What you should look for in a denial letter: disability insurance company's inadequate denial letter causes court to reinstates insured's disability benefits

Citation: Schneider v. Sentry Group Long Term Disability Plan, No. 04-2689, 2005 U.S. App. LEXIS 19273. (7th Cir. Sept. 7, 2005).

For almost three decades, Janet Schneider worked for Sentry Life and performed many different jobs, ultimately leading up to a position of Director of Underwriting Services. As an employee of Sentry Life, Ms. Schneider participated in Sentry Life’s Group Long-Term Disability Plan. Unfortunately, on October 29, 2001, Ms. Schneider was forced to apply for disability benefits as result of major depressive disorder.

In May 2002, Sentry Life approved Ms. Schneider’s disability benefits and commenced payments. Shortly thereafter, Ms. Schneider submitted to an independent medical evaluation requested by Sentry Life and performed by Sentry Life’s expert. The expert opined that Ms. Schneider was capable of returning to work without any special accommodations. Relying on this evaluation, Sentry Life, sent Ms. Schneider a letter notifying her that her benefits were terminated as she “recovered” from her condition and could return to work.

Ms. Schneider brought suit against Sentry Life alleging that its denial letter did not provide her with an adequate explanation of the reasons for terminating her benefits. Specifically, Ms. Schneider alleged that Sentry Life’s denial letter did not meet ERISA’s statutory and regulatory requirements.

The court held in favor of Ms. Schneider and ordered retroactive reinstatement of Ms. Schneider’s disability benefits. In arriving in its decision, the court reiterated the legal requirements that must be contained in a denial letter. The requirements are as follows:

The denial letter must:

1. Set forth the specific reason or reasons for terminating benefits;
2. Reference the specific policy language on which the termination of benefits are based;
3. Provide a description of any additional material or information necessary for the insured to perfect the claim and an explanation of why such material or information is necessary; and
4. Set forth a description of the plan’s review and appeal procedures and the time limits applicable to such procedures.