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.
The Schuman court noted that the claimed violations were sufficient to trigger application of Halo and warrant de novo review of the denial decision.
The court did not rule on the merits of the claim, however, finding that there were ambiguities in the administrative record, particularly regarding the vocational evidence. Therefore, the court remanded the case so that the administrative record could be supplemented with information necessary to permit Aetna to make an appropriate evaluation of the LTD claim. The court noted that, without a remand, the court would be required to consider significant evidence outside of the existing record and essentially become the decisionmaker rather than a reviewer of the claims administrator’s decisions.
It is unclear whether, if Aetna were to correct the alleged procedural errors upon remand, any subsequent denial of benefits would be reviewed under the deferential standard.
Schuman highlights the fact that plaintiffs are increasingly using alleged procedural violations in the claims handling process to try to obtain a more favorable standard of review, additional discovery, and/or the opportunity to supplement the administrative record on remand.