The Second Circuit’s recent decision in McQuillin v. Hartford Life Insurance and Accident Ins. Co., 35 F.4th 416 (2d Cir. 2022), serves as a reminder that plan administrators are required to comply strictly with the claims procedure regulations set forth at ERISA § 503 and 29 C.F.R. § 2560.503-1.
The claimant in McQuillin sought long-term disability benefits after suffering from side effects of prostate cancer treatment. The administrator of the long-term disability plan denied the claim on the grounds that the plan did not have enough information to evaluate the disability. Consistent with ERISA, the initial denial letter informed the claimant of his right to appeal the decision and that the administrator would provide a final benefits decision within 45 days of the appeal. The letter also stated that if the claimant disagreed with the decision on appeal, he had the right to seek judicial review by commencing an action under ERISA.
On April 11, 2020, the claimant filed an appeal that included additional information concerning his disability. Twelve days later, on April 23, 2020, the administrator issued a letter stating that the initial denial was overturned but that the claim was being forwarded to the claims department to evaluate whether the claimant was in fact disabled, and that payment therefore was not guaranteed. On May 27, 2020, the 46th day following his appeal, the claimant commenced a lawsuit in the Eastern District of New York under ERISA seeking payment of long-term disability benefits. In July 2020, the administrator denied disability benefits on the grounds that the claimant was not disabled. In May 2021, the district court dismissed the action on the grounds that the claimant had failed to exhaust the administrative claims procedure because his claim was still under review when he filed suit. The Second Circuit disagreed and reversed.
In reversing the dismissal, the Second Circuit noted that ERISA imposes a duty to “strictly adhere” to its regulations and explained that if a plan fails to meet its obligations with respect to a claim, the claimant shall be deemed to have exhausted the plan’s administrative remedies. McQuillin, 36 F.4th at 419 (citing 29 C.F.R. § 2560.503-1(l)(2)(i)).
ERISA’s regulations require a plan’s administrator to provide a benefit determination within 45-days of the claimant’s appeal, subject to an extension under “special circumstances.” Id. at 421 (citing 29 C.F.R. § 2560.503-1(i)(1)(i), (3)(i)). The Second Circuit found the claimant to have exhausted the claims procedure process because the McQuillin administrator had neither rendered a benefit determination within 45-days of the claimant’s appeal nor obtained an extension. Id. at 422.
The Second Circuit rejected the administrator’s argument that its letter of April 23, 2020 constituted a benefit determination. The letter could not be a benefits determination, the Court reasoned, because it did not provide a complete resolution of the claim. Id. at 420. Moreover, the court explained that the 45-day deadline set forth in ERISA’s regulations would be rendered meaningless if an administrator could simply notify the claimant that it was remanding the claim for further review. Id. at 421.
ERISA’s claims procedures are complicated, and as illustrated in McQuillin, a party’s failure to strictly comply may lead to unfavorable results. If you have any questions about ERISA’s claims procedure, contact Michael Rakower or Melissa Yang.
You may also wish to read the article Mr. Rakower and Ms Yang wrote ERISA’s claims procedure: Failing to Heed ERISA’s Claims Procedure: A Fast-Track to Court and De Novo Review.McQuillin