Does it seem like your disability insurance company is taking too long to decide your claim? You may be correct. If the insurer’s decision is in fact late there are steps you likely need to take to enforce your legal rights.
The Employee Retirement Income Security Act of 1974 (“ERISA”), the law that governs group long term disability claims, imposes strict deadlines on insurance company communications and benefit decisions. Where the insurance company fails to meet those deadlines, ERISA also provides you with a number of important procedural and substantive advantages.
It is nearly impossible for anyone but an ERISA expert to determine whether an insurance company has complied with these highly technical requirements. The purpose of this article will be to explain the basics. If, after reading the article, you suspect the insurer may be taking longer than the law allows to decide your claim, you should immediately contact an ERISA lawyer for a case evaluation.
When Congress enacted ERISA in 1974, by statute it authorized the Department of Labor (“DOL”) to enact regulations defining insurer standards of conduct to ensure that every claim receives a “full and fair review.” The DOL has enacted several versions of these regulations in the last fifty years, most recently updating them in 2018. Each revision has improved the level of consumer protection. Many changes have responded to – and outlawed – commonplace insurance industry practices that tended to undermine ERISA’s primary promise of “enhanced protection of employee benefits.”
Each amendment to the regulations has followed a period of public notice and comment. The DOL historical comments have consistently recognized that time is of the essence when a disabled worker is awaiting a decision on income replacement benefits. So, one of the main objectives of the regulations is to prevent unnecessary delays.
Having said that, the process of filing and investigating a long-term disability (LTD) claim is complex. It often takes months even when the insurance company is diligent and does everything correctly. Sometimes, though, insurance companies drag their feet, make unnecessary and/or duplicative requests for information, or are simply sloppy and negligent in moving their claim investigations forward. Those kinds of delays tend to violate the legal standards set forth by regulation.
This article provides an overview of the legal expectations for the timely processing of LTD claims, using a recent case as an illustrative example, and examines Prudential’s history of denying claims.
Case Overview: Our Client v. The Prudential Insurance Company of America
In the case of Our Client v. The Prudential Insurance Company of America, our client filed a lawsuit because Prudential was months-late in issuing a decision on his claim. Our client therefore exercised his legal right under ERISA regulations to bypass the “administrative appeal” process wherein Prudential would have re-reviewed its claim denial. The appeal process itself can take nine months even when the insurer meets all its deadlines. There was no reason to believe Prudential would do any better in meeting its appeal deadlines than it had with the original claim.
During the lawsuit our client sought partial summary judgment. The plaintiff argued Prudential’s significant delays and failure to comply with the regulatory standards necessitated a judicial review under the more stringent “de novo” standard rather than the deferential “arbitrary and capricious” standard.
ERISA Standards for Claim Processing
The DOL’s ERISA “full and fair review” regulation sets forth specific requirements for the handling of LTD claims for employer-sponsored disability plans. For instance, insurers are obligated to provide a written decision on a claim within 45 days of receipt. Extensions are permissible under special circumstances, but, in order to be effective, they must be communicated before the expiration of the initial deadline.
Moreover, any delays must be for reasons beyond the control of the insurance company, such as the claimant’s own failure to timely submit completed forms. Even if those conditions are met, the insurer may only seek two extensions, each for a maximum of 30 days.
We routinely see insurance companies violate these provisions by:
- Failing to send a timely written notice of extension at all;
- Failing to set forth the “circumstances beyond their control” preventing a decision;
- Purporting to take more than 30 days per extension; and
- Taking more than the two extensions authorized by law.
In our client’s case, we contend that Prudential failed to issue a decision within the stipulated time frames, missing the deadline by 275 days. This significant delay, coupled with procedural violations, led to the plaintiff seeking a summary judgment that the case should be reviewed under a lower burden of proof – making ultimate success more likely.
Key Legal Points
- Strict Adherence to Deadlines: ERISA regulations require strict adherence to decision deadlines. Any deviation, such as delayed extension notices or invalid reasons for extensions, constitutes a procedural violation.
- Deemed Exhaustion of Administrative Remedies: When an insurer fails to comply with these procedural requirements, claimants are deemed to have exhausted their “administrative remedies,” allowing them to file suit immediately, even without going through the otherwise mandated internal appeal process.
- Standard of Judicial Review: In the vast majority of ERISA claims the claimant faces an unusually high burden of proof compared to other civil disputes. In most ERISA-governed disability benefit claims, the courts will uphold the insurer’s denial of the claim even when it disagrees with that decision. The courts will only reverse the decision if there was no reasonable basis for disagreement (ERISA cases refer to this as the “arbitrary and capricious” standard of review).
However, where the insurance company violates its deadlines and other regulatory duties, the claimant’s burden of proof drops to a more traditional “de novo” standard. This means the judge can award benefits if he simply finds the claimant’s evidence more convincing than the insurance company’s. We cannot overstate the importance of this advantage. In short, proving the insurance’s company’s procedural violations makes it much easier to ultimately win the case.
Prudential’s Procedural Violations
We contend that Prudential’s handling of our client’s claim involved multiple procedural missteps:
- Late Start of Investigation: Prudential delayed starting the LTD claim investigation by four months.
- Improper Extensions: Prudential attempted to take three 45-day extensions and a fourth unspecified extension, none of which complied with the regulatory requirement of a maximum of two 30-day extensions.
- Lack of Justification: The reasons provided for the extensions were either non-existent or invalid, failing to meet the “special circumstances” criteria.
These violations led to a significant delay in the final decision, which our client contends was issued 275 days late. Such delays not only breach the insurer’s fiduciary duty but also fail to provide the “full and fair review” required by ERISA.
Prudential’s History of Denying Claims
Prudential has a documented history of claim denials that have resulted in legal challenges and significant scrutiny. Over the years, numerous policyholders have accused Prudential of unfairly denying or delaying claims, leading to financial hardship and distress.
Notable Cases and Settlements
Prudential has been involved in several high-profile cases where courts found the company’s handling of claims to be improper. These cases often highlight a pattern of behavior that includes delaying investigations, failing to communicate adequately with claimants, and using technicalities to deny valid claims.
Rodriguez v. Prudential Insurance Co.: In this case, the court found that Prudential had improperly denied disability benefits to the plaintiff. The court criticized Prudential for its reliance on biased medical reviews and failure to consider the entirety of the claimant’s medical condition.
Hasten v. Prudential Ins. Co. of Am. – the court held as a matter of law that Prudential violated “full and fair” review because its initial claim decision (as opposed to an administrative appeal decision) was untimely. Prudential issued its decision 125 days after receiving the claim and 20 days beyond the maximum 105 days allowed by regulation even with proper extensions. The court noted that Prudential had twice provided deficient attempts to extend its deadline. The court wrote that, as here, “Defendant did not indicate that the delayed response time was due to circumstances beyond control of the Plan. Defendant did not identify a reason for the extension other than it needed more time. Defendant did not offer an anticipated decision date.” Moreover, the court admonished Prudential that its second notice letter, sent 56 days after the first extension period had expired, was untimely. Thus, the court held as a matter of law that Prudential had not strictly adhered to the regulatory requirements of full and of review. The court therefore denied Prudential’s motion to dismiss, holding that Hasten was not required to submit an administrative appeal before filing suit.
Claimants Who Face Such Delays Have Several Avenues for Recourse:
Filing a Lawsuit: As demonstrated in Hasten and several other reported decisions, claimants can file a lawsuit if their administrative remedies are deemed exhausted due to the insurer’s procedural violations.
Seeking De Novo Review: Courts can be petitioned to apply the de novo standard of review, which does not defer to the insurer’s previous decisions, ensuring a fair judicial assessment of the claim.
For claimants, understanding their rights and the regulatory standards can provide a pathway to ensuring they receive the benefits they are entitled to in a timely manner.
Prudential is certainly not alone in its failure to adhere to regulatory deadlines. There are similar reported decisions against reliance Standard Life insurance Company, Standard Insurance Company, Equitable Life Assurance Society, Aetna, American General, Unum and others.
If you feel like you are facing delays and/or poor communication with your long-term disability claim, it is important to immediately consult with a knowledgeable Atlanta, GA ERISA attorney who can help you navigate the complexities of ERISA and advocate for your rights effectively.
