Reliance’s Delay in Denying Disability Claim May Affect Standard of Review

In Fessendon v. Reliance Standard Life Insurance Company, plaintiff’s claim for long term disability benefits under an ERISA governed plan was denied. There is a dispute between the parties as to whether the court should apply an abuse of discretion standard or a de novo review. Plaintiff filed a motion arguing that the court should review his ERISA claim de novo since Reliance did not issue its denial of his claim within the time required under ERISA. Reliance claimed it substantially complied with ERISA time requirements, so an abuse of discretion standard should still apply to the review.

After briefing was complete, but before the court issued its order, a Second Circuit case was published discussing in depth the doctrine of substantial compliance in ERISA cases. The Court did not issue a decision, but directed the parties to file briefs discussing how the new case applies.

Undisputed Facts

Reliance provided disability insurance benefits to plaintiff, an employee of Oracle America, Inc. The policy had a clause giving Reliance “discretionary authority to interpret the Plan and the insurance policy and determine eligibility for benefits.” Reliance’s decision is “complete, final and binding on all parties.” Generally, when a policy has such a clause and a plaintiff files an ERISA lawsuit after a denial, the court reviews the plan’s denial of a claim under an abuse of discretion standard and will only reverse the decision if it was arbitrary and capricious.

In this case, Plaintiff was granted short term disability by Reliance, but his claim for long term benefits was denied and Plaintiff appealed. The appeal was denied a few days after the deadline by which it was required, under ERISA laws, to issue its decision. While waiting for the decision, the plaintiff filed the ERISA lawsuit claiming her appeal was deemed denied since Reliance had missed its deadline.

The court, in a footnote, agreed with plaintiff that Reliance missed the deadline for deciding his claim. The question was what affect that had on the applicable standard of review. Normally, a discretionary clause such as the one Reliance had in the policy would trump de novo review. But, since Reliance missed its denial deadline, plaintiff argued his claim was “deemed denied” which allowed the court to apply the higher standard of review.

De Novo Review is Triggered When the Plan Missed the ERISA Established Decision Deadline

In his argument for de novo review, the plaintiff relied on a Second Circuit case which held that when a plan administrator misses a decision making deadline, the claim is deemed denied which triggers de novo review even if the plan has a discretionary clause. De novo review allows the court to make its own decision on whether a claimant qualifies for disability benefits without giving deference to the plan administrator’s decision. Of course, Reliance argued that it had substantially complied and therefore, the abuse of discretion standard should still apply. The plaintiff disagreed with Reliance’s substantial compliance argument.

Substantial Compliance

After briefing was complete, the Second Circuit published a case discussing the application of substantial compliance to a situation similar to the one before the court. Hence, the court did not make a ruling, but required the parties to provide briefing on what affect the newly-decided case had on their situation.

This case is not being handled by our office, but we believe it is instructive for those who have a dispute concerning the proper standard of review. If you have a question about a similar matter, or any matter relevant to your disability claim, contact one of our lawyers for a free consultation and case evaluation.

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Steve Dell has done an exceptional job with my disability application process. The firm is extremely well managed. They have acquired an incredible amount of experience over many years. I recommend them for disability insurance claims without reservation. 

Don (Florida)

I called this firm a few months ago completely disparaged due to a company cutting off disability benefits at a time that nearly caused me to lose everything.

Attorney Alex Palmera and Danielle worked hard to reach an amicable settlement and my case was settled a few months later. This is a good firm and the specific expertise in disability claims saved me countless hours of hassle at a time when an already fragile state existed.

Thank you Mr. Palamara and Danielle.

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They did a fantastic job communicating between the provider and me, always keeping my best interest at heart and always answering my many many questions. They really did take most of the stress out of this whole situation. I would give them a 10 out of 10 for every step of this crazy journey. Thank you so much for helping me through this.

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Greg Dell and his assistant Anneli have been extremely responsive and helpful, not only our initial consultations, but in follow-ups 1 and 2 years later with the insurance company to ensure that they comply with their agreements (which they did), as well as a separate and only slightly-related inquiry about our health insurance. I always hear back from them very quickly, which is rare and greatly appreciated.

Jeff P. (Oklahoma)

After a very long and frustrating ordeal to keep my LTD payments coming I decided to seek assistance from and attorney. After much research and asking those in the legal profession Dell & Schaefer seemed to be the top choice. I reached out and Alex Palamara was the attorney assigned to my case. All I can say is the experience was outstanding. Both Alex and his Paralegal, Danielle Lauria were excellent to work with. They were very kind, concerned, understanding of my frustrations and treated me with the utmost respect. Communication was excellent with regular updates and telling me what I could expect in each stage of the process.

Alex was also very straight forward with what to expect and no pie in the sky promises or expectations were made. In the end we won our case and I believe it was solely due to their experience and knowledge of not only the laws but the insurance companies as a whole. I would highly recommend them and am very grateful for the help they afforded to me.

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I originally spoke with 3 other long term disability lawyers about my case before contacting Dell and Schaefer. None of those law firms would take it. They said the chances of me winning was not good. After finding Dell and Schaefer online I spoke with one of the attorneys that has since left. He did take my case but later it was picked up by Rachel Alters. Rachel is amazing and a very intelligent attorney. She not only won my case but also was able to get my back pay for 6 months.

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