M. v. Beacon Health Options, 463 F.Supp.3d 1250

Background

Plaintiff Raymond M. is the Plan participant; Amanda (his daughter) is a beneficiary under the Chevron Mental Health and Substance Abuse Plan. Beacon Health Options (BHO) is the Plan’s delegated claims administrator with discretionary authority.
Amanda has long-standing trauma, depressive, PTSD, personality and substance use disorders; she was admitted to New Haven RTC on Dec. 21, 2015 and discharged Oct. 21, 2016.
BHO authorized New Haven RTC care for ~four weeks (through Jan. 18, 2016) but denied coverage from Jan. 19, 2016 onward, concluding RTC was no longer medically necessary; BHO upheld the denial on two administrative appeals.
Plaintiffs sued under ERISA § 502(a)(1)(B) seeking reinstatement of benefits for the denied period and fees; both sides moved for summary judgment.
The court found multiple serious procedural irregularities (including BHO’s failure to assess Amanda’s substance use disorder and to identify reviewers or meaningfully address record evidence), applied de novo review for those defects but held BHO’s decision was arbitrary and capricious even under deferential review.
Remedy: court reversed and remanded to BHO for reconsideration consistent with the opinion, denied prejudgment interest, and awarded plaintiffs attorneys’ fees and costs (petition to be submitted within 21 days).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Appropriate standard of review	De novo because BHO committed serious procedural violations (failed disclosures, failed to consider substance use disorder, no reasoned explanation).	Arbitrary-and-capricious because Plan grants BHO discretionary authority and ERISA procedures were substantially complied with.	Court: de novo warranted due to serious procedural irregularities, but denial is reversible even under arbitrary-and-capricious review.
Whether BHO considered Amanda’s substance use disorder	Amanda’s substance use disorder was an independent basis for RTC care and BHO failed to address it in any decision or appeal.	BHO focused on mental-health necessity and treated record evidence as not supporting continued RTC.	Held: BHO failed to consider substance use disorder — a procedural and substantive error that alone defeats deference and renders the denial arbitrary and capricious.
Whether BHO applied appropriate medical‑necessity criteria	BHO’s criteria for continued RTC improperly required acute-level symptoms inconsistent with the Plan’s classification of RTC as subacute.	BHO argues its criteria are permissible under its delegated authority to set coverage criteria.	Held: BHO applied acute-level standards inconsistent with the Plan’s plain language that RTC is subacute; this was arbitrary and capricious.
Adequacy of the denial explanations and record review	BHO’s denial letters were conclusory, failed to cite or address contrary treating‑provider records, and ignored material evidence—so the decision lacked substantial evidence.	BHO contends the denial was reasonable and supported by the record.	Held: BHO’s explanations were conclusory and cherry-picked evidence; denial lacked a reasoned, substantial‑evidence basis. Remand required.

Key Cases Cited

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (sets default de novo standard unless plan grants discretionary authority)
Glenn v. MetLife, 554 U.S. 105 (ERISA fiduciary duties and standard of care for administrators with conflicts)
Black & Decker Disability Plan v. Nord, 538 U.S. 822 (treating‑physician opinions cannot be arbitrarily ignored)
LaAsmar v. Phelps Dodge Corp., 605 F.3d 789 (exhaustion and review on administrative record in cross‑MSJ ERISA cases)
Rasenack v. AIG Life Ins. Co., 585 F.3d 1311 (procedural irregularities can reduce deference)
Weber v. GE Group Life Assurance Co., 541 F.3d 1002 (arbitrary-and-capricious review framework)
Flinders v. Workforce Stabilization Plan of Phillips Petroleum Co., 491 F.3d 1180 (factors for arbitrary-and-capricious review)
Caldwell v. Life Ins. Co. of N. Am., 287 F.3d 1276 (substantial‑evidence requires considering record as a whole)
Gaither v. Aetna Life Ins. Co., 394 F.3d 792 (failure to consider an independent ground for benefits is arbitrary and capricious)
DeGrado v. Jefferson Pilot Fin. Ins. Co., 451 F.3d 1161 (remedy options: remand or retroactive reinstatement)