Long-term disability claim against Provident almost lost because of untimely appeals

Another case highlights the importance of making timely appeals when your long-term disability benefits are denied. Richard MacLennan discovered this when he took his case to court against Provident Life And Accident Insurance Company (Provident).

MacLennan filed his case in the U.S. District Court, District of Connecticut. In his claim, MacLennan sought to take advantage of tolling, a legal doctrine that allows for a statute of limitation to be extended. “Equitable tolling” can delay the initiation of a statute of limitations or it can halt the countdown of time after it has started.

MacLennan claimed that equitable tolling applied to him because mental illness and depression prevented him from filing a timely appeal. MacLennan asked the court to recognize his incapacity during the two years between April 2, 2003 and March 21, 2005.MacLennan also claimed that he had a case based upon the futility of appealing the denial of his original claim.

The District Court did not buy either argument. Before we discuss some of the reasons why, let’s look into the background of MacLennan’s case.

When Mr. MacLennan was dismissed from his position as senior vice president of Solomon Smith Barney (SSB) in early 2002, it sent him into a deep depression. In March 2002, he filed a claim for short-term disability and long-term disability benefits under the ERISA plan provided by Salomon Smith Barney. The plan was administered by Provident and CIGNA Life Insurance Company of New York. He provided documentation from his health care providers demonstrating his inability to work because of his depression.

Providence and CIGNA denied his claim for long-term disability benefits in a denial letter on October 4, 2002. In the letter, Provident/CIGNA advised him to file an administrative appeal within 180 days. The April 2, 2003 deadline passed.

In November of 2004, Provident entered into a regulatory settlement agreement (RSA), which included, as part of its obligations, giving certain beneficiaries whose claims had been denied, the opportunity to have their claims reassessed. MacLennan was among those selected. Some time in March 2005, though neither Provident nor MacLennan can identify exactly when or even how, MacLennan opted in to having his claim reassessed.

Provident acknowledged MacLennan’s decision to opt in on March 21, 2005. About nine months later on December 16, 2005, Provident sent MacLennan a Reassessment Information Form (RIF). Provident needed this additional information to complete the reassessment. Along with the RIF, Provident included a letter stating that MacLennan had to complete the RIF by February 24, 2006, or apply for an extension by this date.

MacLennan’s counsel failed to meet this deadline. On March 7, 2006 with a new attorney representing him, MacLennan sent a letter to Provident requesting an extension of time until March 30, 2006. Because the request was 11 days late, Provident denied it, on the grounds that it was untimely (received too late). In addition, because the RIF had not been received in time, Provident refused to reassess MacLennan’s claim under the RSA process.

On May 26, 2006, MacLennan sent a letter to Provident appealing their denial of long-term disability benefits. This was more than three years after the deadline to appeal the initial decision had passed. Providence responded by denying MacLennan’s claim as being untimely. MacLennan filed suit on August 8, 2007.

To succeed in his claim under ERISA, MacLennan had to prove his assertion that he qualified for equitable tolling. The court found that the initial proof provided by McClellan was adequate enough to require an evidentiary hearing.

Provident’s case stood on two things, the deadlines that MacLennan missed and the fact that he had failed to exhaust his administrative remedies in his initial claim, an ERISA requirement. MacLennan’s entire defense stood on two things, the reasons missing these deadlines should not be counted against him and the fact that exhausting the administrative remedies of his initial claim would have been futile at that time because of the prevailing claims practices that resulted in the RSA.

At the evidentiary hearing, the Court found that MacLennan could have been mentally incapacitated by his depression for part of the time between April 2, 2003 and March 21, 2005, but not for the entire time. Records made it clear that MacLennan’s condition began to improve by late 2004. The fact that he was able to apply for Social Security benefits toward the end of that year with his attorney’s assistance, and that he appeared to have no difficulties with contacting the attorney in a timely manner regarding his SSB termination, supported this. The Court found that he could not demonstrate that his condition justified applying equitable tolling to his case.

When the letter his attorney sent to Provident on March 21, 2005 came under scrutiny, the Court found that equitable tolling couldn’t apply to the case anyway. The letter was only a request for information, it was not an appeal. The RSA process did not put a hold on or create an extension to any deadlines that fell under ERISA oversight. This was stated explicitly in the RSA.

There was only one way to establish MacLennan’s claim that he qualified for equitable tolling. He had to demonstrate that he was incapacitated for the three years between April 2, 2003 and May 28, 2006. He could not do this.

This left only one possible way in which MacLennan could win his ERISA claim, he had to demonstrate that it would have been futile for him to attempt exhausting his administrative remedies. Had Provident failed to inform MacLennan on how to appeal their decision? Had Provident failed to respond to MacLennan’s request for review of the original decision? Had Provident in some other way clearly indicated that an appeal would have been futile?

When the Court looked at the evidence, Provident had fulfilled its obligations. The company had informed MacLennan in detail how to appeal their decision. Because he never filed an appeal, he could not demonstrate that they had failed to respond. If Provident’s initial review was inadequate, MacLennan failed to do anything about it.

In this context, MacLennan could not prove that Provident would have used faulty claims practices on his file. The accusation was too generalized. If Provident had denied all long-term disability claims within the time covered by the RSA, MacLennan might have had a case. However the insurance company had approved claims during this time. The court found that he had failed to exhaust his administrative remedies.

MacLennan didn’t lose out entirely in this process though. The Court recognized MacLennan’s state-based claim of breach of the RSA contract. The court found that it was unreasonable for Provident to be inflexible about an 11-day delay in meeting the deadline to turn in the RIF. The court found that if MacLennan had filed an incomplete form, the RSA would have required Provident to help him provide the necessary information.

Provident argued that they had to maintain strict deadlines so that they could complete their reassessment process by December 31, 2006. Nevertheless their argument failed credibility for two reasons. 1) They could not explain how an 11-day delay would have impaired their ability to meet their deadline. 2) They also sought and obtained a one-year extension to complete the RSA review process.

Provident argued that it would be impossible for them to reassess his claim because the RSA process had already been completed and their reassessment unit had been disbanded. The long-term disability insurer also suggested that MacLennan’s RSA claims were preempted by his failure to exhaust his administrative remedies. The Court disagreed. Every case Provident cited to prove their point did not include a separate state-law claim based on an alleged breach of the RSA itself.

While the Court granted summary judgment to Provident for MacLennan’s ERISA claims, the Court gave Provident the choice of providing MacLennan with a fresh review of his long-term disability claim or to have MacLennan’s breach of contract, unjust enrichment, and breach of the covenant of good faith and fair dealing, and CUTPA claims brought to trial.