Recent Court Case of an Appeal of Long Term Disability Claim Denial as Untimely Reinforces Plan Administrators ERISA Compliance
The Employee Retirement Income Security Act (ERISA) requires detailed disclosures to covered individuals. The federal law requires plans to establish and maintain claims procedures under which benefits can be requested by covered individuals and how to address disputes about benefits claims. Failing to comply with ERISA could result in benefits disputes ending up in court.
Different requirements apply to different types of benefit claims and plans. For adverse benefit determination involving disability claims, the claimant must have at least 180 days after the receipt of the adverse benefit determination notification in which to file an appeal. Timeliness is crucial because claimants typically lose the right to sue if they do not exhaust the claim procedure.
Given this consequence, claimants may be highly motivated to seek out defects in the handling of a claim and attempt to proceed with a lawsuit without exhausting the plan’s claim procedures.
Consequences of noncompliance also increase the likelihood that a plan will be found liable for benefits that would not otherwise be payable.
Theresa Fortier v. Hartford Life and Accident Insurance Company reinforces the need to ensure plans are complying with ERISA’s claims procedures. The insurer gave notice to the plaintiff that her long term disability benefits provided under her employer’s plan would expire because she had not shown she was eligible for continuation of benefits. The notice provides that she must file an appeal within 180 days of receipt of the notice. The plaintiff filed her appeal about two months after the 180-day deadline. The issue before the First Circuit Court was whether the plaintiff timely filed her administrative appeal for denial of long term benefits or if not, should be excused under the substantial doctrine or the state law notice-prejudice rule.
Ultimately the Court held that the plaintiff failed to timely exhaust her administrative remedies under the plan because the 180-day time limit for submitting appeals commenced on the date the plaintiff received notice of the decision that the insurer was going to terminate her long-term disability benefits, not the actual date her benefits were terminated.
The Court did not agree with the plaintiff’s argument of the substantial compliance doctrine. This doctrine has been applied in the past to excuse a plan administrator who has not complied precisely with ERISA’s requirement but substantially complied with its requirements. The doctrine assists with the prompt review of denial of benefits. It has not been used to excuse a participant who filed an untimely administrative appeal. As for the state law on notice-prejudice rule argument, the Court stated that state common law notice-prejudice rules do not apply to ERISA appeals. Additionally, no state law has been applied to excuse a late administrative appeal.
This case highlights the importance of disclosure and adherence to ERISA’s claims procedures requirements.
So who is ultimately responsible for ERISA compliance?
Under ERISA, the plan administrator has the responsibilities for establishing and maintaining required claims procedures, and thus the liability for failing to do so. In most single employer plans, this is generally the employer. Plans that use third-party insurers or third-party claims administrators should ensure that such third parties are following the required claims procedures.