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The Second Circuit Court of Appeals recently held that claim fiduciaries must strictly comply with ERISA claim regulations or lose the deferential standard of review, as we have discussed in previous posts: Second Circuit rejects “substantial compliance” rule, Insurer’s Failure to Establish “Special Circumstances” for Extension of Time to Decide LTD Appeal Warrants De Novo Review, and District of Connecticut Rules that Violations of Claims Procedure Regulations Result in Loss of Discretion.

While other courts have not applied the same strict level of scrutiny to the claims regulations as Halo and its progeny, the Ninth Circuit recently held that a procedural violation in the claims-handling process may warrant de novo review if it resulted in substantive harm to the claimant. In Smith v. Reliance Standard Life Ins. Co., Dkt. # No. 16-15319 (9th Cir., March 16, 2017), the Ninth Circuit Court of Appeals vacated a district court’s order in favor of the insurer on a plan participant’s claims for short- and long-term disability benefits, remanding the case back to the district court for further consideration.
Continue Reading Ninth Circuit Holds That Violation of DOL Claim Regulations Can Result in a Loss of Deference

As ordered by President Trump in a presidential memorandum (the “Memorandum”) on February 3, 2017, the U.S. Department of Labor (DOL) proposed a 60-day delay to the “fiduciary rule,” which revised the definition of “fiduciary” for retirement investment advice purposes. The rule was originally set to become effective on April 10, 2017; however, after receiving…

Following the 2016 decision of the Second Circuit Court of Appeals in Halo v. Yale Health Plan, 819 F.3d 42 (2d Cir. 2016), in which the Second Circuit rejected the doctrine of “substantial compliance” with ERISA claim regulations in favor of a much stricter interpretation, courts within the Second Circuit have increasingly held insurers and other claims fiduciaries to a high standard of compliance with the claim regulations, regardless of the type of benefit at issue.

Under Halo, a plan’s failure to comply with the claims-procedure regulations will result in that claim being reviewed de novo, unless the plan has otherwise “established procedures in full conformity” with the regulations and can show that its failure to comply with the regulations was both inadvertent and harmless. We have previously written about this here and here.

Most recently, in Schuman v. Aetna Life Ins. Co., 2017 U.S. Dist. LEXIS 39388 (D. Conn. Mar. 20, 2017), the U.S. District Court for the District of Connecticut ruled that Halo compelled de novo review of a denial of long-term disability benefits, despite the grant of discretion in the plan. The plaintiff (plan participant) alleged several violations of the claims-procedure regulations, including: failure to adequately consider a vocational assessment submitted by the plaintiff; improper deference to the initial decision on appeal; failure to provide copies of internal policy guidelines upon request; and lack of adequate safeguards to ensure that claims decisions were made in accordance with the applicable plan document.
Continue Reading District of Connecticut Rules that Violations of Claims Procedure Regulations Result in Loss of Discretion

As ordered by President Trump in last month’s presidential memorandum (the “Memorandum”), the U.S. Department of Labor (DOL) proposed a 60-day delay to its conflict of interest rule (commonly referred to as the “fiduciary rule”). The effective date of the fiduciary rule, which revised the definition of a “fiduciary” for retirement investment advice purposes, is currently April 10, 2017. In addition to a general 15-day comment period, the DOL is also accepting comments until April 16, 2017 on the Memorandum itself and on issues applicable to whether or not the fiduciary rule should be revised, revoked, or further delayed.
Continue Reading DOL Calls For Delay of the Fiduciary Rule

In a recent decision from the Southern District of New York in a case concerning a dispute over the denial of long-term disability (LTD) benefits, a District Court judge held that the LTD insurer had failed to establish special circumstances warranting an extension of the time frame for deciding the claimant’s appeal during the administrative review process. The Court determined that this constituted a violation of the claims processing regulations under ERISA, thereby warranting a de novo review of the insurer’s decision rather than the arbitrary and capricious standard of review that otherwise would apply.

The case, Salisbury v. Prudential Insurance Co. (Dkt. 15-cv-9799, S.D.N.Y.), involves a claim by an employee for LTD benefits under an employer-sponsored ERISA benefit plan. LTD benefits were provided through a group insurance policy issued by Prudential, who served as the claims administrator. After Prudential initially denied the employee’s claim for LTD benefits, the employee appealed the decision with Prudential, as claimants generally must exhaust their administrative remedies prior to initiating litigation. Under the existing U.S. Department of Labor (DOL) claim regulations, Prudential had 45 days to issue a decision on the appeal. 
Continue Reading Insurer’s Failure to Establish “Special Circumstances” for Extension of Time to Decide LTD Appeal Warrants De Novo Review

On December 19, 2016, the Department of Labor ended a year-long process to update the regulations governing claim procedures for disability plans, 29 C.F.R. §  2560.503-1. The text of the new regulations, and the DOL’s explanation of changes and the comment process, can be found here.

The DOL’s express goal in establishing these new regulations is to “strengthen[] the current rules primarily by adopting certain procedural protections and safeguards for disability benefit claims that are currently applicable to claims for group health benefits pursuant to the Affordable Care Act.” The DOL concluded that a stronger regulation was needed, in part, because “disability cases dominate the ERISA litigation landscape today[.]”
Continue Reading DOL Issues New Regulations for Plans Providing Disability Benefits

In Halo v. Yale Health Plan, 819 F.3d 42 (2d Cir. 2016), the Second Circuit made a significant change to the impact of ERISA claim regulations on subsequent litigation, rejecting the rule that it is sufficient for claim administrators to substantially comply with the regulations. Instead, the court held that, unless there is strict compliance with the regulations, courts will ordinarily conduct a de novo review of claim determinations, though it established a path for administrators to retain the arbitrary and capricious standard of review.
Continue Reading Second Circuit rejects “substantial compliance” rule

In Santana-Diaz v. Metro. Life Ins. Co., 816 F.3d 172 (1st Cir. 2016), the court held “that ERISA requires a plan administrator in its denial of benefits letter to inform a claimant of not only his right to bring a civil action, but also the plan-imposed time limit for doing so. Because MetLife violated this regulatory obligation, the limitations period in this case was rendered inapplicable[.]” The First Circuit thus reversed the district court, which had held that the failure to provide notice was not dispositive because plaintiff was aware of the limitation through the group policy.
Continue Reading Failure to disclose contractual limitation in ERISA claim denial letter is per se prejudicial

In Mirza v. Ins. Administrator of Amer., Inc., 800 F.3d 129 (3d Cir. 2015), the court held that the failure to disclose a contractual limitation period in a denial letter precluded enforcement of that limitation, and required application of the most analogous state limitation period.

The district court had ruled, in granting summary judgment for defendant, that a lack of notice was irrelevant, because the plaintiff had knowledge of the limitation, and therefore could not benefit from the equitable tolling that might otherwise flow from a lack of required disclosure. The Third Circuit held “we do not find equitable tolling to be an obstacle, or even relevant, to Mirza’s claim.”
Continue Reading Third Circuit rules that claim denial letters must disclose contractual limitation period