Garner v. Central States, __ F.4th __, 2022 WL 1160386 (4th Cir. Apr. 20, 2022) (Before Circuit Judges Wilkinson, Diaz, and Floyd).

A recent decision from the Fourth Circuit indicates that, even under an abuse of discretion standard, one flawed medical report can taint the entire “deliberate, principled reasoning process” that is required under ERISA.  Further, a claimant cannot be required to exhaust conservative treatment options before undergoing surgery if that is not an explicit term in the applicable plan. Finally, a plan that continuously errs in its decision-making process may be denied remand, even where there is no evidence of bad faith.  In short, three strikes and you're out.

Specifically, Plaintiff Dorothy Garner suffered from chronic back and neck pain, despite medication and postural exercises.  After an MRI, her doctor recommended surgery, which he then performed in 2019. Ms. Garner submitted a claim for the surgery under her husband's ERISA-governed employee health benefit plan (Central States, Southeast and Southwest Areas Health and Welfare Fund Active Plan).  However, Central States denied her claim on the grounds that her surgery was not “medically necessary” under the terms and conditions of the plan. Central States arrived at this conclusion in part based on a medical report from a physician reviewer, even though that reviewer did not have the MRI results, or the records from Ms. Garner's doctor documenting his surgery recommendation.

On the first administrative appeal, Central States' second reviewing physician had access to Ms. Garner's entire file. Nonetheless, Central States still upheld its decision, and also concluded that surgery was not warranted because Ms. Garner allegedly had not tried any conservative treatment measures other than medication. On second appeal, Central States again denied Ms. Garner's claim, and referenced both medical reports, including the first flawed report.   

On appeal, the Fourth Circuit agreed with the District Court that Central States' denials were arbitrary and unreasonable. Specifically, the Fourth Circuit found that Central States “utterly failed to disclose” to their first reviewing physician “critical” medical records, even though he explicitly complained of a lack of information. The Fourth Circuit noted that it would be inconsistent with the “‘purposes and goals of the plan,' for Central States to deny benefits on the basis of inadequate documentation after Central States itself failed to provide that documentation … . [I]t is clear that Central States did not give due consideration to Garner's claim.”

The Fourth Circuit rejected Central States' argument that it cured that error with the report of its second reviewing physician, who reviewed all of Ms. Garner's file. Rather, the Fourth Circuit faulted Defendant because it continued to reference the first faulty report in denying Ms. Garner's claim, and concluded that its denial was not “a reasoned determination.”  Id. (citing to Booth v. Wal-Mart Stores, Inc., 201 F.3d 335, 342 (4th Cir. 2000) (noting that one of the factors supporting a reasonable determination is “the adequacy of the materials considered to make the decision and the degree to which they support it”)).

The Fourth Circuit also rejected Central States' contention that Ms. Garner was required to exhaust conservative treatment prior to her surgery.  The Court opined that Central States could not require it “as an absolute condition” because it effectively “add[ed] a new term to the plan, a term for which Garner did not bargain, and about which she lacked any notice.” The Court also noted that Defendant's argument was factually incorrect as well, because the record contained undisputed evidence that Plaintiff had tried yoga to relieve her symptoms. 

Finally, the Fourth Circuit agreed with the District Court that payment of benefits was the proper remedy. The Fourth Circuit refused to grant remand because of Central States' repeated mistakes. After “no fewer than three opportunities to give Garner's claim the reasoned consideration that it deserved…[i]t would neither encourage the careful and efficient resolution of benefits claims, nor would it be fair to Garner, to permit Central States a fourth opportunity. Three strikes are enough.”

In order to avoid similar outcomes, plan administrators should take care to provide reviewing physicians with all information relevant to a claim.  Further, where a medical review may be found flawed or deficient, that report and information should be removed from all future decision-making.  Plan administrators must not add terms that are not actually set forth in the applicable plan documents.  Even absent a finding of deliberate bad faith, ERISA requires principled and reasoned decision-making, and courts may award benefits where plan administrators simply fail to meet that standard.

If you find yourself or your loved one in a similar circumstance – having a medical benefit claim denied unfairly – we here at Pridgen Bassett Law may be able to help you.  We have undertaken many large-dollar healthcare matters, which we were able to successfully resolve, before or during litigation.  Contact one of our attorneys today to discuss your unique situation.