In jurisdictions that have not passed legislation banning discretionary clauses in ERISA governed disability insurance policies, if the policy contains express and unambiguous language granting the insurance company the discretion to make benefit determinations the standard of review in litigation is arbitrary and capricious. This means that if a lawsuit is filed, the claimant must prove that the claim decision was both wrong and unreasonable. This is a very high burden to meet.
The court can literally find that the evidence supports that the claimant is disabled and the carrier’s decision was incorrect. However, there was at least a reasonable basis to make the wrong decision. Moreover, under the arbitrary and capricious standard of review the court’s review is limited to the facts known to the carrier at the time of the final claim denial. In most circumstances, no new evidence can be submitted by the claimant to prove his/her case. That means that you must prepare your trial before the last denial is even issued.
The ERISA regulations provide that an insurance company has 45 days to render a disability claim decision. The carrier may take a 30 day extension, if BEFORE the expiration of the initial 45 day deadline it submits a written statement to the claimant setting forth “special circumstances” beyond the carrier’s control justifying an extension. The carrier may take a second 30 day extension if PRIOR TO the conclusion of the extended deadline, it notifies the claimant of a valid circumstance beyond its control justifying the extension.
Likewise, the carrier has 45 days to render decision after receiving an administrative appeal of a denied ERISA governed disability insurance claim. The carrier may take a 45 day extension, if BEFORE the expiration of the initial 45 day deadline it submits a written statement to the claimant setting forth “special circumstances” beyond the carrier’s control justifying an extension. See 29 CFR § 2560.503-1 (1)(i); (3)(i).
If the carrier misses a decision deadline, sends an extension letter after the deadline, or sends an extension letter that does not set forth valid “special circumstances beyond its control” justifying an extension, the claimant is deemed to have exhausted their administrative remedies under the Department of Labor Regulations. See 29 CFR § 2560.503-1 (I)(2) (ii). Therefore, the claimant is permitted to immediately file suit.
The courts have explained that engaging in necessary activities to evaluate a claim such as obtaining a medical records review is not a special circumstance beyond the carrier’s control and thus, is not a valid justification for an extension. Likewise, 29 CFR § 2560.503-1 (h) (4), provides that carriers have an obligation to provide claimants with any new or additional evidence considered, relied upon, or generated during the review of an ERISA administrative appeal “as soon as possible and sufficiently in advance of the” 45 day appeal decision deadline to give the claimant a reasonable opportunity to respond prior to that deadline. According, a carrier may not take an extension to give the claimant an opportunity to respond.
This is important because if the insurance company misses its deadline and a claimant files suit, the standard of review changes from arbitrary and capricious to de novo. That means that the claimant must only prove that the carrier’s decision was wrong (i.e. that the claimant is disabled), a MUCH easier burden to meet; and in some jurisdictions (such as Florida), the claimant is able to submit new evidence establishing their disability – the judge is not restricted to only reviewing evidence submitted prior to the final denial. This is a huge advantage for claimants.
Don’t hesitate to contact an experienced ERISA claims attorney at Disability Insurance Law Group. We can explain your rights and help you understand your insurance company’s obligations when it comes to deadlines. Contact us today by calling our primary office in Fort Lauderdale at 954-989-9000 or send us an email to schedule your free consultation. We offer flexible appointment hours.
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