Appellate Judges Set Out New Benefits Review Standard

September 17, 2007 ( - In a sweeping ruling that sets out a new framework for how judges should decide such cases, a federal appellate court has thrown out a lower court decision dismissing a disabled New Jersey dentist's lawsuit over the cutoff of her benefits.

The 3 rd U.S. Circuit Court of Appeals’ decision came as part of Carol Post’s request to review a ruling by Senior U.S. District Judge Robert F. Kelly of the U.S. District Court for the Eastern District of Pennsylvania throwing out her complaint against the Hartford Insurance Company over her benefits cutoff.

According to the appellate judges, Post’s case is different from other benefits cutoff appeals because, in her case, the insurance company determines the eligibility for benefits and also pays benefits out of its own funds.

In writing for the appellate court, Circuit Judge Thomas L. Ambro asserted Kelly mistakenly used too light a standard of review when considering the Hartford’s benefits decision in light of Post’s complaints of numerous “irregularities” in the handling of her claim. In the appellate court’s judgment, Ambro said, “the overwhelming weight of evidence in Post’s record argued in her favor.”

A “Sliding Scale” of Review

The 3 rd Circuit’s latest holding could potentially affect other similar lawsuits because it significantly amplifies the Philadelphia-based court’s 2000 decision in Pinto v. Reliance Standard Life Insurance Co., which adopted the “sliding-scale” approach in cases where the ERISA fiduciary suffers from a conflict of interest.

The Pinto case established that courts should consider both “structural” and “procedural” factors when deciding whether to apply a “heightened arbitrary and capricious review.”

Ambro argued that in Post’s case a structural conflict existed because “the administrator is an outside insurer that makes claims decisions itself. This is the very sort of conflict that Pinto declared to be substantial and worthy of raising the standard of review.”

Among the procedural issues raised in Post’s case, Ambro found that Kelly too easily ignored numerous anomalies because each individually appeared to be minor and that Kelly improperly concluded because of that determination that they were not important and the heightened legal review standard was not called for.

“Both structural and procedural factors favor a more searching standard of review than was used here,” Ambro wrote in the appellate ruling. “In light of what we believe the standard of review should be, the District Court erred by applying only slightly heightened review. Moving toward the high end of the sliding scale, the District Court must searchingly review both the merits and the process to determine if Hartford’s decision was not the product of reasoned, disinterested discretion. No doubt the evidence on the merits appears close. But a fact finder reviewing the merits could yet determine that the weight of the medical evidence supports Post and that it, coupled with the evidence of bias, yields the conclusion that Hartford did not properly exercise its discretion.”

Whiplash Injuries

According to the case history in court documents, Post was a passenger in a car that was rear-ended in a November 1993 accident and then pushed into traffic where two more motor vehicles collided with it. Post, a dentist and a pharmacist, worked at Overlook Hospital in Summit, New Jersey, until her whiplash-related injuries, which she said prevented her from working, according to the documents.

Kelly and Ambro’s decisions both detail the case’s long history involving disputes over the extent of Post’s infirmities and whether her injuries kept her from working at any job. The history shows evidence of visits to numerous doctors and reviews by other doctors and industrial experts.

Although Post was originally granted benefits, Hartford eventually cut them off after reviews by independent doctors rejected the finding by Post’s doctors that she was completely disabled, according to the records.

The Hartford’s review included video surveillance of Post that was eventually stopped as being “unsuccessful” because it showed her never leaving her home.Ambro criticized Hartford’s use of the tactic in Post’s case. “The fact that Post did not leave her home while she was under surveillance is perfectly consistent with, and corroborative of, her claim for disability. Yet Hartford was undeterred in continuing to pursue evidence that Post was not disabled,” Ambro wrote.

The new appellate court ruling is  here .

Kelly’s district court decision is  here .