One of the more frustrating aspects of ERISA disability insurance practice is where insurers are not taken to task more forcefully where they fail to comply with ERISA and the regulations governing ERISA disability claim. As one example, an insurer is obligated to issue a benefit determination on an appeal of a claimant’s adverse benefit determination (a claim denial or claim termination) within a proscribed period of time. This time frame is usually within 45 days, with the potential for a second 45 days if the insurer identifies special circumstances.
However, quite often, an insurer will fail to issue a decision timely. What can be done in such circumstances? Can a claimant file a lawsuit and claim to the Court that the appeal has been “deemed denied”? What will be the effect of this?
Courts throughout the country have wrestled with this concept. Many courts have adopted the “deemed denied” approach, which in essence strips the insurer of whatever level of discretionary authority it may have held, and proceeds to conduct a de novo claim determination. This alteration of the standard of review can result in a markedly different litigation posture, as many cases are lost where the standard of review is considered abuse of discretion or arbitrary and capricious.
However, numerous courts continue to reward insurers who have failed to comply with ERISA and the regulations. Some refuse to alter the standard of review, claiming that the insurer has “substantially” complied, while others have directed that the claim to be remanded to the insurer for further consideration. This has the effect of rewarding an insurer’s recalcitrant behavior, and results in further delays to a claimant’s ability to secure adjudication of his or her claim (perhaps something the insurer is hoping for, in an effort to forestall).
Thus, depending upon what jurisdiction your claim can be heard, it is important to consider strategy in commencing litigation where an insurer has failed to comply with its obligations under ERISA. If you are faced with such a situation, please do not hesitate to contact us, we can help.