ABSTRACT

The evidentiary scope of judicial review of discretionary employee benefit plan decisions is well-established: review is usually confined to the evidence in the plan administrative record. As this article demonstrates, however, the rule is not absolute. Courts have developed variations on and exceptions to the rule, which present opportunities or pitfalls, as the case may be, for claimants and plan administrators. This article surveys the variations and exceptions on a Circuit-by-Circuit basis.

A. INTRODUCTION

The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. §§ 1001-1461, provides a two-tier system for resolving benefit claim disputes between employee benefit plans and their participants and beneficiaries. In brief, the plan and the claimant must first attempt to resolve the benefit dispute under the plan's internal administrative claims procedure before the claimant can take the dispute to federal district court.

ERISA section 503 and its accompanying regulations mandate a reasonable claims procedure for resolving benefit disputes. Courts have generally required benefit claimants to fully exhaust their administrative remedies under the plan's internal claims procedure before taking their benefit disputes to court.

It is the express statutory policy of ERISA to provide employee benefit plan participants and their beneficiaries appropriate remedies and ready access to the federal courts. ERISA section 502(a)(1)(B), specifically provides that a participant or beneficiary in an ERISA plan may bring a court action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan."

Once a dispute between a claimant and an employee benefit plan has landed in federal court, the court and the parties are faced with two important threshold questions regarding (1) the standard of judicial review of the plan's benefit determination, and (2) the evidentiary scope of judicial review. The first threshold question regarding the standard of judicial review generally entails a choice between de novo review or more deferential review of the plan's benefit denial.

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), the Supreme Court held that "a denial of benefits challenged under [ERISA section 502(a)(1)(B), 29 U.S.C.] § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." In the case of a plan that grants the administrator or fiduciary discretionary authority to construe the plan and decide benefit claims, judicial review of a benefit denial is highly deferential. A reviewing court may overturn the plan's benefit decision only when the court finds the decision to be arbitrary and capricious or an abuse of the discretion vested in the plan.

This article examines the second threshold question regarding the evidentiary scope of judicial review of discretionary employee benefit plan determinations for plans subject to deferential judicial review under the "arbitrary and capricious/abuse of discretion" standard. The article discusses and analyzes recent federal case authority on a Circuit-by-Circuit basis. As a general rule, deferential judicial review of an employee benefit plan decision is confined to the plan administrative record that was before the plan administrator or fiduciary when it made the benefit determination under review. However, as shown below, there are limited exceptions to this general rule. Moreover, in an appropriate case the reviewing court has the option of remanding the benefit claim back to the plan administrator or fiduciary for consideration of new evidence that was not part of the original plan administrative record.

The issue is of vital interest to claimants, plan administrators, and their legal representatives. Typically, in a benefits case reviewed exclusively on the plan administrative record, there is no need for discovery. Thus, confining judicial review to the administrative record usually means that the case can be resolved under cost-efficient, streamlined summary judgment procedures focusing solely on the evidence in the administrative record and relevant plan documents. By contrast, if judicial review is not confined to the administrative record, the rationale for barring discovery disappears. Moreover, admission of new, extra-record evidence can sometimes be the difference between winning and losing a case and, in any event, will most likely lead to more costly and time-consuming discovery and trial procedures.

B. CIRCUIT-BY-CIRCUIT REVIEW

The following Circuit-by Circuit review examines the evidentiary scope of judicial review of discretionary employee benefit plan decisions in each federal judicial circuit (except the Federal Circuit).

1. First Circuit

Unlike other circuits, the First Circuit has not clearly pronounced that a court must restrict itself to the plan administrative record when reviewing a discretionary benefits determination. Indeed, the First Circuit recently declined the opportunity to stake out its position on this issue in Recupero v. New England Telephone & Telegraph Co., 118 F.3d 820, 833 (1st Cir. 1997). That said, the First Circuit has not been completely silent on the issue.

In Recupero, the claimant was injured in an elevator accident during a coffee break. She sought accidental disability benefits under her employer's welfare benefit plan. Under the plan, benefits were available when an employee became disabled due to accidental injury occurring in the course of employment. The plan administrator denied the claim after concluding that Recupero's injuries had not occurred in the course of her employment. The district court held that the administrator did not abuse its discretion in denying the claim. The First Circuit affirmed, but only after an extended analysis of issues relating to the court's role in reviewing benefit decisions.

With respect to judicial review of the administrative record, the First Circuit stated that "[d]eciding disputable factual issues about what is or is not properly part of the 'record' for judicial review is fundamentally different from deciding disputable factual issues going to the merits of a benefits claim." The court explained that a reviewing court should not disturb findings of "historical fact" absent an abuse of discretion by the fact-finder. In contrast, however, factual disputes about the "content" of the administrative record are not entitled to deference, and a court may take evidence on motion or convene a nonjury trial to "develop a 'record' suitable for judicial review." Thus, courts may consider extra-record evidence regarding whether the administrative record filed in court should have included additional materials or, conversely, whether the administrative record contains materials that were not (but should have been) considered by the plan administrator or that were improperly considered by the plan administrator.

The First Circuit reiterated these principles in Doe v. Travelers Ins. Co., 167 F.3d 53 (1st Cir. 1999). Although the parties in Doe did not dispute the contents of the administrative record, the First Circuit noted that limited discovery of extra-record evidence could be appropriate in some cases: "Finding out just what information Travelers had and why it acted as it did depends upon the medical notes provided to it, the exchange of correspondence, and the recollections of oral conversations; this in turn can require discovery and even fact finding by the district court."

In sum, the First Circuit allows discovery and fact-finding on the limited issue of the scope of the plan administrative record filed in court (that is, to determine whether the record is complete or otherwise adequate for judicial review of the benefit denial and, if not, what supplementation is appropriate).

2. Second Circuit

The Second Circuit adheres to the rule that district court review of an ERISA benefit plan determination is limited to the plan administrative record. In Miller v. United Welfare Fund, 72 F.3d 1066 (2d Cir. 1995), the claimant sued to recover medical benefits for private duty nursing care that were denied by the defendant welfare benefit plan. Although the arbitrary and capricious standard of review applied, both parties relied on extraneous evidence not included in the administrative record to support their respective positions. The Second Circuit rejected such reliance on extra-record evidence and adopted the general rule limiting district court review of discretionary benefit plan decisions to the plan administrative record.

In Miller, the Second Circuit set forth an important corollary rule for district courts to follow pursuant to this evidentiary limitation: "if upon review a district court concludes that the Trustees' decision was arbitrary and capricious, it must remand to the Trustees with instructions to consider additional evidence unless no new evidence could produce a reasonable conclusion permitting denial of the claim or remand would otherwise be a 'useless formality.'" The Second Circuit instructed the district court to remand the case to the plan for development of additional evidence from both parties, because the administrative record was incomplete and thus inadequate for judicial review of the plan's benefit denial.

Accordingly, under Miller, a district court may be required to allow discovery and consider additional extra-record evidence for the limited purpose of determining whether remanding the case to the plan for further development of the administrative record is appropriate. The Miller remand rule may actually work to the advantage of a claimant or a plan insofar as it gives each party a second opportunity to support its position on the claim at issue.

3. Third Circuit

In the Third Circuit, the general rule limiting judicial review of ERISA plan benefit denials to the administrative record was confirmed in Mitchell v. Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir. 1997). The Third Circuit has not strayed from this rule in reviewing factual findings underpinning a benefit denial. However, the Third Circuit has indicated that consideration of extra-record evidence on issues of plan interpretation is permissible.

In Epright v. Environmental Resources Management, Inc. Health and Welfare Plan, 81 F.3d 335, 339 (3d Cir. 1996), the claimant Epright was denied medical benefits under his employer's plan because he was purportedly a part-time employee and as such excluded from the plan. Epright claimed that the denial of benefits was wrongful, because he met the express terms of the plan's definition of "full-time employee" and therefore should have been granted benefits. The employer argued that the definition was ambiguous and that additional evidence supported the plan's interpretation of this definition.

After analyzing Epright's work status and the express terms of the plan, the Third Circuit concluded that the plan's definition of "full-time employee" was not ambiguous and that Epright was a full-time employee under this definition. Accordingly, Epright was entitled to coverage under the plan, and the denial of benefits was arbitrary and capricious. In the course of its analysis, the Third Circuit announced that in reviewing issues of plan interpretation, "[e]xtrinsic evidence may be used to determine an ambiguous term." Accordingly, if the definition of "full-time employee" had been ambiguous, the employer could have relied on extrinsic evidence to support its interpretation of the Plan.

4. Fourth Circuit

The Fourth Circuit has long adhered to the general rule that a court may consider only the evidence that was before the plan administrator when reviewing a benefits denial. The Fourth Circuit has not authorized any exceptions to this rule.

Indeed, in Gluth v. Wal-Mart Stores, Inc., 117 F.3d 1413, 1997 W.L. 368625 (4th Cir. 1997) (unpublished per curiam opinion), the Fourth Circuit held that it is error for the district court to take trial testimony to explain the meaning of documents contained in the administrative record. The facts of the case present a cautionary tale regarding the timely development of evidence. Before beginning a new job, Gluth was examined by his physician and found to have an enlarged prostate. The physician noted this finding on Gluth's medical records. Gluth then became a participant in his new employer's health plan, which excluded coverage for pre-existing conditions. Shortly thereafter, Gluth suffered acute prostate disease and required emergency surgery. The health plan denied Gluth's claim for medical benefits for the surgery, citing the pre-existing condition exclusion and the diagnosis of his enlarged prostate prior to employment. In the district court, Gluth presented the testimony of his examining physician and a urologist stating, among other things, that his pre-employment condition of an enlarged prostate did not constitute the illness for which he later required surgery and that an enlarged prostate was normal for men of his age. These witnesses thus concluded that the health plan had misinterpreted Gluth's earlier medical records and had erroneously concluded that his prostate disease was a pre-existing condition. On the basis of this testimony, the district court concluded that the plan had abused its discretion in denying Gluth benefits.

The Fourth Circuit reversed, finding that "when a court is constrained to review a plan administrator's decision denying benefits under the abuse of discretion standard, consideration of evidence not before the plan administrator is proscribed." On the basis of the record evidence, the Fourth Circuit determined that the benefit denial was reasonable and not an abuse of discretion. A concurring opinion lamented that Gluth had failed to present either his physician's explanation of his medical records or the urologist's opinion to the plan administrator during the claims review process in the first instance. Indeed, as the concurring opinion points out, it is not difficult to conclude that the case would have gone Gluth's way if he had taken full advantage of the claims review process.

The Fourth Circuit has also indicated that, when a district court concludes that the administrative record upon which a benefits decision is made is inadequate or otherwise deficient in some respect, the proper remedy is to remand the case to the plan administrator for further consideration. Bernstein v. CapitalCare, Inc., 70 F.3d 783 (4th Cir. 1995), illustrates this principle.

In Bernstein, the claimant, a member of a Washington, D.C. HMO, was suffering end-stage AIDS. While visiting New York, he suffered psychological problems and was committed to a psychiatric facility. He was released with a discharge plan that called for him to live in New York with his brother and to receive round-the-clock nursing care. The discharge plan also called for medical treatment with an AIDS specialist in New York. While still in New York pursuant to the discharge plan, the claimant suffered new, stroke-like symptoms, and was admitted to the hospital. The claimant's brother notified the HMO about the admission. The HMO then denied benefits for the hospitalization because "benefits are not provided for members living outside the Washington, DC service area when 'the need for care could have been foreseen.'" The claimant's brother sent a letter providing detailed information in support of coverage, but the HMO never responded to the letter. After the claimant died, his brother sued to recover benefits for the hospitalization.

The plan administrative record contained five documents: (1) a phone log of calls showing the brother's requests for information about converting the claimant's home area to New York; (2) a phone log reflecting the brother's call notifying the HMO about the hospitalization; (3) a memo regarding the earlier admission to the psychiatric facility; (4) notes regarding the psychiatric condition and the availability of benefits following the discharge from the psychiatric facility; and (5) the HMO's denial letter.

The Fourth Circuit determined that in these circumstances, a "threshold" issue under the arbitrary and capricious standard is "whether the administrative record before CapitalCare at the time of the benefit determination contained sufficient evidence to allow the district court adequately to assess the reasonableness of the plan's decision." This requirement "ensures the plan beneficiary that he or she receives procedural fairness under the plan and that the plan administrator's decisions are principled and deliberate." Moreover, the administrative record must be sufficient to allow the district court "to conduct meaningful appellate review of a benefit determination, even under a deferential standard."

The Fourth Circuit determined that the HMO's administrative record was insufficient. It failed to "adequately document the administrator's decisional process" and provided "little support" for the denial of benefits. Further, discovery during the course of the lawsuit developed "much relevant additional evidence." The district court had reviewed this extra-record evidence de novo and made its own finding that the HMO properly denied benefits on the basis of this new evidence. The Fourth Circuit held that the district court erred in considering the evidence, even though the administrative record was woefully inadequate. The Fourth Circuit instructed the district court to remand the case to the plan administrator to consider the additional evidence and to make a new determination.

The Fourth Circuit has, however, indicated that remands should be used "sparingly." In Elliott v. Sara Lee Corp., 190 F.3d 601 (4th Cir. 1999), the district court granted summary judgment affirming the plan's denial of disability benefits. The district court also rejected an extra-record vocational consultant's affidavit offered by the claimant for the purpose of demonstrating the insufficiency of the administrative record presented to the plan. The Fourth Circuit, in affirming the district court, acknowledged that, if a district court finds that the plan lacked sufficient evidence on which to make a rational decision, the proper course is not to bring new evidence before the district court, but rather to remand the claim to the plan to make a new determination. Remand is also appropriate where the plan trustees failed to consider relevant evidence that they were obliged by the plan to consider or where the claim involves readily available records that the plan trustees agreed to, but did not, consider. However, in Elliott the Fourth Circuit determined that there was ample medical evidence in the record that was fully considered by the plan in reaching its decision and that was adequate for the district court to conduct a meaningful review of that decision. Hence, the district court properly rejected the claimant's proffer of new evidence and affirmed the denial of disability benefits without remanding the case to the plan for further consideration.

In sum, the Fourth Circuit strictly applies the general prohibition on extra-record evidence, requires plan administrators to consider all evidence in the first instance, and uses remands sparingly. However, in the case of a plan administrative record that is inadequate for meaningful judicial review of the benefit denial, the district court should remand the claim to the plan to develop a complete administrative record.

5. Fifth Circuit

The Fifth Circuit has made clear that judicial review of discretionary factual determinations by plan administrators is confined to the administrative record.

However, review of plan interpretation issues is subject to the more complicated analysis set forth in Wildbur v. ARCO Chemical Co., 974 F.2d 631 (5th Cir. 1992). In Wildbur, ARCO maintained two plans, a retirement plan and a severance plan. Both plans contained provisions designed to enhance benefits of participants whose employment was terminated due to downsizing. The severance plan stipulated that the enhanced benefits were unavailable to participants that became employees of a company that purchased ARCO assets as part of the downsizing.

ARCO decided to consolidate its operations by selling some of its divisions and certain of its assets. The claimants were employed by an ARCO subsidiary, ChemLink, and were participants in both plans. As part of the consolidation, ARCO sold ChemLink to PONY, an unrelated third party. The claimants became PONY employees. Thereafter, the claimants sought enhanced benefits under both plans, asserting that they were "terminated" from ARCO as a result of the sale to PONY. ARCO maintained that the claimants did not qualify for the enhanced benefits under the severance plan because they had not been terminated from employment.

Administrative review of the case continued while the case was before the district court. As a consequence, the administrative record was in a continuous state of flux. The district court eventually found for ARCO. In reaching its holding, the district court reviewed the record de novo and refused to consider certain evidence offered by the claimants.

The Fifth Circuit reversed and remanded the case to the district court for additional findings. In doing so, the court concluded that the district court had not only applied the wrong standard of review, but had also failed to provide a meaningful record of what evidence it did and did not consider. Consequently, the Fifth Circuit was unable to determine whether the district court had properly evaluated all of the potentially relevant evidence. On the other hand, the Fifth Circuit rejected the district court's holding that it was not permitted to consider extra-record evidence on issues of plan interpretation.

In connection with its remand order, the Fifth Circuit defined the two-step process that a district court must follow when applying the deferential "abuse of discretion" standard of review to issues of plan interpretation. First, a court must determine the legally correct interpretation of the plan. Second, if the administrator did not give the plan the legally correct interpretation, the court must then determine whether the administrator's decision was an abuse of discretion.

In answering the first question -- whether the administrator's interpretation of the plan was legally correct -- a court must consider:
(1) whether the administrator has given the plan a uniform construction,
(2) whether the interpretation is consistent with a fair reading of the plan, and (3) any unanticipated costs resulting from different interpretations of the plan.

If a court concludes that the administrator's interpretation of the plan is incorrect, the court must then determine whether the administrator abused its discretion. Three factors are important in this analysis: (1) the internal consistency of the plan under the administrator's interpretation, (2) any relevant regulations formulated by appropriate administrative agencies, and (3) the factual background of the determination and any inferences of lack of good faith.

The court noted that, although the fact that an administrator's interpretation is incorrect does not by itself establish that the administrator abused it discretion, it is a strong indication of arbitrary and capricious behavior, particularly when the interpretation directly conflicts with express plan language. In this light, the court explained that the above factors make it obvious that some evidence other than that contained in the administrative record may be relevant at both steps of the review process. Determining whether the administrator has given a uniform construction to a plan may require a court to "evaluate evidence of benefit determinations other than the one under scrutiny." Likewise, to determine whether an interpretation results in unanticipated costs, "a court may be required to review what costs were anticipated and what costs may flow from the challenged interpretation." The court noted that much of this kind of information is unlikely to be in the administrative record.

If a reviewing court concludes that the administrator's interpretation of the plan was incorrect and proceeds to the second step of abuse of discretion analysis, three additional factors become relevant. The court did not address the first two factors -- internal consistency and applicable regulations -- other than to note that application of such factors is unlikely to require consideration of extra-record evidence. On the other hand, the third factor -- the factual background of the determination and any inferences of a lack of good faith -- may require the court to review evidence outside the plan administrative record, especially with respect to the question of good faith.

The court made clear, however, that its holding is not to be interpreted as meaning that a claimant is free to disregard the evidence before the administrator and relitigate in court the "historical facts" surrounding a claim. It stated that a district court must evaluate the administrator's fact findings regarding the eligibility of a claimant based on the evidence before the administrator, assuming that both parties were given an opportunity to present facts to the administrator.

The Fifth Circuit reiterated this admonition in Vega v. National Life Ins. Services, Inc., 188 F.3d 287, 299 (5th Cir. 1999) (en banc). In Vega (a preexisting condition/material misrepresentation case), the en banc court noted that Fifth Circuit case law confirms that the plan administrator has the obligation to identify the evidence in the administrative record and that the claimant may contest whether the record is complete. Once the administrative record is determined, the district court may not stray from it, except on issues of plan interpretation or medical terminology. Thus, evidence of how an administrator interpreted a plan term in other cases would be admissible in reviewing the administrator's interpretation of that plan term in a given case. Likewise, evidence, including expert opinion, that aids the district court in understanding medical terminology or practice related to a claim would be equally admissible.

Finally, the Fifth Circuit noted that, while remand to the plan administrator might be appropriate in special circumstances, remands should not be liberally granted as a matter of course whenever new evidence for either party surfaces in court, because the parties should be encouraged to exhaust the plan's administrative procedures and develop a complete record before the case comes to court.

Offutt v. Prudential Ins. Co. of America, 735 F.2d 948 (5th Cir. 1984), and Schadler v. Anthem Life Ins. Company, 147 F.3d 388 (5th Cir. 1998), set forth the Fifth Circuit's pre-Vega case law on remanding benefit claims to plan administrators. While neither opinion is directly inconsistent with Vega, the cases should be read in light of the Vega court's restrictions on remands to administrators.

In Offutt, the Fifth Circuit set forth a general rule for remands: "If new evidence is presented to the reviewing court on the merits of the claim for benefits, the court should, as a general rule, remand the matter to the plan administrator for further assessment. . . . No remand is necessary, however, when it would be a useless formality." In Offutt, the defendant-appellee plan administrator raised new arguments before the district court in support of its denial of benefits. The Fifth Circuit determined that the district court could properly consider the new arguments, because the plan had not proffered any new evidence in support of its new arguments. Moreover, remand would have been a useless formality, because any determination based on these arguments would only have reinforced the decision already made against the claimant.

In Schadler, the Fifth Circuit added a different twist to the general rule regarding remand. The claimant's husband was employed by Lockheed Corporation. Anthem Life Insurance Company administered Lockheed's welfare benefit plan. After her husband died from an overdose of illegal narcotics, Mrs. Schadler filed a claim for accidental death benefits. Anthem denied the claim, contending that Mr. Schadler was not covered by the plan because his enrollment card was never received and no premium was ever paid. In the district court, Anthem abandoned its "lack of coverage" defense and for the first time asserted that the claimant was not entitled to accidental death benefits because her husband's death was due to "intentionally self-inflicted injury." The plan specifically excluded from coverage any injury that was intentionally self-inflicted. The claimant argued that Anthem could not raise its new self-inflicted injury defense for the first time in the district court. The district court ultimately ruled in favor of Anthem on the basis of its new defense.

The Fifth Circuit vacated the district court's decision, noting that Anthem had denied the claim because it had determined that Mr. Schadler was not covered by the plan, not because it had determined that death resulting from self-inflicted injury was excluded from coverage under the plan. Consequently, the court explained, after Anthem abandoned its lack of coverage defense, there was no exercise of administrative discretion, nor an administrative record, for the district court to review, because the administrator had not had any occasion to interpret and apply the self-inflicted injury exclusion to the claimant's case. Accordingly, the Fifth Circuit ordered that the case be remanded to the administrator to develop a full factual record and make a decision in the first instance on the self-inflicted injury exclusion issue.

6. Sixth Circuit

The Sixth Circuit hews closely to the rule that courts cannot consider evidence beyond the administrative record when reviewing discretionary benefit determinations. The Sixth Circuit, however, has developed a clarification and one exception to the general rule.

The Sixth Circuit clarified the general rule in Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 986 (6th Cir. 1991). The court determined that under the arbitrary and capricious standard, it was appropriate for a district court to consider not only the contents of the administrative record, but also "what occurred during the administrative appeals process" that led up to the final decision on review.

In this case, Miller claimed that Metropolitan Life improperly terminated her disability benefits after a psychiatrist selected by Metropolitan Life reported that Miller could "return to work on a trial basis." Miller asked Metropolitan Life to reconsider the psychiatrist's report and for a referral to another independent examiner. Metropolitan Life then requested Miller to submit a report from a physician verifying her disability and any other evidence supporting her continued disability. Miller never submitted any such supporting evidence, even though the plan at issue imposed on participants the burden of supplying evidence of continuing disability on demand. In reliance on Miller's failure to present evidence of her continued disability, the district court upheld Metropolitan Life's termination of benefits.

On appeal Miller challenged the district court's ruling, claiming that the district court had gone beyond the administrative record in considering her failure to submit the requested evidence supporting her continued disability. The Sixth Circuit determined that Miller had misconstrued the evidentiary limitation and that "the district court correctly considered plaintiff's failure to supply the documentation requested by Metropolitan subsequent to the initial termination of benefits." Miller's failure "thwarted the administrative appeals process and justified Metropolitan's final denial of disability benefits after plaintiff's request for reconsideration." In sum, a court reviewing a benefit denial is entitled to consider not only the facts contained in the administrative record, but also "what occurred during the administrative appeals process" as relevant facts bearing on the benefit dispute.

The Sixth Circuit carved out a limited exception to the general rule in Killian v. Healthsource Provident Administrators, Inc., 152 F.3d 514 (6th Cir. 1998). Killian sought benefits under her health plan for a medical procedure known as high-dose chemotherapy with peripheral stem cell rescue. Her physician requested a "preliminary 'determination of benefit' and a 'pre-authorization of treatment'" for this procedure. The request and all supporting documentation were forwarded to the plan's independent "Medical Ombudsman Program" for a determination. The request was denied, and a letter was sent informing Killian that any appeal must be filed within 60 days. Killian appealed and submitted additional evidence in support of her appeal within the 60-day period. Her appeal was denied. The denial letter did not contain any information regarding possible further appeal, but it also did not state that further action was foreclosed.

Killian continued to submit additional evidence. Initially, the plan advised Killian by letter that the new evidence would receive due consideration. Later, however, the plan advised Killian that she had already exhausted her administrative remedies, that the plan had issued a final denial of her request, and that the additional evidence was submitted outside the 60-day appeal period. Accordingly, the plan refused to consider her new evidence at all. The letter cited the benefit claims review provisions of the plan in support of this position, even though the request for pre-authorization of treatment was not technically a claim for benefits. Despite the position taken in this letter, the plan continued to solicit medical evidence from physicians regarding the proposed treatment and gather additional evidence in support of the denial.

In court, the plan attempted to limit the scope of the evidence on review to the evidence before the plan before it issued its final denial. The Sixth Circuit rejected the plan's position and found that the plan acted arbitrarily and capriciously in failing to consider all evidence presented by the claimant, even evidence submitted after the appeal period had expired and the final denial was issued. The court relied on a combination of the following factors. First, the plan was operating under a conflict of interest. Second, the plan did not contain a specific claims review procedure for pre-authorization reviews, which entail "wholly different considerations" from a claim for benefits. Third, the plan continued to gather evidence in support of its denial after it refused to accept evidence submitted by the claimant in support of her request. The Sixth Circuit ordered that the case be remanded to the plan administrator for consideration of the additional evidence proffered by the claimant.

Thus, although the Sixth Circuit in Killian rejected the district court's review of evidence beyond the administrative record, it gave the district court the power to find an administrative record inadequate and to remand the claim to the plan to consider the additional evidence and make a new decision.

7. Seventh Circuit

Since Firestone, the Seventh Circuit has not strayed from the general rule that a court must confine itself to the plan administrative record when reviewing the merits of a discretionary benefit determination. In Perlman v. Swiss Bank Corp. Comprehensive Disability Protection Plan, 195 F.3d 975, 981-82 (7th Cir. 1999), the Seventh Circuit recently reinforced this rule by concluding that it is error for a district court to allow discovery into the plan administrator's decision-making in an ERISA benefit claim case subject to deferential review.

The Seventh Circuit has also authorized district courts to remand benefit claims to plan administrators in certain circumstances. Before Firestone, in Wardle v. Central States, Southeast and Southwest Areas Pension Fund, 627 F.2d 820, 824 (7th Cir. 1980), the Seventh Circuit held that if new evidence is presented, the court should remand the case to the plan administrator to assess the new evidence, unless to do so would be a "useless formality." In Wardle, the Seventh Circuit considered remand unnecessary (i.e., a "useless formality") where the additional evidence presented by the unsuccessful claimant strengthened his case only minimally.

In Quinn v. Blue Cross and Blue Shield Association, 161 F.3d 472 (7th Cir. 1998), the plan administrator determined that Quinn was not entitled to long-term disability benefits under the plan, payable when a participant has a disability that makes her unable to work at a "comparable occupation." A "comparable occupation" was defined as an occupation in a similar salary range for a person with education and skills similar to those of the claimant. The plan administrator determined that Quinn's prior occupation was neither highly paid nor highly skilled and that Quinn could perform many clerical jobs available in Chicago.

Upon examination of the administrative record, the Seventh Circuit noted that at the time of decision, the plan administrator had no knowledge of Quinn's training, experience, job duties or transferable skills, was unaware of any work limitations resulting from her disability, and therefore could not have known whether any "comparable occupation" existed. In other words, the plan administrator did not make a "reasonable inquiry" into the relevant factors, and its decision was thus arbitrary and capricious. The Seventh Circuit remanded the case to the plan administrator for another attempt at reasoned decision-making, because this was not a case where it was "clear-cut" that it was unreasonable for the plan administrator to deny Quinn benefits.

8. Eighth Circuit

The Eighth Circuit adheres to the general rule that evidence not presented to the plan administrator cannot be considered by a reviewing court. Pursuant to this rule, in Maune v. International Brotherhood of Electrical Workers, Local No. 1, Health and Welfare Fund, 83 F.3d 959, 963 (8th Cir. 1996), the Eighth Circuit held that a district court may properly stay discovery in a benefit claim case subject to deferential "arbitrary and capricious" review.

The Eighth Circuit has nevertheless proven that rules can sometimes be bent (or broken). In Bernards v. United of Omaha Life Ins. Co., 987 F.2d 486 (8th Cir. 1993) (per curiam), Bernards was suffering from cancer. After conventional chemotherapy failed, his physicians recommended high-dose chemotherapy with autologous bone marrow transplant ("HDC-ABMT"). Bernards sought advance approval for the procedure. United of Omaha declined coverage because it viewed HDC-ABMT as an experimental type of treatment, which was excluded from coverage under the governing group health insurance plan. In the interest of time, the parties agreed to forego the plan's usual review procedure, which required arbitration, and to seek judicial review of the denial of benefits. On the basis of new medical expert opinion evidence, as well as the administrative record, the district court determined that United of Omaha had provided an inadequate explanation for its denial and that the denial of coverage was thus arbitrary and capricious.

On appeal, the Eighth Circuit agreed that United of Omaha had failed to provide "a sufficient rationale to permit judicial review of its decision." But the Eighth Circuit determined that the district court had erred in conducting an independent de novo review of the evidence in the case. Normally, the Eighth Circuit noted, the proper procedure is to remand the case to the plan administrator for a "fuller explanation." In addition, the Eighth Circuit found that the administrative record was missing so many relevant facts and was so undeveloped on important issues that "an informed decision under the deferential standard of review" could not be made.

However, because the Bernards case was "complicated" on account of the "emergency situation," the Eighth Circuit directed the district court to expand the record by ordering depositions and other discovery from the parties and to make a decision under the deferential standard on the basis of this "expanded record." Accordingly, in the appropriate "emergency" case in which irreparable harm might occur, the Eighth Circuit will not only allow, but will require, the district court to develop an expanded plan administrative record to achieve a speedy determination.

The Eighth Circuit has also demonstrated how important it is for a health plan to consider, resolve and explain all aspects of a benefit denial. In Mansker v. TMG Life Ins. Co., 54 F.3d 1322 (8th Cir. 1995), Mansker's estate sought review of a denial of health benefits. The insurer denied benefits based on a policy exclusion for injuries arising out of employment, but did not decide whether the claimed medical expenses were "medically necessary" or "reasonable and customary," as required by the plan. After review of the record, the district court found that the employment exclusion did not apply in Mansker's case and that the claimed benefits were thus wrongfully denied. The district court awarded Mansker's estate over $500,000 in medical benefits, based on an affidavit submitted by the estate avowing that the claimed charges were medically necessary and reasonable and customary.

On appeal, the plan argued that, even if its denial of benefits based on the policy exclusion for work-related injuries had been in error, it was nevertheless improper for the district court to reach a decision on the amount of benefits to be awarded. The plan reasoned that it had not examined the claimed expenses for "medical necessity" and for "reasonable and customary" fee maximums, because of its threshold coverage exclusion argument. The plan further argued that the district court had erroneously admitted and considered the affidavit evidence de novo.

The Eighth Circuit rejected the plan's argument, because it concluded that the plan had had the opportunity to address the medical necessity and reasonable and customary issues, but had failed to do so. By virtue of its failure to address these issues, the plan had waived the deferential standard of review and its decision was thus subject to de novo review. Furthermore, because of the plan's failure to create an administrative record on these issues, the district court properly relied on extra-record evidence submitted for the first time in the district court, including the uncontroverted affidavit submitted by Mansker's estate.

In sum, the Eighth Circuit has allowed district courts to consider extra-record evidence in cases normally subject to deferential review: (1) where an emergency situation demands expedited consideration by the court; and
(2) where the plan fails to make a determination at the administrative level relevant to its denial of benefits and loses the deferential standard of review as a consequence.

9. Ninth Circuit

Shortly after the Supreme Court decision in Firestone, the Ninth Circuit affirmed that courts must limit deferential review of benefit denials to the evidence contained in the plan administrative record. The Ninth Circuit has reaffirmed this rule on numerous occasions. However, two recent decisions demonstrate that the Ninth Circuit may deviate from the general rule in specified circumstances.

In Stringer v. Aetna Life Ins. Co., 156 F.3d 1238, 1998 W.L. 538118, 1998 U.S. App. LEXIS 20791 (9th Cir. 1998) (unpublished opinion), the claimant filed a claim for benefits under his employer's disability plan, which was administered by Aetna. Aetna denied his claim, and the district court upheld the denial. In the course of its review, the district court not only examined the administrative record, but "also examined information outside the administrative record in order to evaluate Stringer's claim that Aetna abused its discretion by failing to obtain relevant and readily available information from its doctors." The district court found that nothing in the additional evidence required a contrary result in the case.

On appeal, the Ninth Circuit cautioned that an "[a]dministrator is not required to seek additional information where he or she is able to make a rational decision on the record and specific circumstances do not point to particular information that should be sought." The Ninth Circuit readily determined that the plan administrative record provided an ample basis for Aetna's benefit denial.

Booton v. Lockheed Medical Benefit Plan, 110 F.3d 1461 (9th Cir. 1997), presents a case where specific circumstances pointed to particular information that should have been, but was not, sought by the plan administrator. Booton was kicked in the teeth by a horse. The accident left four of her front teeth hanging from her gums, and required her dentist to reset those teeth by supporting them from the rear teeth with a splint. Booton's medical plan, administered by Aetna, did not cover ordinary dental work, but covered dental work required on account of accidental injury to natural teeth. Booton claimed medical benefits for the work on her front and rear teeth, but Aetna granted benefits only for the work on the front teeth. Aetna determined that the work on the rear teeth was not required on account of an accidental injury.

The Ninth Circuit took a dim view of Aetna's decision-making process and the absence of any "meaningful dialogue" between Aetna and Booton. The court held that Aetna abused its discretion by denying Booton's claim without explanation and without obtaining relevant information. As a result, Aetna did not make the kind of rational decision to which a court must defer. That being the case, the Ninth Circuit had no difficulty in considering two new declarations by Booton's dentists that were not part of the administrative record. With the help of these declarations, the Ninth Circuit determined that Aetna never came to grips with Booton's claim that the dental work on her rear teeth was needed to repair the damage to her front teeth caused by the accident. Worse, Aetna's own consulting dentist advised Aetna that further information could have substantiated Booton's claim. However, Aetna never requested such information but, instead, made its determination "blindfolded." Based on the new, extra-record evidence, the Ninth Circuit ruled in favor of Booton.

Thus, Booton shows that the Ninth Circuit allows consideration of new, extra-record evidence in an extraordinary case where the plan administrator ignored relevant information and thus failed to make the kind of rational decision entitled to judicial deference.

Finally, in Tremain v. Bell Industries, Inc., 196 F.3d 970, 976-77 (9th Cir. 1999), the Ninth Circuit concluded that evidence outside of the plan record may be relevant for the limited purpose of determining whether the plan administrator operated under a conflict of interest in making a claims decision. Firestone requires that courts weigh such conflicts of interest in measuring the degree of deference to be accorded to a denial of benefits by an administrator operating under a conflict of interest.

10. Tenth Circuit

The leading Tenth Circuit cases are Sandoval v. Aetna Life and Casualty Ins. Co., 967 F.2d 377 (10th Cir. 1992) and Chambers v. Family Health Plan Corp., 100 F.3d 818 (10th Cir. 1996). Sandoval demonstrates that the Tenth Circuit strictly adheres to the general rule limiting deferential judicial review of ERISA benefit denials to the plan administrative record. In Sandoval, the Tenth Circuit also explicitly rejected the liberal remand procedure espoused by the Seventh Circuit in Wardle, reasoning that "a curtain falls when the fiduciary completes its review, and for purposes of determining if substantial evidence supported the decision, the district court must evaluate the record as it was at the time of the decision." In Chambers, the Tenth Circuit surveyed some of the cases from other circuits discussed above and took a dim view of the exceptions to the general rule developed in those cases. For example, the Tenth Circuit rejected arguments for the admissibility of extra-record evidence on issues of plan interpretation based on the Fifth Circuit's decision in Wildbur.

In Buchanan v. Reliance Standard Life Ins. Co., 5 F. Supp. 2d 1172 (D. Kan. 1998), the district court fashioned a limited exception to the rule. It allowed deposition testimony from individuals involved in processing Buchanan's claim for benefits. The court reasoned that "plaintiff is not precluded from submitting new evidence on the narrow issue of the manner in which defendant made its decision, so that the court may determine whether defendant acted arbitrarily in making that decision." As an example, the court stated that "if a decision-maker testified in a deposition that he or she had flipped a coin to decide the claim, the court believes that it should be permitted to consider such evidence in determining whether the defendant's action was arbitrary and capricious." Accordingly, the district court admitted the deposition testimony only to the extent that it concerned the procedure by which the plan reached its decision.

11. Eleventh Circuit

The Eleventh Circuit follows the general rule that deferential review of benefit denials should be limited to the evidence presented to the plan administrator at the time the claim was denied. If a court finds that the administrator failed to consider relevant evidence before it at the time of its decision, the court should remand the decision to the administrator. However, upon remand the administrator is required to consider all new or old evidence relevant at the time of remand, not simply the evidence available at the time of its original decision. Two cases illustrate these principles.

In Jett v. Blue Cross and Blue Shield of Alabama, Inc., 890 F.2d 1137 (11th Cir. 1989), Jett's claim for inpatient treatment for depression was denied as not medically necessary. Jett sued, and the district court determined that the administrator's decision was arbitrary and capricious because it was not based on a consideration of the relevant factors and showed a clear error of judgment. On appeal, the Eleventh Circuit found that the district court had in fact conducted a de novo review, had improperly failed to limit its review to the plan administrative record, and had based its opinion on its own findings of fact. The court also found that the plan administrator had some discretion to determine what information was relevant or appropriate to consider in making a benefit determination. The court remanded the case to the district court with instructions to review the case solely on the basis of the plan administrative record.

However, the Eleventh Circuit did not leave the claimant "stuck" with the original administrative record. In order to supplement the record, the claimant had to accept the remand to the plan administrator. Thus, if the plaintiff wished "to present additional information that might affect the determination of eligibility for benefits, the proper course would be to remand to Blue Cross for a new determination." The administrator's new decision would then be reviewed by the district court on the basis of the administrative record as supplemented on remand.

A more recent case, Shannon v. Jack Eckerd Corp., 113 F.3d 208 (11th Cir. 1997), explores the scope of information that an administrator must consider on remand. Shannon was denied preauthorization for a pancreas transplant, because the administrator found that the operation was experimental and was therefore excluded from coverage under the plan. The district court ruled that the denial was arbitrary and capricious because the administrator failed to consider relevant evidence. The district court then remanded the case to the administrator. On remand, the administrator determined that the transplant procedure was no longer experimental, but nevertheless refused to cover the operation because it had been experimental when Shannon initially requested preauthorization. The district court reversed the plan administrator, and the Eleventh Circuit affirmed. The Eleventh Circuit found that the plan administrator had a continuing responsibility to pay benefits, and therefore its denial of benefits was a continuing denial. The Eleventh Circuit thus held that the denial should be reviewed on the basis of the record as it was supplemented on remand with relevant new evidence, i.e., the current medical status of the procedure.

12. D.C. Circuit

The D.C. Circuit has not fashioned any exceptions to the general rule. In Block v. Pitney Bowes, Inc., 952 F.2d 1450 (D.C. Cir. 1992), Block fell while working and severely injured his knee. He underwent surgery and was awarded temporary total disability benefits. Subsequently, Pitney Bowes' medical director recommended terminating Block's disability benefits because he was no longer totally disabled. The Plan Administrative Committee followed this recommendation. Block then filed suit for benefits in federal court.

In support of his claim that the plan's decision was arbitrary and capricious, Block pointed to the fact that he had been awarded social security disability benefits. The D.C. Circuit found that the social security determination was based on medical records that had never been submitted to the plan. As the D.C. Circuit said, "[c]ourts review ERISA-plan benefit decisions on the evidence presented to the plan administrators, not on a record later made in another forum." Because the Social Security Administration's decision was based on information not given to the plan, the court accorded the award of social security disability benefits no weight in its review of the plan's decision.

Similarly, in Heller v. Fortis Benefits Ins. Co., 142 F.3d 487 (D.C. Cir. 1998), the court refused to consider evidence that was unavailable to the plan at the time of its initial determination. Heller's disability benefits were terminated in 1992 when the plan determined that she did not meet the plan's new definition of "totally disabled." After being informed of the initial decision to terminate her benefits, Heller sent a number of documents to the plan administrator. The plan informed her that it would treat her additional submissions as an appeal of the initial decision. Rather than continue with her appeal, Heller filed suit. The district court granted summary judgment for the plan and Heller appealed.

On appeal, Heller contended that a statement made by her treating physician five years after the plan's initial decision to terminate benefits created a genuine issue of material fact with respect to whether she qualified as "totally disabled." The court refused to consider the treating physician's statement because it had not been made available to the plan administrator at the time of its initial decision.

C. SUMMARY AND CONCLUSION

The federal courts of appeals have generally barred the admission and use of new, extra-record evidence in cases involving deferential review of discretionary employee benefit plan decisions based on the plan administrative record. As the Tenth Circuit put it in Sandoval, "a curtain falls when the fiduciary completes its review," such that "the district court must evaluate the record as it was at the time of the decision."

Of course, if the plan administrative record is defective in some respect, the general rule will be relaxed in order to remedy the defect. For example, if the plan restricted the claimant's ability to submit supporting evidence or ignored and excluded from the record relevant, probative evidence that was brought to its attention, the rationale for strict application of the general rule no longer applies. In such a case a court will either remand the case to the plan to reevaluate the claim in light of the new, extra-record evidence (e.g., Sixth Circuit decision in Killian) or review and decide the case based on the administrative record as supplemented with the new evidence (e.g., Ninth Circuit decision in Booton).

The federal appellate courts have carved out other limited exceptions to the general rule. The Third Circuit in Epright and the Fifth Circuit in Wildbur held that extra-record evidence is admissible on issues of plan interpretation (but not on factual issues). Several Circuits have held that extra-record evidence is admissible and discovery and fact-finding are available to determine whether the plan administrative record is complete or otherwise adequate for judicial review of the challenged plan benefit denial. Some of the Circuits have also similarly held that extra-record evidence is admissible to examine the administrative process by which the plan rendered the decision under review. In Mansker, the Eighth Circuit ruled that, if a plan fails to make a determination on an issue raised by the claimant, there is no administrative decision entitled to judicial deference. Thus, the court will review the issue de novo and admit any extra-record evidence offered by the claimant. Finally, as the Eighth Circuit demonstrated in Bernards, the general rule may be dispensed with in extraordinary circumstances, such as health plan cases involving challenged denials of preauthorization for potentially life-saving emergency medical care.

As noted above, one way around the general rule is a remand to the plan to allow consideration of new evidence. For example, the Seventh Circuit has expressed a fairly liberal policy favoring remands. If either the claimant or the plan comes up with new evidence in court, the court should remand the case to the plan, unless remand would be a "useless formality" (i.e., where it is "clear-cut" that the new evidence does not materially strengthen the party's case). On the other hand, in Vega the en banc Fifth Circuit took a more restrictive approach to remands, reasoning that under ERISA claimants and plan administrators should not be routinely granted "second bites at the apple," but rather should be encouraged to exhaust the plan's administrative procedures and develop a complete record before cases go to court. Similarly, in Elliott the Fourth Circuit stated that remands should be used sparingly, i.e., in cases where there was not sufficient evidence in the plan administrative record for the plan to make a rational decision and for the district court to conduct meaningful review of that decision, or where the plan trustees failed to consider relevant evidence that they were obliged to consider or had agreed to consider.

The lessons for plan administrators and claimants and their attorneys are obvious. Plan administrators must heed the dictates of ERISA and provide and assiduously follow a reasonable and meaningful administrative claims procedure that produces a complete administrative record that is adequate for judicial review. In particular, the plan administrative record should include all evidence submitted by the claimant and all other relevant evidence from any source that was brought to the plan's attention. Adherence to these procedures will preserve the deferential standard of judicial review and greatly enhance the plan's ability to defend its decisions in court. Claimants are likewise well advised to gather and submit to the plan all supporting evidence during the administrative stage of their claims. If a claimant does not discover or develop critical supporting evidence until after he or she is in court, it will usually be too late to have the evidence added to the plan administrative record, unless the claimant can convince either the plan administrator or the court to agree to a remand to the plan for consideration of the new evidence.