## Facts

- Ethan L. Bedrick, a severely disabled minor with cerebral palsy and spastic quadriplegia, was covered as a dependent under an ERISA employee welfare benefit plan funded and administered by Travelers Insurance Company.
- Ethan required ongoing physical, occupational, and speech therapy to prevent deterioration (including contractures) and to maintain or improve functioning.
- After internal utilization review by a Travelers-affiliated reviewer, Travelers cut off coverage for speech therapy and limited physical and occupational therapy to fifteen sessions per year.
- Travelers also denied coverage for an upright stand requested to assist positioning and reduce contracture risk.
- The plan limited benefits to care that was “medically necessary,” and included a separate speech-therapy provision covering therapy “if needed to restore speech.”
- Travelers treated “medically necessary” as requiring a likelihood of “significant progress” and relied on that rationale to restrict or deny benefits, despite contrary views from Ethan’s treating providers.
- Ethan and his parents sued for benefits; the case proceeded as an ERISA § 502(a) action after removal to federal court.
- The district court granted summary judgment to Travelers, effectively deferring to Travelers’ benefit determinations.

## Issues

1. What standard of review applies to Travelers’ benefit determinations under an ERISA plan that grants discretionary authority, and how does Travelers’ dual role as funder and administrator affect that review?
2. Whether Travelers reasonably interpreted plan terms—particularly “medically necessary” and the speech-therapy “restore speech” language—to deny or limit coverage for Ethan’s therapies and an upright stand.
3. Whether the challenged denials and limitations were supported by the plan’s text and the medical record, or instead reflected an unreasonable, cost-driven narrowing of coverage.

## Decision

- The Fourth Circuit affirmed in part, reversed in part, and remanded with instructions.
- The court applied abuse-of-discretion review because the plan conferred discretionary authority, but scrutinized Travelers’ determinations more closely due to its structural conflict of interest as both administrator and payor.
- The court held that Travelers abused its discretion as to significant portions of the challenged coverage decisions, including decisions tied to importing a “significant progress” requirement not found in the plan’s written terms.
- The court upheld other aspects of Travelers’ determinations that fell within a reasonable interpretation and application of the plan.

## Legal Principles

- When an ERISA plan grants discretionary authority, courts review benefit determinations for abuse of discretion.
- An insurer-administrator that both decides claims and pays benefits operates under a structural conflict of interest that must be weighed in evaluating reasonableness under abuse-of-discretion review.
- A plan administrator may not effectively amend coverage by adding extra-textual eligibility requirements (e.g., a “significant progress” threshold) that are not supported by the plan language.
- “Medically necessary” care can include treatment or devices aimed at preventing deterioration or maintaining function, not solely services expected to restore normal function.
- Denials that rely on strained readings of specific benefit provisions (including outcome-focused interpretations of “restore speech”) may be unreasonable when inconsistent with plan purpose and medical evidence.

## Conclusion

The Fourth Circuit required conflict-sensitive abuse-of-discretion review of Travelers’ ERISA benefit decisions and found that Travelers acted unreasonably where it narrowed coverage through requirements not contained in the plan text, particularly when therapies and equipment were supported as medically necessary to prevent decline or maintain functioning, and it remanded for further proceedings.


Bedrick v. Travelers Ins. Co., 93 F.3d 149 (4th Cir. 1996)