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Enforcing "Full and Fair Review": Insurers Can't Change Claim Denial Reasoning

by Karl W. Pilger, Esq.

In a positive trend for employees, federal courts have begun to stop insurers from changing the basis for disability claim denials at the last minute.  Employees have argued that the insurer's changes deprive them of their right to respond to the reasons for the claim denial, and that they violate ERISA's requirment of a "full and fair review" of the decision to deny the claim.

The Sixth Circuit Court of Appeals found that the insurer's changed reasoning "clearly violated ERISA" in the case of Wenner v. Sun Life Assurance Co. of Canada.  That case was decided April 12, 2007.

Plaintiff Wenner had been receiving disability benefits, when Sun Life terminated them for failure to submit updated medical information.  Wenner then submitted the required information and appealed the termination of benefits.  In its decision on the administrative appeal, Sun Life upheld the termination of benefits on the basis that Wenner was no longer disabled, a reason not relied upon in the initial termination of benefits.

The Sixth Circuit found that Wenner had not been afforded an opportunity in the administrative process to address the operative reason for the termination of benefits.  Since Wenner had not been given the required "full and fair review", the court determined that the Sun Life's decision to end the benefits was inoperative.  Therefore, the Court ordered benefits reinstated.

The Court made an important distinction between the termination of exisiting benefits and the denial of new claims for benefits:  existing benefits could properly be reinstated under these circumstances, but it would not necessarily grant new benefits for the same reason.

Cases with similar outcomes include:

• Sanford v. Harvard Industries, 262 F.3d 590 (6th Cir. 2001)
• Glista v. Unum Life Ins. Co., 378 F.3d 113 (1st Cir. 2001)
• Thompson v. Life Ins. Co. of N. America, 30 Fed. Appx. 160 (4th Cir. 2002) 

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