Following the submission of an ERISA disability appeal an insurance company is allotted 45 days under the law with which to render a decision on the appeal. ERISA also allows the insurance carrier a single 45 day extension to complete the review so long as the extension is for good cause. It is common for an insured to receive a letter from their disability carrier during the initial 45 day timeframe that the insurance company is exercising its right to the 45 day extension. Quite often there is limited ability for an insured to challenge the extension, but as seen in the recent case, McFarlane v. First Unum Life Insurance Company, there are limits to the application of the extension by the insurance company.
Prior to the filing of any lawsuit under ERISA against an insurance company for the denial of benefits an insured must exhaust his or her administrative remedies. The administrative remedy is the formal administrative appeal of the denial of benefits. If an insured does not file an appeal of the insurance company denial within the 180 day deadline imposed by ERISA then the insured can be barred from bringing legal action against the insurance carrier. In turn, when an insurance company fails to render a decision within the statutorily allotted timeline imposed by ERISA an insured is entitled to file a lawsuit for the failure to render a timely decision.
In McFarlane, First Unum (a company under the Unum umbrella) denied McFarlane’s claim for disability benefits shortly after initially approving her claim. Through counsel, McFarlane filed an appeal of First Unum’s denial. After the initial 45 day deadline had ended, McFarlane’s counsel contacted First Unum to notify them that the time to render a decision on the appeal had expired. In response, Unum request a 45 day extension to complete its review of the appeal due to a failure to receive requested documentation from one of McFarlane’s treating doctors. Unum additionally note that the start date of the 45 extension would be tolled until such time that the information was received from McFarlane’s doctor. After waiting nearly two months McFarlane filed a lawsuit against First Unum for failure to render a timely review of her claim. Unum in turn filed a motion with the court to have the lawsuit dismissed for failure to exhaust administrative remedies (complete the appeal process). As set forth below, the Court denied First Unum’s motion and allowed the case to proceed.
In denying First Unum’s motion the court notes that ERISA regulations specify that an “extension notice” needs to indicate a date on which a determination will be rendered, but First Unum had failed to provide such a date when notify McFarlane of the extension. The court stated that First Unum’s failure to provide a date the review of the appeal would end was in violation of ERISA regulations; and that the fact First Unum was tolling the start date of the extension was inappropriate as said start date was dependent on receipt of information from a third party (her doctor) beyond McFarlane’s control.
Unum attempted to argue that the timeframe for which the extension was to begin could be tolled for McFarlane’s failure to provide information necessary to render a decision on the claim. The court disagreed with First Unum’s interpretation of the law, as according to the court there was no indication that McFarlane failed to provide requested information, but rather a third party failed to provide information. As such the Court rejected Unum’s position it could toll the period that the 45 day extension would begin until it received information requested of a third party.
The importance of providing all pertinent information during the ERISA administrative appeal process.
Even though the Court allowed McFarlane’s lawsuit to stand that does not mean that the Court has decided in McFarlane’s favor as to First Unum’s denial of her claim for benefits. Although the Court holds that a plaintiff would not be liable for actions of the third parties in providing information as it relates to appeal reviews, it is still very important to note that it is often in the best interest of the insured to provide an insurance carrier with all pertinent information during the appeal process as failure to provide the information could bar the insured from presenting potentially helpful information at trial.
In situations where an insurance company requests records from an insured’s doctors, we at Dell & Schaefer work to secure any requested information that is helpful to our client’s claim for benefits and that ensures the most timely review of an appeal. Although the above case is being allowed to proceed at trial it does not mean that the plaintiff did not hurt their case by failing to try to obtain the information from their doctor. It is also worth noting that the Court indicates that McFarlane is not to be held responsible for the failure of a third party to respond to a request for information- but this still leaves the question, what if First Unum asked McFarlane directly to obtain the information from her doctors to provide as part of the review? This difference in semantics could have changed the outcome of the court’s ruling dramatically.