937 F.3d 71
1st Cir.2019Background
- Restoration Hardware's ERISA-governed LTD plan, administered and funded by Aetna, contained a 12-month exclusion for disabilities "caused or contributed to" by a pre-existing condition, defined by diagnosis/treatment/services/prescribed drugs during a three-month look-back period before coverage.
- Lavery saw his PCP (Dr. Lopez) on April 25, 2014 for a suspicious skin lesion (no treatment, prescription, or melanoma diagnosis), was biopsied and diagnosed with malignant melanoma on June 19, 2014, and stopped working on September 30, 2014.
- Aetna denied Lavery's LTD claim (March 2015) under the pre-existing exclusion based on treatment during the March 1–May 31, 2014 look-back; internal reviewers and Aetna staff changed positions multiple times during the file review and appeal.
- On appeal, Aetna relied alternatively for the first time in its final (September 2015) denial on (1) a different look-back period (April 1–June 30, 2014) based on a retroactive Plan amendment and (2) that the April visit "substantially contributed" to the disability; Lavery was not given a chance to respond to the new rationale.
- The district court granted summary judgment to Lavery, awarded back benefits, fees, costs, and prejudgment interest; Aetna appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether April 25, 2014 PCP visit constituted "diagnosed, treated, or received services" for the disabling melanoma during the March 1–May 31, 2014 look-back | Lavery: PCP did not diagnose or treat melanoma, only referred him; so pre-existing exclusion does not apply | Aetna: April visit sufficed to trigger exclusion | Court: Ambiguity resolved contra proferentem; record shows PCP did not diagnose/treat melanoma; denial on that basis improper |
| Whether Aetna permissibly relied on a corrected (retroactive) look-back period disclosed only in the final denial | Lavery: Aetna failed to give notice and chance to respond to new rationale -> procedural violation and prejudice | Aetna: Look-back change was proper and Lavery could have raised employment/start-date evidence earlier | Court: Aetna violated 29 C.F.R. §2560.503-1(h)(4)(ii) by not giving advance notice of new rationale and Lavery was prejudiced; denial vacated |
| Whether Aetna's benefit denial was entitled to arbitrary-and-capricious deference given conflict and claim-handling | Lavery: Aetna acted as a conflicted fiduciary and acted procedurally unreasonably (inconsistent reasons, unexplained reversals) | Aetna: Claimed discretion under plan and clinical reviews justify denial | Court: Aetna’s inconsistent rationales, unexplained supervisor reversals, and regulatory violation rendered decision arbitrary and capricious; no deference afforded |
| Remedy: Remand for further admin review vs. award of benefits and prejudgment interest | Lavery: Award back benefits through mandate date and interest/fees/costs | Aetna: Remand necessary because record lacks recent medical evidence to determine ongoing disability | Court: Affirmed award of back benefits through date of mandate (remanded for ministerial adjustments); prejudgment interest affirmed; future claims after mandate must follow plan procedures |
Key Cases Cited
- Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) (conflict of interest and procedural reasonableness relevant to arbitrary-and-capricious review)
- Hughes v. Boston Mut. Life Ins. Co., 26 F.3d 264 (1st Cir. 1994) (ambiguity in pre-existing-treatment language construed against insurer)
- Denmark v. Liberty Life Assur. Co. of Bos., 566 F.3d 1 (1st Cir. 2009) (conflict exists when administrator both adjudicates claims and pays benefits)
- Buffonge v. Prudential Ins. Co. of Am., 426 F.3d 20 (1st Cir. 2005) (court may award retroactive benefits where administrator acted arbitrarily)
- Cook v. Liberty Life Assur. Co. of Bos., 320 F.3d 11 (1st Cir. 2003) (equitable considerations support awarding benefits when administrator's wrongful denial impedes contemporaneous proof)
- Glista v. Unum Life Ins. Co. of Am., 378 F.3d 113 (1st Cir. 2004) (range of remedial powers where administrator relies on a previously unarticulated rationale)