The short answer: Yes, depending on how much time has passed since you first submitted your claim.
Consider the following scenario. You work for a company that has an insured long-term disability (“LTD”) plan that is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). Let us say the insurance company is Prudential Insurance Company of America. You go out on disability due to chronic pain and file a claim with Prudential on July 25, 2019. On August 19, 2019, Prudential acknowledges that it received your medical records, activities of daily living questionnaire, and work capacity questionnaire. But inexplicitly, it says it needs more time to decide your claim and takes a 30-day extension. In the meantime, Prudential reaches out to your doctor to request feedback on its medical evaluation conducted by one of its nurse reviewers. Prudential also seeks clarification from you regarding your medical history. On November 13, 2019, Prudential confirms that the file is complete, but it states it needs more time to decide your claim. It does not explain why it needs more time. Finally, on November 27, 2019, Prudential decides against you. Can you file a lawsuit?
According to Judge Jeffrey White in the Northern District of California, the answer is yes. See Hasten v. Prudential Ins. Co. of Am., No. 19-CV-07943-JSW, 2020 WL 3786229 (N.D. Cal. July 6, 2020).
Exhaustion of Administrative Remedies. It is important to understand the framework governing ERISA disability claims. “As a general rule, an ERISA claimant must exhaust available administrative remedies before bringing a claim in federal court.” Hasten, 2020 WL 3786229, at *2, citing to Barboza v. California Ass’n of Professional Firefighters, 651 F.3d 1073, 1076 (9th Cir. 2011). What that means in the simplest terms is that you must appeal the denial to the insurance company and wait for its decision before you can file a lawsuit. A court can decide whether you had to exhaust administrative remedies or whether there is a good excuse for you to not go through the appeals process.
ERISA Regulations. It is also important to note the regulations which govern your ERISA claim. The ERISA regulations provide that, “if the plan fails to strictly adhere to all the requirements of this section with respect to a claim, the claimant is deemed to have exhausted the administrative remedies available under the plan.” 29 C.F.R. § 2560.503-1(1)(2). An administrator (here, Prudential) must issue its decision within 45 days of receipt of the claim. 29 C.F.R. § 2560.503-1(f)(3). It can take up to two 30-day extensions provided that the extension is “necessary due to matters beyond the control of the plan” and the insurer notifies the claimant “of the circumstances requiring the extension of time and the date by which the plan expects to render a decision.” The insurer must provide notice to claimant that explains “the standard on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues.” Additionally, the notice must be sent prior to the expiration of the current period.
In short, if an insurer follows the protocol, it can take up to 105 days to decide your claim. There is a circumstance where it can go beyond this period, but we will leave that for another blog.
Timeliness. In Hasten, which involved the fact pattern described above, the court made a few significant determinations. First, it found that Prudential’s notice of the extensions did not meet the requirements set forth in the ERISA regulations. Prudential did not identify a reason for why it needed more time nor did it offer an anticipated decision date. Its second extension request was sent 56 days after the first extension period had already expired. Thus, Prudential failed to meet the timelines outlined in the regulations or follow the proper procedures.
Strict Adherence. The ERISA regulations provide that if an insurer does not “strictly adhere” to the claim handling requirements, a claimant is deemed to have exhausted administrative remedies and may file a lawsuit. The Hasten court rejected Prudential’s argument that it only need to “substantially comply” with the regulations. The 2018 regulations make it clear that strict adherence is required. Where substantial compliance may have been an excuse in the past, it is no longer.
De Minimis Violation. The ERISA regulations excuse “de minimis” (too small to merit consideration) violations of the requirements. Prudential tried to argue that its late decision was de minimis and did not cause the claimant harm. The court disagreed. Prudential did not demonstrate that the delays were for good cause or due to matters beyond its control. So even if the claimant did not allege that she had been prejudiced, Prudential’s actions do not qualify as de minimis.
Despite this good decision, it is still wise to exhaust administrative remedies when you can. Whether you should appeal or file suit requires a case-by-case evaluation. If you have a pending long-term disability claim and need legal advice on next steps, contact the ERISA attorneys at Kantor & Kantor, LLP for a free consultation at 800-446-7529 or use our online contact form. We have helped thousands of insureds secure long-term disability benefits from private insurance companies.