Salley v. E.I. Dupont de Nemours & Co.
966 F.2d 1011 (5th Cir. 1992)

Facts:

  • Danielle Salley was a fifteen-year-old girl with a history of emotional disabilities, drug abuse, and depression.
    • She spent time in and out of DePaul Hospital as a psychiatric patient. Each time, her condition would improve, but then she would relapse as soon as she was released.
  • Her father, Jack Salley, was a retired DuPont employee. Danielle, being his dependent, was covered under DuPont’s Hospital Medical-Surgical Coverage Policy (the “Plan”).
    • The Plan was established in accordance with the Employee Retirement Income Security Act (ERISA).
  • During Danielle’s third visit to the hospital, her treating physician, Dr. Blundell, reported that her condition had improved, but she shouldn’t be released because she would quickly regress.
  • However, Dr. Ahluwalia and Ron Schlegel (case manager) concluded that Danielle’s treatment was no longer “medically necessary.”
    • Note: They never examined Danielle nor reviewed her medical records from the second and third visits.
  • From October 11, 1990 to January 24, 1991 (when she was released), Danielle didn’t receive the benefits.
  • Danielle and her father then brought suit to recover the costs of her hospitalization.

History:
The district court concluded that DuPont abused its discretion when it terminated benefits for Danielle’s in-patient hospitalization.

  • Consequently, the court found DuPont liable for Danielle’s hospital bills from October 11, 1990 through January 25, 1991.

Issues:
(1) What is the proper standard of review?
(2) Did DuPont abuse its discretion when it terminated the benefits?

Holdings:
(1) Abuse of discretion.
(2) Yes.

Reasoning:

(1) Standard of review.

  • The denial of benefits is to be reviewed under a de novo standard. However, if the plan gives the administrator or fiduciary discretionary authority, then an abuse of discretion standard is applied.
    • Firestone.
  • Here, the Policy stated “The DuPont Employee Relations Department shall be responsible for development of procedures to implement the policy, for interpretation of policy, and for coordination of administration.”
  • Furthermore, “DUPONT reserves final authority to authorize or deny payment for services to beneficiaries of a Plan.”
  • Thus, because DuPont had discretionary authority, an abuse of discretion standard should be applied.

(2) Abuse of discretion.

  • “Although we generally decide abuse of discretion based upon the information known to the administrator at the time he made the decision, the administrator can abuse his discretion if he fails to obtain the necessary information.”
    • Here, DuPont abused its discretion because they never examined Danielle and didn’t review all of her records.
  • Additionally, Plan administrators may rely on the treating physician’s advice, or they can independently investigate the treatment’s medical necessity.
  • Here, DuPont relied on Dr. Blundell, but they only relied on part of his advice (that her condition improved), while ignoring his other advice (that she shouldn’t be released).
  • Note: The “treating physician rule” requires the court, in appropriate circumstances, to defer to a patient’s treating physician’s testimony unless substantial evidence contradicts the testimony.