.”[23] Allowing claim administrators a second chance to deny the claim lends itself to an unfair “heads we win; tails, let’s play again” system of disability benefits decision-making.[24]

IV. Conclusion

The power of courts to remand ERISA actions to plan administrators is not expressly conveyed by the ERISA or judicial procedure statutes, and courts should be reluctant to invoke remedies not explicitly authorized. The power to remand to plan administrators is not officially endorsed by the Supreme Court. Most importantly, the power to remand to plan administrators places an unfair burden and delay on claimants, even after a reviewing judge decides in claimants’ favor. Wherever possible, especially in cases where courts can conclude that benefits are owed outright, courts should consider the possible financial and emotional harm to claimants before deciding remanding to plan administrators is “just under the circumstances.”

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[1] 29 U.S.C. § 1132(a)(1)(B).

[2] Employee Benefits Security Administration, Fact Sheet 1 (2021), https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/ebsa-monetary-results.pdf.

[3]  Lars Golumbic, William Delany and Samuel Levin, 2020 ERISA Litigation Trends Hint At What’s Ahead This Year, Law 360, https://www.groom.com/wp-content/uploads/2021/01/Law360-2020-ERISA-Litigation-Trends-Hint-At-Whats-Ahead-This-Year.pdf.

[4] Card v. Principal Life Ins. Co., 2021 U.S. App. LEXIS 32599 at *13-14 (6th Cir. 2021) (J. Murphy, concurring).

[5] 28 USCS § 2106.

[6] See e.g., SEC v. Chenery Corp., 318 U.S. 80, 88 (1943); INS v. Ventura, 537 U.S. 12, 16 (2002) (per curiam).

[7] Card v. Principal Life Ins. Co., 2021 U.S. App. LEXIS 32599 at *14 (6th Cir. 2021) (J. Murphy, concurring).

[8] Card, 2021 U.S. App. LEXIS 32599 at *13 (6th Cir. 2021) (J. Murphy, concurring) (citing cases from eleven federal circuit courts remanding to plan administrators).

[9] See generally Card, 2021 U.S. App. LEXIS 32599 (J. Murphy, concurring); Wallace v. Oakwood Healthcare, Inc., 954 F.3d 879, 900 (6th Cir. 2020) (Thapar, J., concurring).

[10] Card, 2021 U.S. App. LEXIS 32599 (6th Cir. 2021).

[11] Card, 2021 U.S. App. LEXIS 32599 at *2.

[12] Id. at *3.

[13] Id.

[14] Id. at *4

[15] Id. at *12.

[16] Card, 2021 U.S. App. LEXIS 32599 at *13 (6th Cir. 2021) (J. Murphy, concurring).

[17] See generally 29 U.S.C. § 1132(a)(1)(B); see also Buffonge v. Prudential Ins. Co. of Am., 426 F.3d 20, 31 n.14 (1st Circ. 2005).

[18]  California v. Sierra Club, 451 U.S. 287, 297 (1981).

[19] Vartanian v. Monsanto Co., 14 F.3d 697, 702 (1st Cir. 1994).

[20] Id. quoting S. Rep. No. 127, 93d Cong., 2d Sess., 3 (1974), reprinted in 1974 U.S.C.C.A.N. 4639, 4871.

[21] Benecke v. Barnhart, 379 F.3d 587, 595 (1st Cir. 2004) (quoting Varney v. Secretary of Health & Human Services, 859 F.2d 1396, 1398).

[22] Card v. Principal Life Ins. Co., 2021 U.S. App. LEXIS 32599 at *7-8 (6th Cir. 2021) ( “If the record leaves no doubt that an ERISA plan entitles a beneficiary to benefits, the court may simply award the ‘benefits due to him under the terms of his plan[.]’”, citing 29 U.S.C. § 1132(a)(1)(B)).

[23] Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (9th Cir. 2001).

[24] Benecke, 379 F.3d 587, 595.