In an ERISA disability case, an insurance company cannot deny a claim without any explanations. Instead, under 29 U.S.C. §1133, it has to provide written notice of the “specific reasons” for the denial, and it must allow a “full and fair review” of any denial, i.e., an administrative appeal.
An important regulation from the United States Department of Labor provides some guidance on §1133. Specifically, 29 C.F.R. § 2560.503–1 (the “claims procedure regulation”) requires, in part, that any denial of a claim include the following information:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent plan provisions on which the denial is based;
(3) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
(4) Appropriate information as to the steps to be taken if the participant or beneficiary wishes to submit his or her claim for review.
The claims procedure regulation, in particular, provides notable protections for claimants: An insurance company must not only explain its reasons for denial, but also, it must inform the claimant what information or documents he or she needs to submit in order to appeal. The insurance company also cannot withhold important documents from the claimant. For example, in Hamall-Desai v. Fortis Benefits Ins. Co. (N.D. Ga. 2004), the district court held that the requirement of a “full and fair review” of a denial meant that the insurance company had to provide the claimant with copies of all the documents, records and other information it relied on in making its decision to deny the claim. The court explained that, by failing to provide this information, the insurance company prevented the claimant from preparing an adequate appeal because she could not respond to the evidence the insurance company used to support its decision.
Perhaps the most important consequence of the claims procedure regulation embodied in §1133 is that an insurance company cannot deny a claim for any reason, either on appeal, or later in court litigation, that the plan administrator did not rely on in its initial denial. For example, in Castle v. Reliance Standard Life Ins. Co. (S.D. Ohio 2001), the plan administrator denied the claimant’s claim for benefits. After the claimaint filed a long term disability lawsuit in court, the insurance company argued that the claimant was not entitled to benefits because she failed to establish she was under the continuing care of a physician, as required under the disability policy. The district court rejected that argument, in part, because the plan administrator did not cite it as a reason for denying the plaintiff’s claim. Specifically, the court held that the insurance company ran afoul of §1133 and the claims procedure regulation when it developed a “post hoc justification” for denying the claimant’s claim. The court noted, that by failing to cite the “regular care of a physician requirement” as a basis for initially denying the claimant’s claim, the defendant denied her the opportunity to present evidence on that issue when she appealed her denial.
The Castle court’s decision is helpful to claimants and Tennessee disability attorneys. Specifically, the court’s interpretation of §1133 in that case means that, when a claimant submits an administrative appeal of a denial of benefits, he or she needs to address only the reasons for denial which the insurance company set forth in its denial letter, or in subsequent communications. The claimant, or the claimant’s attorney, can then draft a targeted appeal directed at the insurance company’s reasons for denial, without having to pro-actively address issues that the insurance company has never previously raised.
Administrative appeals are tricky, especially in ERISA cases. If your insurance company denied your claim for benefits, you should first consult with a disability attorney before submitting your appeal.