Over the past few months we have been seeing an increase in denial letters from various insurance companies that contain information not previously seen. This information includes a notice of claimant rights written in multiple languages, and in the case of final denials of benefits the notification to claimants of the exact date the Statute of Limitations to bring a lawsuit under ERISA to seek one’s benefits will expire. The inclusion of these items was an early rollout by various insurance companies in advance of the Department of Labor’s new disability claim regulations set to take effect on April 1, 2018.
From the perspective of a plaintiff’s attorney representing people trying to secure disability insurance benefits, there are two key regulation changes that we believe are most beneficial to the claimant/insured: the “Right to Review and Respond to New Information Before Final Decision” and “Deemed Exhaustion of Claims and Appeal Processes.” These changes are a direct result of the efforts by plaintiffs’ attorneys to convince Courts for the need of such changes.
First, and the most important as it relates to the administrative appeal process is the right of the insured while their claim is under an administrative appeal review by the insurance carrier to review any new evidence created by the insurance carrier during the appeal review process and respond to same. The Department of Labor states:
Right to Review and Respond to New Information Before Final Decision. The final rule prohibits plans from denying benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage, unless the claimant is given notice and a fair opportunity to respond.
The “new evidence” addressed is assuredly meant to target at any medical reviews conducted at the request of the insurance company in response to the insured’s administrative appeal. Prior to this formal change in regulation an insurance company did not have to provide the insured with a copy of any new information and/or medical review reports created during the appeal review. This in turn prevented an insured from being able to respond to the opinion(s) of the insurance company’s doctor(s). Although some insurance companies have commonly provided medical review reports to an insured with a request that the insured’s doctors respond to same before a final decision is rendered, it is now a requirement. It appears that gone are the days when an insurance company can deny an administrative appeal without affording a claimant the right to respond to the very medical opinions that the company is relying on to deny their appeal.
The second regulation change that greatly expands the rights of the insured is a requirement by the insurance company to strictly adhere to claims procedures. Per the Department of Labor:
Deemed Exhaustion of Claims and Appeal Processes. If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan, unless the violation was the result of a minor error and other specified conditions are met. If the claimant is deemed to have exhausted the administrative remedies available under the plan, the claim or appeal is deemed denied on review without the exercise of discretion by a fiduciary and the claimant may immediately pursue his or her claim in court. The final rule also provides that the plan must treat a claim as re-filed on appeal upon the plan’s receipt of a court’s decision rejecting the claimant’s request for review.
This change is intended to overturn years of case law, which had determined that only “substantial compliance” with the regulations was required. This requirement to strictly adhere to claims procedures could open the door to claimants being able to terminate the claims process and file a lawsuit to determine if an error occurred and whether the error on the part of the insurance company was more than minor. According to the Department of Labor, if the error is deemed to be more than minor then the deference a Court may normally provide to the insurance carrier will no longer be in place and the insured’s claim would be entitled to a “de novo” review. In ERISA litigation a de novo review is the best standard of review an insured can obtain. However, it will remain to be seen how Courts address this regulation change as it conflicts with case law in many jurisdictions as well as case law set forth by the Supreme Court. Regardless, this regulation change will help guarantee that insurance companies will comply with claims procedures and hopefully end the seemingly endless delay tactics many companies employ when rendering a decision on a claim.
It remains to be seen if the Department of Labor’s regulation changes will make a noticeable impact to the benefits of insureds and claimants, but the fact that changes are being made is a step in the right direction to protect insured’s rights under ERISA governed disability insurance policies. For more information about the regulation changes, please feel free to review the Department of Labor’s fact sheet regarding same.
If you are currently on disability or thinking about filing a disability claim and wanted to know how these regulation changes affect you, please do not hesitate to reach out to speak to one of our disability insurance attorneys.