What do these two stories have in common, the first about a claims administrator not being allowed to change the basis for a denial of benefits during the internal appeal and the second about an administrator not being allowed to deny benefits based on factual investigation during litigation? They both highlight the importance, for the parties on both sides of the “v” in any denial of benefits case, of the administrative claim process. Under the court decisions discussed in both stories, the record, and the grounds for denying benefits, were effectively frozen thereafter. In one of the two cases, in fact, the administrator was not even allowed to shift the grounds for denial during the processing of the appeal of its initial denial of claim, before the case even moved to litigation, and was forced to stand on the basis for denial contained in its original, initial denial.
From a practical perspective, there are lessons to be learned here about the need to stake out your position, and back it up, very early on in the claim process in an ERISA denial of benefits dispute. From a more philosophical perspective, the cases raise a serious question, about what the rule should be if, in fact, there is new evidence or analysis that would invoke a new plan term limiting coverage or otherwise affect the outcome of a claim, that is learned by the natural course of the claim’s progression. For instance, it may well be that an administrator denies a claim on one ground under the plan, but evidence submitted during an appeal of the initial denial taken by the participant demonstrates the applicability of another plan term as a basis for denial. Should the plan or the administrator be frozen out of raising that plan term as a ground for denial on the final decision, after the appeal of the initial decision, just because it wasn’t raised in the initial denial of benefits?