What can I do when the insurer fails to make a decision on my appeal within the required timeframe?
This question is addressed in a recent case decided by the 10th Circuit Court of Appeals. More specifically, the case addresses what a claimant may NOT do when the insurer fails to render a decision on the claimant’s appeal within the time frame set out by ERISA—a claimant may not rely on the insurer’s said failure as a reason to not exhaust all administrative remedies required by the Long Term Disability Plan.
In this Tenth Circuit case, Union Security took 137 days to issue another denial letter on its first level of review. When it did issue that denial letter it advised the claimant, Ms. Holmes, that she “may request another review of the decision” and that the second level of review was the “final level of administrative review available”.
Ms. Holmes did not appeal again and, instead, filed a lawsuit two years later. The sole issue under review by the court of appeals was whether Ms. Holmes was excused from exhausting administrative remedies.
As in most cases where the plaintiff brings suit despite not having exhausted all required administrative remedies the lower court had dismissed Ms. Holmes’s case for her failure to exhaust. On appeal to the higher court, Ms. Holmes put forth two arguments in support of her position that she should be excused from exhausting administrative remedies. This article focuses on one of those arguments: that she should be deemed to have exhausted her administrative remedies due to Union Securities failure to comply with ERISA’s timing and notice requirements.
Union Security took 137 days to issue another denial letter on its first level of review.
Under ERISA regulations, a plan administrator has an initial 45-day deadline to issue a decision on an appeal. Additional time is allowed where the administrator properly requests an extension of time—although this is less of a “request” and more of a notice requirement whereby the administrator must notify the claimant that it is taking an extension of time of up to an additional 45 days for a total of 90 days.
In this case, Ms. Holmes sought an appeal of the initial denial of her claim for benefits on November 21, 2005. On the last day of its 45-day deadline, January 5, 2006, Union Security notified Ms. Holmes that due to “special circumstances,” it required an extension of time for processing her appeal. In the same letter Union Security explained that it was in need of a complete set of medical records from certain doctors prior to completing a determination and to “please forward a copy of Ms. Holmes’s medical records… as soon as possible.”
Ms. Holmes did not respond to the letter or to subsequent letters written by Union Security to Ms. Holmes on February 2, 2006 and on February 24, 2006 reiterating that “special circumstances exist that prevent [it] from rendering a decision on Ms. Holmes’s appeal,” and renewing its request for a complete set of medical records.
Union Security finally received the requested records on March 13, 2006.
As the court explained, Union Security’s notice to Ms. Holmes prior to the termination of the initial 45-day period tolled the running of the time for decision until Ms. Holmes responded. In other words the clock stopped ticking until Ms. Holmes submitted the requested information, at which time Union Security was required to render a decision on Ms. Holmes’s appeal within 45 days.
As the third-party claims administrator, Union Security had unilateral authority to begin tolling an extension period. Moreover, since the plan had given Union Security broad discretion its decision was entitled to judicial deference. Ms. Holmes pointed out nothing indicating Union Security’s decision that it needed her entire medical file to complete her claim evaluation was arbitrary or capricious. Additionally, as the court put it “Ms. Holmes had the power to end the tolling period and recommence the running of the time for decision simply by responding to Union Security’s request.”
Ms. Holmes’s argument therefore did not convince the court.
So what does this mean for other ERISA claimants?
It is important to remember that ERISA cases are usually very fact specific. This case reminds us that the requirements of exhausting administrative remedies under ERISA are very strict. The case also serves as a reminder that the administrator often gets the benefit of the doubt and broad discretion in determining if an extension of time is necessary to make a decision on an ERISA appeal, even if the administrator takes longer than the timeframe allowed by ERISA. At the very least, an administrator would be justified in extending the deadline where the claimant fails to provide information necessary for the administrator to make a decision.
However, this case does not suggest that plan administrators can extend their review for any reason and for any length of time. Whether an administrator has abused its discretion requires a complete analysis of all the surrounding circumstances and only an experienced ERISA attorney can sift through the facts to determine whether an administrator has exceeded its authority.