In cases brought under the Employee Retirement Income Security Act, the standard of judicial review applied by the district court is critical to the outcome of the litigation, and when the district court makes factual findings, courts of appeals review those findings under the clear error standard.
The 8th U.S. Circuit Court of Appeals recently issued a ruling that illustrates how appeals courts look at ERISA cases. In Weyer v. Reliance Standard Life Insurance Company, 2024 WL 577374 (8th Cir. July 30, 2024), the appellate court upheld a district court’s determination that Kelsey Weyer was totally disabled and that a policy limitation for mental and nervous disorders was inapplicable. The court’s analysis is instructive.
Weyer sought disability benefits due to a host of medical impairments that included chronic fatigue syndrome (also known as myalgic encephalomyelitis), Lyme disease, migraine headaches and other conditions. Although Reliance Standard approved Weyer’s claim for benefits, it terminated payments after 24 months when the standard which needed to be met to qualify for benefits shifted from an “own occupation” to an “any occupation” definition of disability.
Reliance Standard also maintained that Weyer’s benefits were limited because of a policy limitation stating that benefits were only payable for mental and nervous disorders for 24 months. Weyer disagreed and submitted a pre-litigation appeal of Reliance Standard’s determination; however, her appeal was unsuccessful, and litigation ensued.
The district court sided with Weyer, finding the weight of the evidence supported her claim that she was unable to work at any occupation. The lower court also rejected the insurer’s invocation of the mental and nervous disorder limitation. The appeals court affirmed the lower court’s decision.
The court explained that while there was evidence supporting Reliance Standard’s position, there was no clear error in the district court’s findings. In addition to records and reports from five treating doctors, the lower court was also persuaded by the Social Security Administration’s approval of Weyer’s application for disability benefits since SSA’s definition of disability requires the claimant to demonstrate an inability to engage in “any substantial gainful activity.” 42 U.S.C. Sec. 423(d)(1)(A).
The district court was also unpersuaded by 13 minutes of video surveillance the defendant submitted purporting to show Weyer mowing her lawn because it was unclear if the person depicted in the video was Weyer. Even if it were the plaintiff, though, the district court explained that since the video was only 13 minutes long, it did not prove that Weyer could work eight hours a day.
Moreover, what was depicted was consistent with one of the treating doctor’s reports that Weyer could “occasionally on a good day be able to push a lawnmower over a small yard.”
Thus, the judicial standard for reversal of the lower court’s decision for clear error — a “definite and firm conviction a mistake has been made” — was not met.
The court also held that Reliance Standard failed to establish the applicability of the policy limitation, which stated: “Monthly Benefits for Total Disability caused by or contributed to by mental or nervous disorders will not be payable beyond an aggregate lifetime maximum duration of twenty-four (24) months.”
The court explained that the applicability of the limitation requires “but-for causation,” i.e., the physical impairments alone would not suffice to cause disability (citing Michaels v. Equitable Life Assurance Soc’y of U.S. Emps., Managers & Agents Long-Term Disability Plan, 305 F. App’x 896, 904 (3d Cir. 2009); George v. Reliance Standard Life Ins. Co., 776 F.3d 349, 355-56 (5th Cir. 2015); and Okuno v. Reliance Standard Life Ins. Co., 836 F.3d 600, 609 (6th Cir. 2016). That requirement was unmet based on the court’s finding that “Weyer’s physical conditions independently rendered her unable to work.”
As to the issue of “but-for causation” being necessary before a disability insurance policy’s mental and nervous disorder limitation is applicable, the court could have also cited Krolnik v. Prudential Insurance Company of America, 570 F.3d 841, 844 (7th Cir. 2009), which pronounced: “If [Paul] Krolnik’s limitations today are entirely physical (or if physical problems disable him no matter what his mental state), then benefits are available under this policy.”
Thus, if a disability insurance policy limits benefits for behavioral health conditions as most do, the limitation applies only if the claimant’s behavioral health condition is either the sole cause of the disability or enough of a factor that co-morbid physical conditions would not suffice to account for the disability.
On the larger issue, the Weyer case illustrates a key distinction between the two standards of judicial review that are applied in ERISA denial-of-benefits cases — de novo or arbitrary and capricious. The arbitrary and capricious standard applies if the plan contains language stating the insurer has the “discretion” to make a benefit eligibility determination. However, including such language in an insured health or disability plan issued or delivered in Illinois is unlawful according to 50 Ill. Admin. Code § 2001.3.
Where the arbitrary and capricious standard of review applies, though, courts uphold benefit denials so long as they are “reasonable.” Thus, given the discussion in the Weyer opinion acknowledging the existence of evidence supporting Reliance Standard’s determination, the outcome would have been completely different had the court not applied the de novo standard of judicial review.
What is particularly odd about most ERISA cases, though, is that while the Krolnik ruling states a trial is appropriate when the de novo standard applies, the 7th Circuit stands alone among the circuits in permitting trials.
In every other federal circuit, courts adjudicate ERISA cases as file-review proceedings. Even in the 7th Circuit, most ERISA cases are decided based on the parties’ submission of a record to the court to conduct a trial on the papers.
While doing so promotes efficiency, what is lost is the ability of the trier of fact to evaluate the credibility of witnesses, although that was obviously not required in Weyer since the district court was persuaded both by the quantity and quality of the evidence presented.
Mark DeBofsky is a shareholder at DeBofsky Law Ltd.
This article was first published by Chicago Law Bulletin on August 7, 2024.
