The United States Court of
Appeals for the Eleventh Circuit recently reviewed whether a
long-term disability ("LTD") insurer must consider evidence
generated as a result of a claimant's application for Social Security
Disability Income ("SSDI") benefits. In deciding Melech
v. Life Insurance Company of North America, the Eleventh Circuit
held that when an LTD policy requires a claimant to apply for SSDI
benefits, procedural fairness requires the LTD insurer to consider
evidence developed during the SSDI application process.
In Melech, the
plaintiff's orthopedist diagnosed her as having degenerative disc
disease and ordered her to stop working. Consequently, she filed a
claim for benefits under her employer's LTD plan. The LTD policy
required her to file a claim for SSDI benefits through the Social
Security Administration ("SSA") because any SSDI benefits
would offset the insurer's payments.
As required, the plaintiff
filed an SSDI application. However, while her SSDI claim was pending,
the insurer denied her LTD claim. As part of the SSDI process, SSA
required the plaintiff to visit two specialists for independent
evaluations. Based on these evaluations, SSA approved her SSDI claim.
The plaintiff next filed an
appeal with the insurer and informed it of the independent
evaluations and the SSA decision to award SSDI benefits.
Nevertheless, the insurer upheld its decision to deny the plaintiff's
LTD claim, reasoning that SSDI decisions are independent of its LTD
determinations. In response, the plaintiff sued, alleging that the
insurer violated the terms of the LTD policy and ERISA.
The district court upheld
the insurer's decision and the plaintiff appealed to the Eleventh
Eleventh Circuit Ruling
In reviewing the case, the
Eleventh Circuit clarified that it was not determining the propriety
of the insurer's ultimate decision to deny the plaintiff's LTD claim.
Instead, the Eleventh Circuit analyzed the relationship between SSDI
benefits and LTD benefits under the policy and determined that the
insurer was obligated to consider evidence developed during the SSDI
application process. The insurer did not have this evidence when it
initially denied the plaintiff's LTD claim or when it denied her
The Eleventh Circuit
concluded that the insurer's failure to consider the evidence
developed during the SSDI application process was procedurally unfair
and inconsistent with the "fundamental requirement that an
administrator's decision to deny benefits must be based on a complete
administrative record." The Eleventh Circuit reasoned that after
requiring the plaintiff to seek SSDI benefits as required by the LTD
policy, the insurer was not then free to ignore the resulting
evidence. It therefore vacated and remanded the district court's
decision, with instructions that the case be sent back to the insurer
for further administrative consideration in light of the evidence
developed during the SSDI application process.