The Importance of Denial Letters in Long-Term Disability Litigation

In an ERISA disability lawsuit, the plan administrator’s “denial letter” is one of the most important documents for a plaintiff. The letter is supposed to explain why the plan administrator denied a claim for disability benefits. A denial letter may also describe why the plan administrator rejected an administrative appeal of an earlier decision to deny benefits.

A denial letter should detail what evidence (medical exams, functional capacity evaluations, file reviews) the plan administrator relied on in making its determination that the claimant is disabled under the policy.  Too often, however, plan administrators craft denial letters to sound official by simply reciting the policy language and claimant’s medical diagnosesꟷwithout actually explaining the basis for their decisions. These letters may run 8-10 pages, but they often don’t say anything of substance.

A vague, conclusory denial letter is not merely irritating, it runs afoul of ERISA and Sixth Circuit case law. As a result, an attorney representing an ERISA disability plaintiff can use a defective denial letter against a plan administrator by arguing that the letter indicates an arbitrary and capricious review of the disability claim. Under ERISA, courts usually will only overturn a denial of disability benefits if the plaintiff can show that the decision was “arbitrary and capricious.” A flawed, incomplete denial letter can be evidence of just that.

Under 29 U.S.C.A. § 1133(1), a denial letter must set forth “specific reasons for such a denial, written in a manner calculated to be understood by the participant.” Courts in the Sixth Circuit, which includes the federal district courts in Tennessee, have faulted plan administrators for denial letters that have not met this standard. For example, in Corey v. Sedgwick Claims Mgmt. Servs. (6th Cir. 2017), the court held that the plan administrator’s denial of disability benefits was arbitrary and capricious, in part, because the denial letter failed to provide any explanation for the plan administrator’s decision.

The Sedgwick court also stated that a plan administrator “can’t issue a conclusory denial and then rely on an attorney to craft a post-hoc explanation.” So, for example, if a plan administrator in its denial letter never referred to surveillance footage it had of a claimant appearing to exceed his or her stated capabilities, the plan administrator’s attorneys cannot argue that that footage supports the denial of benefits in subsequent lawsuit.

Just as importantly, a denial letter must explain why the plan administrator is rejecting a claimant’s evidence in support of his or her claim for long-term disability benefits. In
Watson v. W. & S. Fin. Grp. Flexible Benefits Plan (E.D. Ky. 2019), the plaintiff’s rheumatologist opined that the plaintiff had osteoarthritis in her knees that was exacerbated by her obesity. The physician concluded that, as a result of plaintiff’s medical condition, she could not perform any of her job functions.

The defendant insurance company denied plaintiff’s claim for disability benefits. In its denial letter, the defendant recited verbatim the plan’s definition of disability and then simply stated:

The medical documentation submitted fails to support your claim for short-term disability benefits under the Plan. Your request for additional [STD] has been denied. No additional information is necessary for you to perfect your claim.

The defendant’s denial letter then advised the plaintiff as to how to pursue an appeal.

In awarding the plaintiff benefits under her employee benefit plan, the district court criticized the defendant’s conclusory denial letter, specifically noting that it did not provide any explanation as to why the conclusions of the plaintiff’s physician were rejected. Noted the court: “This is a textbook indicator that Western & Southern [Defendant] acted arbitrarily and capriciously.”

A denial letter is not just more paperwork from the plan administrator. It is an important document that should explain, in some detail, why a plan administrator rejected a claim for disability benefits. If you have questions as to whether you are entitled to benefits under your plan or policy, contact an experienced disability law firm to help you understand your legal rights.

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