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Halo v. Yale Health Plan

United States Court of Appeals for the Second Circuit

September 11, 2015, Argued; April 12, 2016, Decided

Docket No. 14-4055

Opinion

 [*45]  Katzmann, Chief Judge:

] Under Sections 503 and 505 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1133, 1135, Congress empowered the Department of Labor to issue rules and regulations governing claims procedures for employee benefit plans. This case calls upon us to interpret an agency regulation in the context of the regulation's purpose, as well as the purpose of the regulation's authorizing statute, as we address some of the consequences that follow from a plan's failure to comply with the Department's claims-procedure regulation, 29 C.F.R. § 2560.503-1.

The United States District Court for the District of Connecticut (Bryant, J.) held that, when exercising discretionary authority to deny a claim for benefits, a plan's failure to establish or follow reasonable claims procedures in accordance with the regulation entitles the claimant to de novo review of the claim in federal court, unless the plan "substantially complied" with the regulation, in which case an arbitrary and capricious standard applies to the federal court's review of the claim. The district court further held that a plan's failure to follow the [**3]  Department's regulation results in unspecified civil penalties.

We respectfully disagree with the district court's holdings in light of the careful balance struck by the Department's regulation. Specifically, we hold that, ] when denying a claim for benefits, a plan's failure to comply with the Department of Labor's claims-procedure regulation, 29 C.F.R. § 2560.503-1, will result in that claim being reviewed de novo in federal court, unless the plan has otherwise established procedures in full conformity with the regulation and can show that its failure to comply with the regulation in the processing of a particular claim was inadvertent and harmless. We further hold that ] civil penalties are not available to a participant or beneficiary for a plan's failure to comply with the claims-procedure regulation. Finally, we hold that a plan's failure to comply with the claims-procedure regulation may, in the district court's discretion, constitute good cause warranting the introduction of additional evidence outside the administrative record. Accordingly,  [*46]  we VACATE and REMAND for further proceedings consistent with this opinion.

Factual Background and Procedural History

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819 F.3d 42 *; 2016 U.S. App. LEXIS 6659 **; 61 Employee Benefits Cas. (BNA) 2257

TIFFANY L. HALO, Plaintiff-Appellant, —v.— YALE HEALTH PLAN, DIRECTOR OF BENEFITS & RECORDS YALE UNIVERSITY, Defendant-Appellee.

Prior History: Sections 503 and 505 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1133, 1135 [**1] , authorize the Department of Labor to issue regulations governing claims procedures for employee benefit plans. The United States District Court for the District of Connecticut (Bryant, J.) held that, when exercising discretionary authority to deny a claim for benefits, a plan's failure to comply with the Department's claims-procedure regulation entitles a participant or beneficiary to de novo review of her claim for benefits in federal court, unless the plan substantially complied with the regulation, in which case an arbitrary and capricious standard of review applies. The district court also held that claimants are entitled to unspecified civil penalties if the plan fails to comply with the regulation. Because we conclude that these two holdings upset the Department of Labor's regulatory framework, we VACATE and REMAND.

Halo v. Yale Health Plan, 49 F. Supp. 3d 240, 2014 U.S. Dist. LEXIS 138945 (D. Conn., 2014)

CORE TERMS

regulation, claimant, claims-procedure, preamble, district court, deference, plans, failure to comply, civil penalty, benefits, standard of review, courts, arbitrary and capricious, claim procedures, trust law, compliance, reasonable claim, de novo review, discretionary, deferential, inadvertent, violations, administrative record, minimum standards, fail to comply, federal court, good cause, de novo, processing, purposes

Pensions & Benefits Law, ERISA, Administration & Enforcement, Judicial Review, Standards of Review, De Novo Standard of Review, Administration & Enforcement, Handling of Claims, Civil Litigation, Remedies, Civil Procedure, Appeals, Summary Judgment Review, Standards of Review, Claim Procedures, Remedies, Exhaustion of Administrative Remedies, Causes of Action, Suits to Recover Plan Benefits, Handling of Claims, Arbitrary & Capricious Review, Estate, Gift & Trust Law, Trustees, Duties & Powers, Claims Against & By, Administrative Law, Deference to Agency Statutory Interpretation, Judicial Review, Governments, Legislation, Interpretation, Administrative Record, Scope of Review