The Importance of Creating an Administrative Record in ERISA Claims

ERISA requires employees to exhaust all administrative remedies before pursuing claims in court.  This means that an employee must follow the claims procedures outlined in his or her Summary Plan Description.  Abiding by these requirements and taking this phase of the process seriously is crucial.   

Typically, a claim is filed with the plan administrator in accordance with the plan’s procedures.  The plan administrator then must provide adequate notice to the employee in writing, setting forth the specific reasons for such denial.  ERISA provides that every plan participant must be afforded a full and fair review of the decision denying the claim.  Any documentation, records, or other relevant information submitted by the claimant along with additional evidence, documentation and records used by the plan administrator constitutes the administrative record. 

Developing a sufficient administrative record is imperative because after an administrative appeal and once a claim is filed in court, various circumstances determine whether or not the court’s review of the administrator’s decision is limited to the evidence in the administrative record or if additional discovery is allowed. Certain language in a plan along with an employee’s location can determine his or her rights.    

The first step in determining whether discovery is allowed outside the administrative record is to decide the applicable standard of review.  As discussed in my prior article, the Supreme Court in Firestone Tire and Rubber Co. v. Bruch, decided that a de novo standard (allowing the court to substitute its own judgment) applies when reviewing a claim denial, unless the language of the plan gives the plan administrator discretion to interpret and apply the plan.  If a plan provides such discretion, the reviewing court applies an abuse of discretion standard and gives the benefit denial deferential treatment. 

Since the abuse of discretion standard assesses the reasonableness of the benefit decision based upon the facts known to the plan administrator at the time, consideration of evidence outside the record is extremely rare. 

However, when a de novo standard applies, the circuits have articulated a variety of rules concerning discovery outside the administrative record. 

• The Fifth and Sixth Circuits do not permit the introduction of extrinsic evidence reasoning that federal courts are not to function as substitute plan administrators.
• The Seventh and Eleventh Circuits allow the admission of all extrinsic evidence because de novo review requires an independent decision rather than an independent review. 
• The First and Second Circuits have limited discovery of extrinsic evidence to show procedural irregularities or conflict of interest
• The Fourth and Tenth Circuits apply a multi-factor approach.  Generally, review is limited to evidence in the administrative record except where the court finds that additional evidence is necessary for resolution of the claim.  These circuits have discussed a number of exceptional circumstances which may warrant a court to exercise its discretion, such as cases with concerns of impartiality or procedure, complex medical issues, or circumstances where the claimant would not have been able to present the evidence during the administrative process. 
• The Eighth and Ninth Circuits permit extrinsic evidence upon a showing of good cause.  “Good cause” is similar to the exceptional circumstances articulated by the Fourth and Tenth Circuits.  However, if the plan participant had multiple opportunities to submit evidence to the plan administrator but failed to do so, such evidence will be excluded at trial.   
• The Third Circuit looks to whether the administrative record was sufficiently developed and may allow the admission of additional evidence where there is a lack of an administrative record. 

Savvy employers will likely include language in the plan that gives the plan administrator discretion to interpret and apply the plan, thus limiting review of the benefit denial to the administrative record.  However, even if a plan does not contain discretionary language, de novo review does not guarantee the admission of extrinsic evidence.  In sum, creating an adequate administrative record is crucial for Plaintiffs. 

If you are a claimant needing assistance in handling a claim, contact the attorneys at Cosgrove Law Group, LLC.