• What Can I Do When The Insurer Fails To Make A Decision On My Appeal Within The Required Timeframe?

Is there an advantage to filing an ERISA disability lawsuit after the expiration of the 45 day deadline and before the disability insurance carrier makes a decision on an ERISA Appeal?

Yes, as it can change the “standard of review” a court must apply at trial from the “arbitrary and capricious” standard of review to a “de novo” standard, which in turn increases the chances of success at trial.

Arbitrary and Capricious Standard in Disability Insurance Cases and Discretionary Clause

In the majority of ERISA governed long term disability policies, the insurance company adds a “discretionary clause” (although more States are banning these clauses), which allows, the insurance company what amounts to free rein to interpret the provisions of its policy. This in turn means that at trial the “standard or review” with which the court will determine entitlement to benefits will be under an “arbitrary and capricious” standard of review. Under the “arbitrary and capricious” standard of review the plaintiff must prove (1) that they are disabled from a medical condition and (2) that the insurance carrier acted “arbitrary and capricious” (unreasonable) in denying the claim. As we have discussed in numerous videos and articles, this latter step is where most insurance companies prevail, as it does not seem to take much for a court to determine an insurance company gave a reasonable review of a claim. In short arbitrary and capricious is a bad thing for claimants.

HOWEVER… and the De Novo Standard of Review

In insurance carrier’s failure to provide a response to an appeal within the 45 day timeframe (in the absence of tolling of time to review or a proper request for an extension) allows an insured to file lawsuit under ERISA predicated upon 29 C.F.R. § 256.503-1(f), which reads in part:

“[A] claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act…”

The reason for this is to protect a claimant by insuring that the administrative appeals process does not go on indefinitely.

So what happens when you file a lawsuit based upon a failure to make a timely decision? Your claim could be reviewed under the de novo standard of review. Under a “de novo” standard of review the ultimate question of disability is limited to whether or not the Judge feels that the insured is disabled under the terms of the policy. This takes away the deference a judge must give to the review conducted by the insurance company under the “arbitrary and capricious” standard of review. Thus the de novo standard of review is a great thing for disability claimants.

The Courts Agree With The Need to File A Timely ERISA Lawsuit

In a recent Pennsylvania federal court decision in the matter of Dibartola v. The United States Steel and Carnegie Pension Fund (“Pension Fund”), the Court eludes to how important the timing of the filing of a lawsuit can be. In the Dibartola case, the plaintiff was denied disability benefits under the Pension Fund and ultimately filed an ERISA appeal of the denial. Following the submission of the appeal, the Pension Fund did not render a decision on the claim within the 45 day deadline imposed by ERISA. However, instead of filing lawsuit immediately on account of same, Dibartola waited until after a final decision to deny the benefit was rendered by the Pension fund. This spelled the difference between an “arbitrary and capricious” standard of review and the much more favorable “de novo” standard. The Court states in its opinion:

“If Plaintiff had chosen to proceed prior to the administrative determination denying benefits, and thus filed suit under 29 U.S.C. § 1132(a), on the basis of the Plan’s failure to comply with 29 C.F.R. § 256.503-1(f), the Court’s standard or review, according to sister Courts of Appeals, would be de novo…”

However, Plaintiff chose not to file suit after the period of time under § 2560-503-1(f) had arguable expired. Instead, she chose to await a decision from the Plan… [W]hen a claimant makes the choice to wait for a determination from a plan instead of filing suit as permitted by section 2560.503-1(l), the Court is require to apply an arbitrary and capricious standard of review.

This is not to say that even if Dibartola had filed suit immediately after the expiration of the deadline that the court would have found her disabled even under the de novo standard of review. However, it is to say that Dibartola would have had a much better chance of success of prevailing at trial. It should be noted that this firm did not represent Dibartola nor were we involved in any way in the case.

What We Learn

The Courts take the deadlines imposed by ERISA very seriously and failure to file a lawsuit when it is ripe could have a detrimental effect on your claim for benefits. If your claim for long term disability has been denied or your insurance company has not responded to your appeal, please feel free to contact Attorneys Dell and Schaefer for a free consultation to determine how we may be able to assist you. Hiring an experienced ERISA disability attorney can be the difference between collecting and not collecting.

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