• Do I Have To File An ERISA Appeal Of A Disability Insurance Denial Before I Can File A Lawsuit?

Do I Have to File an ERISA Appeal of a Disability Insurance Denial Before I Can File a Lawsuit?

A recent D.C. Court ruling in an ERISA long term disability denial lawsuit sparks the question: If a claim for disability insurance benefits has been denied, is the claimant required to file an ERISA appeal with the insurance company, or can the claimant bypass the appeal process and, upon denial, move forward and file a civil lawsuit under ERISA? The general answer is that in almost every case a claimant must file an ERISA appeal, but in this blog entry we will discuss some legal exceptions that could allow a lawsuit to be field with the filing of an administrative Appeal.

In the D.C. case, the Plaintiff argued that he was not required to exhaust his available administrative remedies because: 1) ERISA does not mandate exhaustion and that this requirement should be determined by the individual courts on a case-by-case basis; 2) the denial notice he received did not mention any claims procedure or appeal process, thereby excusing him from pursuing administrative remedy; and 3) pursuing administrative remedy would have been futile and that he had already attempted to resolve this matter in house before filing his lawsuit. The D.C. court found that none of the Plaintiff’s arguments were sufficient to waive the strict exhaustion requirement.

Exhaustion Requirement Under ERISA in Disability Insurance Denial Cases

The ERISA law itself does not specifically state whether a claimant is required to exhaust all available administrative remedies before filing a civil lawsuit. However, there is a long settled rule of judicial administration which mandates that no one is entitled to judicial relief for an alleged injury until such time as the prescribed administrative remedy has been exhausted. This means that because ERISA does not specifically address this issue, the exhaustion requirement will automatically be applied to all cases, except for instances where the district court, through its own sound judicial discretion, determines that the exhaustion requirement does not apply, or should be waived, for a particular case.

This leads us into the question: under what circumstances will a court determine that the ERISA exhaustion requirement does not apply, or should be waived?

Exception # 1: Lack of Meaningful Access to Higher Levels of Review

The first circumstance when the exhaustion requirement may be waived is if a claimant lacks, or is denied, meaningful access to higher levels of review. In the D.C. case, the Plaintiff tried to argue that the denial notice he received did not specifically mention the insurance company’s appeal process or claims procedure. Without being informed of the appeal process or the claims procedure, he was therefore denied access to higher levels of review of the denial of his claim for benefits. However, the Plaintiff’s argument failed because he did not claim that no claims procedure existed, but rather, the notice did not mention it. The courts have well-established that ignorance of a claim procedure does not waive the exhaustion requirement and that each individual/claimant has a duty to seek the necessary information, regardless of whether it has been made available.

Another example of this would be if a claimant tried to initiate higher levels of review procedure, but the insurance company denied or otherwise prevented the claimant from being able to proceed with the higher level review of the claim or denial.

Exception #2: The Futility Exception

The second circumstance whereby the exhaustion requirement may be waived is known as the futility exception. The D.C. Plaintiff argued that, prior to filing the lawsuit, he attempted to resolve his issue by contacting several members of his employer’s management to no avail. Therefore, to go through the administrative appeal process would have been futile because it was highly likely his appeal would be denied. However, the futility exception has very strict standards. It is not enough for an adverse decision to be “highly likely”. Instead, it is required for there to be a certainty of an adverse decision. An administrative process could be deemed futile if, for example, it would require such considerable time to complete that the Plaintiff’s rights would be lost by the inability to make a speedy decision. Or, if a claimant was notified unequivocally that appeal of a denial would not be considered or would not alter the decision to deny.

Because the D.C. Plaintiff was not able to present sufficient arguments to the court to support his contention that the exhaustion requirement should be waived in his case, as well as for several other reasons such as failing to move for leave to amend his complaint and failure to state a claim, the court dismissed the Plaintiff’s lawsuit with prejudice and, upon motion for reconsideration, the dismissal was upheld. As a result of this plaintiff and his disability attorney filing a premature lawsuit, the claimant will be forever barred from having his disability denial heard by any court. The claimant’s claim is over and he has not further rights.

How to Ensure that You Fulfil the Exhaustion Requirement

This case teaches us that there are several crucial steps that must be taken if your claim for disability benefits has been denied, and even before that point, prior to submitting your initial application for benefits. First and foremost, read your Plan and understand your insurance company’s process for reviewing claims and the administrative appeal process that is available if/when the decision is made to deny benefits. Second, if your claim is denied, the denial letter should include language explaining your right to file an appeal. Appeals are typically time-barred and you only have a certain amount of time once your claim has been denied to submit additional information to the insurance company and request they reconsider their decision to deny your benefits. If the denial letter does not include this information, it is your duty to either read your Plan and learn what the procedure is to appeal a denial, or contact your claim representative and ask them to explain what remedy is available to you since your claim was denied.

If you file an Appeal, the disability company has 45 days to make decision and then for exceptional cause they can request two additional 30 day extensions. Once the time period is elapsed, if a decision has not been made the case is still not clear in every court as to whether a lawsuit can be filed. In our cases, if a disability company does act in accordance with the time restraints provided by the ERISA statutes, then we will file a disability lawsuit before a final decision is returned.

The best solution, if your claim for disability benefits has been denied, is to make sure to contact an experienced ERISA disability attorney. If you have any questions regarding your rights under a short or long term disability policy please contact Attorneys Dell & Schaefer for a free consultation.

Comments (2)

  • Jim, if your administrative appeals are exhausted your only option would be to bring a lawsuit against them. The concern though would be the statute of limitations (the time with which you can bring a lawsuit). If your initial denial of benefits (and no payments after that) was in 2014, this could be a very real concern. Please feel free to contact our office to discuss your claim in greater detail to determine your rights under the policy and options available.

    Stephen Jessup Jun 30, 2018  #2

  • I have filed 2 Appeals with Cigna LTD since 2014 of being disabled. As of now they have terminated me yet again and said I’m only allowed to file 2 Appeals. Now what’s my options? I am waiting for their letter to Arrive. If it’s a law suit how long will I have to file one? I’m pretty sure I’m going to be seriouly needing you next week. Please advise.

    Jim Jun 29, 2018  #1

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Charles A. M.D.

I am very humbled to have the privilege to write this testimonial on behalf of Dell & Schaefer and more specifically, Mr. Cesar Gavidia. Unfortunately, after suffering from Essential Benign tremors for numerous years I lost a career for which I dearly loved. I was a dental implant surgeon whose accomplishments are quite humbling. I devoted my entire career to my patients, employees, colleagues and students. Upon discovery of my disability, I contacted Mr. Cesar Gavidia for professional guidance. Upon meeting Mr. Gavidia, I inquired of his knowledge, years of experience, colleagues and most importantly his “Passion” to represent each and every client.

What I discovered was a very sincere Gentleman with a tremendous depth of knowledge regarding my disability policies and many others aspects of business law. During the last five (5) years of my career I could have increased the benefits of my disability policy. However, I failed to do so. I thought I had all of the answers. I was wrong! I would encourage each and every reader to consult with an expert such as Mr. Cesar Gavidia prior to entering into a “Disability Insurance Contract”. Or at least shortly thereafter. You will be enlightened to learn the details and how they will affect you if you incur a career ending disability. You owe it to yourself and your family to understand your DISABILITY POLICY. Mr. Gavidia’s ability to explain the most important details was masterful. My initial conversation with Mr. Gavidia reminds me of our patients and how we sometimes would fail to explain things in laymen’s terms. And we wondered why our patients were confused? Now I know.

I would further suggest that you conduct an annual review of your policy with Dell & Schaefer to ensure your understanding and expectations to protect yourself and your loved ones. I am fortunate. I thought I had performed my “Due Diligence”. I had to a minimal level. Had I taken the initiative to contact this excellent group of experts, early on I could have protected my wife and children like a responsible spouse and father should. However, we are fortunate and blessed in that my disability insurance covers our very nominal financial requirements.

We have no additional funds for our children’s college nor do we live a lavish lifestyle. I simply receive the “minimum” to get by each month. I am very fortunate to have a “true expert” to take care of me and an insurance company, who to date has honored their contract. I thought I had performed my due diligence. In retrospect I was simply naive. While considered an “expert” in my profession with the highest accolades in the world I finally realized that it is impossible to know everything. My encouragement would be to focus on your passion and expertise and let those who are experts in their field help you.

I am very, very fortunate to have sincere and professional colleagues, Mr. Cesar Gavidia and his paralegal, Ms. Danielle Lauria help me through some very difficult times. I have returned to school and recently earned my MBA so I can “get back on my feet” and continue to help those who have blessed me so much. Dell & Schaefer helped me with this too. They encouraged me to do so when I thought the world had ended. In medicine we take an oath, “Do No Harm”. That should also apply to ourselves. Make sure you take care of yourself and your loved ones. You deserve it!

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