In Jody Rizzo v. First Reliance Standard Life Insurance Company, plaintiff’s late husband, Angelo Rizzo, participated in a group life insurance policy provided as a benefit by his employer, Barnes & Noble, where he was employed as an assistant store manager. The policy was issued by Reliance Standard. On about November 12, 2012, Mr. Rizzo stopped working due to his multiple medical problems. He died approximately 15 months later at the age of 42.
The life insurance policy had a “waiver of premium” (WOP) clause which paid a plan participant’s premiums if that person became totally disabled. Total disability was defined as a “complete inability to engage in any type of work for wage or profit for which he/she is suited by education, training or experience.”
On March 1, 2013, Reliance Standard wrote to Mr. Rizzo informing him of how to apply for WOP benefits, and explained to him that his life insurance coverage policy could only be maintained if his employer paid for seven more months of benefits. Reliance told him since he was no longer working, he could only maintain the policy if his WOP application was approved, or he converted the group policy to an individual policy within 31-days of a denial of his WOP application.
Mr. Rizzo timely applied for WOP benefits, but On October 9, 2013, 203 days after his application, Reliance sent a letter denying his application on the grounds that he was not totally disabled under the terms of the policy. Reliance alleged that between November 8, 2012, and November 1, 2013, Mr. Rizzo could perform a sedentary occupation, and identified four such occupations which it believed Mr. Rizzo could perform.
The October 9, 2013 letter also informed Mr. Rizzo that he had 180 days from the date of the letter to appeal the denial of WOP benefits. Meanwhile, on February 24, 2014, Mr. Rizzo died.
Mrs. Rizzo alleged that she did not receive the WOP denial letter until after Mr. Rizzo’s passing, and she contacted Reliance. Then, she only received it on March 6, 2014 after she requested it.
Mrs. Rizzo ultimately filed this ERISA lawsuit alleging that Reliance wrongfully denied her late husband’s WOP application and she was therefore entitled to the benefits of the policy. Reliance moved to dismiss the lawsuit on the grounds that Mr. Rizzo failed to exhaust his administrative remedies and therefore, the lawsuit was time-barred.
The United States District Court for the District of New Jersey held since Reliance failed to comply with timelines established by ERISA and case precedent, it deemed Mrs. Rizzo to have exhausted her administrative remedies. It further ruled in Mrs. Rizzo’s favor and awarded her the $188,000 life insurance policy that had been offered to Mr. Rizzo.
Exhaustion of Administrative Reasons
The Court noted that although ERISA does not specifically require a plaintiff to exhaust internal review procedures before filing a lawsuit, courts have read an exhaustion of remedies requirement into the statute. On the other hand, there are exceptions. One exception is “where a plan expressly requires exhaustion but fails to establish or follow claims procedures consistent with the applicable ERISA regulatory requirements, permitting a court to deem claimant to have exhausted their administrative remedies.”
In the Rizzo case, according to ERISA rules, Reliance was required to inform Mr. Rizzo that it had denied his WOP application within 90 days of his application. The denial letter it claimed to have sent on October 9, 2013 was sent 230 days after the application was submitted, 113 days after the expiration of the 90-day requirement. Since Reliance failed to comply with the statutory requirement, the Court held that “Plaintiff’s administrative remedies were deemed exhausted upon the expiration of the 90-day adverse determination period, and she was free to bring this lawsuit at any time thereafter.”
Denial of Benefits was Arbitrary and Capricious
The Court weighed several factors in determining that Reliance’s action in denying WOP benefits to Mr. Rizzo was arbitrary and capricious.
- Failure to consider medical information. The Court agreed with Mrs. Rizzo that Reliance concluded Mr. Rizzo was not disabled almost solely based upon an attending physician’s note of April 25, 2013 indicating Mr. Rizzo could perform sedentary work. That note also included serious diagnoses and symptoms that Reliance overlooked. In the period between April 25 and the denial letter of October 9, 2013, detailed additional medical information was available. The Court found Reliance’s failure to obtain further medical evidence was a factor that weighed in favor of Mrs. Rizzo.
- Violation of ERISA. ERISA requires that plan participants must be provided adequate written notice of why their benefit claim has been denied, setting forth specific reasons for the denial. Here, the Court found this weighed in favor of Reliance and that the October 9, 2013 letter provided the required information to Mr. Rizzo.
- Conflict of Interest. Reliance conceded that it had a structural conflict of interest since it was responsible for paying benefits as well as determining eligibility for collecting benefits. Thus, the conflict of interest of Reliance weighed in favor of Mrs. Rizzo.
The Court balanced all factors and held that Reliance’s “denial of Mr. Rizzo’s WOP application was arbitrary and capricious. The Court gave significant weight to the fact that Defendant failed to consider medical information available for its review before making a benefit determination.”
The Court continued, finding that Reliance “seemingly turned a blind eye to information that was, or could have been made, available to it between Dr. Riss’s April 25, 2013 Attending Physician Statement and its October 9, 2013 denial.” Taking all factors into consideration, the Court determined that Reliance’s “decision to deny Mr. Rizzo’s WOP application was not the product of reasoned decision-making and substantial evidence. Thus, the Court concludes that Plaintiff is entitled to the $188,000.00 in which the life insurance policy at issue in this case offered Mr. Rizzo.”
This case was not handled by our office, but if you have any questions about this, or any question concerning your disability claim or waiver of premium benefits claim, contact one of our attorneys at Dell & Schaefer for a free consultation.