Having Required a Claimant to go through the SSI process, the Eleventh Circuit Finds that LINA Must consider evidence Developed in a claimant’s Social Security File. Melech v. LINA, decided January 6, 2014, is an important decision for claimants under ERISA policies because the Court acknowledged that a claims administrator – in this case LINA – has an obligation and duty to consider relevant medical evidence presented to Social Security because the administrator required the claimant to apply for the benefit. As the Court explained:
[T]he Policy effectively requires all claimants to apply for SSDI at the outset; if a claimant fails to do so, LINA can reduce her benefits under the Policy, if any, by the amount of SSDI LINA says she could have gotten. In the event that LINA decides to pay a claim, the Policy allows LINA to hold the claim open, at least with respect to the total amount LINA must pay, until the SSA reaches a final decision. LINA may assist the claimant in obtaining SSDI, even going so far as to transfer the medical evidence that LINA gathered to LINA’s vendor, who then presumably transfers it to the SSA. And if the SSA denies the claimant’s application, LINA can force the claimant to exhaust her administrative appeals. All this effort makes perfect sense from LINA’s perspective because—having decided to pay the claim—every dollar the claimant gets from the SSA is one less dollar LINA has to pay.
The Eleventh Circuit did not take exception that the claimant was required under the terms of the policy to aply for social security benefits, but rather, the fact that LINA would ignore the evidence once it no longer suited its needs. The Court explained:
[T]he Policy terms that required Melech to apply for SSDI and LINA’s seemingly self-interested disregard for her SSDI application give us pause. We find nothing necessarily troubling in the terms of LINA’s Policy that allow it to benefit from the SSA’s alternative compensation mechanism. Nor do we take issue with the lengths LINA has gone to to ensure that its claimants apply for SSDI, or even LINA’s right to second guess an SSA denial. However, in light of these openly self-interested efforts, we are troubled by the implication of LINA’s actions in Melech’s case, where it ignored her SSDI application and the evidence generated by the SSA’s investigation once it no longer had a financial stake in the outcome.
The Court further found relevant the fact that “LINA’s disclosure authorization form allows it to obtain information directly from the SSA,” but because LINA denied the claim based on the evidence available to it at the time, LINA did not wait for the conclusion of the SSA process, notwithstanding the fact that the evidence generated by the SSA’s investigation might prove useful in determining whether Melech was eligible for benefits under the Policy. The Court succinctly stated, “having sent Melech to the SSA to seek alternative compensation, LINA was not free to ignore the evidence generated by the SSA.”