The Remand Has No Clothes!
Remand is a word that often arises in ERISA cases. It typically refers to a court returning a case back to the plan administrator (which is often an insurance company, if the plan is insured) to correct a mistake, and then make a decision again. The concurrence of a recent opinion raises some interesting thoughts about remand as it is done in ERISA cases. Card v. Principal Life Ins. Co., 20-6217, at *1 (6th Cir. Nov. 2, 2021).
Facts of the Case:
Ms. Card had chronic lymphocytic leukemia – a blood cancer that can cause significant fatigue.
Her short and long-term disability claims were denied.
After she exhausted the claim process, she filed a case in the federal district court. The court ruled against her.
The Sixth Circuit “… found that the administrator of her disability plan arbitrarily denied her benefits, so [it] … ordered a remand to the plan administrator for it to take a second look at her claims.”
The plan gave the Principal Life Insurance Company discretion to make claim decisions. So, the court was required to apply the arbitrary and capricious standard of review. The court believed that if there were only procedural problems with the claim denial, then under that deferential standard, it was required to remand the case back to the claim administrator. Though the court had the right to grant the benefit outright, remand was appropriate for procedural problems.
On remand, Principal took another look at the claim. This time, it paid the short-term benefits. (though this was six years after the benefits were needed). However, Principal failed to timely decide the long-term disability claim.
Card’s counsel filed a motion seeking a judgment on the long-term disability claim and a motion for attorney’s fees. The district court declined to hear the motions, because the remand was made directly from the Sixth Circuit Court of Appeals back to the plan administrator. So, back to the Sixth Circuit, who remanded the case back to the District Court to address the two pending motions. It was Judge Murphy’s concurrence in that remand that is so interesting.
Judge Murphy, while agreeing with the decision, noted that the remand raised a serious question:
“Why do courts have any power to ‘remand’ a pending federal lawsuit to one of the private litigants? That strikes me as quite an unusual thing. Why shouldn't the district courts, instead, oversee any additional litigation compelled by an arbitrary-and-capricious finding using the normal rules of civil procedure?” Cf. VanderKlok v. Provident Life &Accident Ins. Co., 956 F.2d 610, 616-17 (6th Cir. 1992).
Judge Murphy noted that all of the circuit courts seem to agree that the remand power exists. “Yet the Supreme Court has not approved of this remand practice. And the case law leaves me with little confidence that the Court would do so – at least not using the current justifications for it.” Card at *8. He noted that in other areas of law there is a remand to an administrative agency, but continued, “… I am aware of no other area of law in which a federal court "remands" a case to one of the two private litigants.” Id. at *9.
He made the following points, which our ERISA disability attorneys wholeheartedly agree with:
“I see nothing in ERISA's text that grants a court the power to remand a claim to an administrator”. Id. at *9.
“I have found no circuit decisions that have approved of this "remand" power by analogy to the common law of trusts.” Id. at *10.
“"[I]t is troubling to have no better reason for a rule of law than that the courts made it up for policy reasons."” Id. at *11 quoting Wallace v. Oakwood Healthcare, Inc., 954 F.3d 879, 900 (6th Cir. 2020), “the existing case law has not adequately justified what seems to me to be a strange procedure-remanding a case to a private litigant for further proceedings rather than completing those proceedings in the court.” Id. at *12.
Kudos to Judge Murphy. A circuit judge candidly observed that the remand has no clothes – just like the emperor in the old folk tale. The remand is a poorly contrived convention with no articulation in the law and with a very poor policy basis. In addition to these arguments, there are some others against a remand to an insurance company:
When the claims process is exhausted, the claimant is entitled to pursue his or her remedies in court. The regulations are crystal clear that when there are significant procedural violations, the claim process is "deemed exhausted" and the claimant is entitled to seek judicial relief. A remand should not allow the insurance company a mulligan. It had its chance and blew it. With a remand, the court is ignoring some provisions of the plan document (the deadlines and time limits) while giving great deference to another (the discretionary clause – the insurance company gets to decide the claim).
A remand back to the insurer causes denies a claimant the timely benefits to which he may be entitled. Time is of the essence in disability insurance. Its sole purpose is to protect a beneficiary from a loss of income.
An insurance company that has already shown its willingness to deny a claim has no incentive to properly pay a claim on remand. They can wear a claimant down when the only remedy is pursuing further appeals.