Appealing Benefit Denials with the Plan: Law, Regulations and Practice

By: David Rintoul

(This article was prepared for a September 19, 2012 ERISA Seminar for the Connecticut Bar Association. It was prepared for attorneys who have some background in ERISA, but the article should be informative for a lawyer or non-lawyer with some knowledge of ERISA benefit claims)

•I. Introduction

Your client comes into your office with a great case: the long-term disability insurer for the employer's plan denied disability benefits to a brain surgeon who has Parkinson's. You are all ready to file suit, planning on getting a third of the $7,000 a month benefits and attorneys' fees. Before you can collect on this payday, however, you have to go back to the same people who unjustly denied the benefits in the first place to ask them to reverse the decision. Under ERISA, you have to exhaust the plan's procedures for appealing a benefit denial prior to bringing the case to court.

The plan's appeal procedures usually don't result in the denial being overturned. An effective and timely plan appeal is crucial, however, in prevailing in any suit to recover benefits under ERISA. These materials are intended to guide you through the legal and some of the practical aspects of conducting a plan appeal. These materials discuss the following:

  • Recent changes in regulations governing appeals of health benefit claims.
  • The law of the plan appeal process, including what claims must be appealed and exceptions to the exhaustion rule.
  • The regulations governing time limits and the process of the administrative appeal; and
  • Practical aspects of presenting an effective appeal of a benefit denial.

•II. Recent Development in Administrative Appeals: New Procedures for Health Benefit Claims

President Obama's health care law, the Patient Protection and Affordable Care Act ("PPACA") instituted new rules for processing and appeal of health benefit claims under group health insurance policies. An explanation of the final rules can be found at http://webapps.dol.gov/FederalRegister/HtmlDisplay.aspx?DocId=25131&AgencyId=8&DocumentType=2 The PPACA provides the following, in summary:

  • If the insurer does not strictly adhere to all the regulation's requirements, administrative appeals are deemed exhausted, allowing the claimant to proceed to federal court without pursuing further administrative remedies. Importantly, any review of the decision in any subsequent litigation will be de novo rather than under an arbitrary and capricious standard. [1] There is an exception for "minor compliance errors," which will not result in deemed exhaustion if the error is: de minimis; non-prejudicial to the claimant; beyond the insurer's control or is the result of good cause; was made as part of an ongoing, good faith exchange of information; and is not reflective of a pattern or practice of noncompliance. If the plan asserts an exception to the deemed exhaustion provision, the claimant has the right to request that the plan state in writing its basis for asserting that it is entitled to the exception.
  • Plans must offer an external review process for denials. Fully insured and self-insured plans must both comply. Plans must use an available state external review process. The decision of the external review is binding on the plan. If no state external review if available, then plans can use the review process currently administered by HHS, or a Federal external review process supervised by the U.S. Departments of Labor and Treasury. After January 1, 2014, a state external review procedure can only be used if it complies with certain provisions of the National Association of Insurance Commissioners Uniform Model Act. Connecticut's external review program, administered by the Insurance Department, complies with the requirement, so all plans should be using the state process after January 1, 2012. Self-insured plans not subject to a state review process or the HHS-supervised process have a safe harbor to comply with the external review requirement if they contract with at least three independent review organization and rotate claims among them by July 1, 2012
  • Response to an "urgent care claim" is still 72 hours, as under the prior regulations, but a plan cannot contest a physician's determination that a claim is "urgent."
  • To reduce conflicts of interest, decisions on hiring, compensation, termination and promotion of plan administration employees cannot be based denying claims. For instance, a plan could not offer a bonus based on how many denials an administrator made.
  • The denial letter must include the date of service, identify the health care provider, the claim amount, and any denial codes and their meaning. The letter must notify the claimant of the claimant's right to request diagnosis and treatment codes and their meaning.
  • The letter must describe any standard used to deny the claim, and how it was applied. For instance, if medical necessity is the basis for the denial, the notice must include a description of the medical necessity standard.
  • The plan must describe the process for internal appeals and the external review process, including how to initiate an appeal.
  • The plan must provide information on how to contact any consumer assistance program established under the Public Health Service Act to assist individuals with the claims process.
  • A rescission of coverage, for reasons other than non-payment of premium, is an "adverse determination" that requires a denial letter in compliance with the regulations. Rescission of coverage occurs, for instance, when a plan claims a participant was not truthful in completing a medical certification.
  • If more than 10% of the population in the claimant's county of residence speaks the same non-English language, the plan must provide notices in a "culturally and linguistically appropriate" manner. There are no counties in Connecticut that would be included, so these materials do not describe this process in detail. If you have a case that might be subject to these requirements, a description of the process and the counties that are included are listed in DOL's Final rule, the cite for which is above.

Most of these regulations only came into effect this year, and no cases construing the regulations have been decided yet. We therefore don't know yet what the practical consequences of the new rules will be.

•III. Statutes and Cases on the Administrative Appeal Process

ERISA requires that all plans must "afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim." 29 U.S.C. § 1133(2). While ERISA does not require administrative exhaustion, courts have uniformly interpreted this provision to impose an administrative exhaustion requirement on persons making claims for ERISA benefits. Kennedy v. Empire Blue Cross and Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993) Chapman v. Choicecare Long Island Term Disability Plan, 288 F.3d 506, 511 (2d Cir. 2002).

•A. Why Is the Administrative Appeal Procedure Important?

•1. General Rule: nothing is admissible in court that was not presented during the administrative process

The administrative appeal procedure is crucial to any subsequent litigation of the claim because evidence not presented during the administrative process is generally not admissible in any subsequent litigation. Muller v. First Unum, 341 F.3d 119 (2d. Cir. 2003); Zervos v. Verizon N.Y., Inc., 277 F.3d 635, 647 (2d. Cir. 2002). For instance, if the plan disputes the extent of cognitive impairment in a long-term disability claim, you may not be able to present a neuropsychological exam in court if you did not submit it during the administrative process. In conducting the administrative appeal, therefore, you should try to the greatest extent possible to put everything in during the administrative process that you might want to present at trial. While this rule is stricter in an arbitrary and capricious review case, it is also applied in de novo review cases. DeFelice v. American Int'l Life Assurance Co, 112 F.3d 61, 66 (2 nd Cir. 1997) (even in de novo review cases, court "ought not" to consider evidence outside the record).

•2. Exceptions to the Rule Excluding Non-Record Evidence

Clients may come to you who have already completed the administrative process, and you may be stuck with whatever administrative record they prepared. If the client recently finished the appeal process, and have any doubts about whether the record is complete, immediately send the plan a letter asking for an additional thirty to sixty days to submit additional information.

If you are stuck with an existing record, there are exceptions to the rule if you can show good cause for why it was not presented at the administrative level. DeFelice v. Am. Int'l Life Ins. Co., 112 F.3d 61, 67 (2d Cir. 1997). Good cause includes:

•a) Evidence to show a conflict of interest. In Metlife v. Glenn 554 U.S. 105 (2008) the Supreme Court ruled when the same entity determined benefit claim and paid benefits, there existed an inherent conflict of interest that could lead to a less deferential standard of arbitrary and capricious review. The Court further held that plaintiff could obtain discovery bearing on the existence of a conflict, and whether that conflict had expressed itself in biased handling of the claim. This issue in discussed by the other presenters.

•b) Evidence regarding the proper interpretation of the plan. Masella v. Blue Cross & Blue Shield of Conn., 936 F.2d 98, 104(2d. Cir. 1991) (allowing testimony regarding the nature of TMJ and its treatment to establish that the claim was for medical benefits rather than excluded dental treatment).

•c) The administrative record is inadequate, and the party seeking to add the information was not at fault (Masella, 936 F.2d at104 (when plan gave few reasons for the benefit denials and stated it would not change its decision, claimant allowed to submit additional evidence in the district court).

•d) The case involves complicated medical questions. Quesinberry v. Life Insurance Company of North America, 987 F.2d 1017, 1027 (4 th Cir. 1993) (live testimony allowed at trial, not presented during the administrative process, in resolving complicated issue of whether the insured's death was accidental).

•B. Do All ERISA Claims Require Administrative Exhaustion?

•1. Benefit Claims

Claims for benefits pursuant to ERISA § 503(a) (1) (B) always require administrative exhaustion, unless one of the general exceptions applies discussed below.

•2. Fiduciary Duty Claims

As the court in Smith v. Sydnor, 184 F.3d 356, 364 (4 th Cir. 1999) discusses below, there is a split in the circuits regarding the necessity for exhaustion prior to bringing breach of fiduciary duty claims. Bickley v. Caremark Rx, Inc., 461 F.3d 1325 (11th Cir. Ala. 2006) held that it was required.

While the courts of appeals are in near unanimity that exhaustion of administrative remedies is required before a plaintiff can bring an ERISA action in federal court to recover benefits under a plan, see Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 418 & n.4 (6th Cir. 1998) (listing cases), they are in sharp disagreement as to whether a plaintiff must exhaust administrative remedies before bringing an action in federal court to assert a violation of an ERISA statutory provision, such as a claim for breach of fiduciary duty. Compare Lindemann v. Mobil Oil Corp., 79 F.3d 647, 649-50 (7th Cir. 1996) (holding that district court has discretion to require exhaustion for ERISA § 510 claim); Mason v. Continental Group, Inc., 763 F.2d 1219, 1226-27 (11th Cir. 1985) (holding that exhaustion is required for ERISA § 510 claim and claims for breach of fiduciary duties), with Chailland v. Brown & Root, Inc., 45 F.3d 947, 950-51 (5th Cir. 1995) (holding that exhaustion is not required for ERISA § 510 claim where plan is incapable of providing a remedy); Richards v. General Motors Corp., 991 F.2d 1227, 1235 (6th Cir. 1993) (holding that exhaustion is not required for ERISA § 510 claim); Horan, 947 F.2d at 1416 n.1 ("The exhaustion requirement applies to plaintiffs' benefits claim, but does not apply to the plaintiffs' fiduciary breach claim because this claim alleges a violation of the statute, ERISA, rather than the Plan."); Held v. Manufacturers Hanover Leasing Corp., 912 F.2d 1197, 1204-05 (10th Cir. 1990) (holding that exhaustion is not required for ERISA § 510 claim); Molnar v. Wibbelt, 789 F.2d 244, 250 n.3 (3d Cir. 1986) (stating in dicta that exhaustion is not required for claim for breach of fiduciary duty).

•3. 510 Claims

Administrative exhaustion is generally not required for Section 510 claims. Novak v. TRW, Inc., 822 F. Supp. 963, 969 (E.D.N.Y. 1993); Lawford v. New York Life Ins. Co., 739 F. Supp. 906, 912 (S.D.N.Y. 1990); Zipf v. American Telephone & Telegraph Co., 799 F.2d 889, 891-92 (3d Cir. 1986); MacKay v. Rayonier, Inc., 25 F. Supp. 2d 47, 50 (D. Conn, 1998).

•4. Should I Pursue Administrative Remedies Anyway?

Even if you are sure that the administrative exhaustion requirement does not apply to your claim, you should do it anyway. Administrative exhaustion in the case of a 510 or fiduciary duty claim is likely to involve a single letter to the plan and a rejection of the claim. Doing this will avoid any fight in future litigation whether you have satisfied the administrative exhaustion requirement. Further, if you bring a breach of fiduciary duty claim without exhausting administrative remedies, the court might recast your complaint as a claim for benefits, and dismiss the case for failure to exhaust. D'Amico v. CBS Corp., 297 F.3d 287, 292 (4 th Cir. 2002).

•C. Is Administrative Exhaustion Ever Excused?

If an attorney is involved with a claim from the beginning, there should never be a problem with not pursuing administrative remedies. Even if you believe the law is clear that administrative exhaustion is not required, you should still do it to avoid the inevitable motion for summary judgment that will result from failure to pursue administrative remedies.

Clients will come to you, however, after time periods to appeal have expired. There are some limited exceptions to the requirement of administrative exhaustion. Failure to exhaust is not jurisdictional, but is rather a special defense that must be pled and that is subject to equitable consideration. Paese v. Hartford Life & Accident Ins. Co., 449 F.3d 435, 446 (2d Cir. 2006)

•1. Pursuing the administrative appeal process would have been futile. Sometimes, if the plan has made its position clear in the pending litigation, such that its disposition of any administrative claim is clear, the claim will not be remanded to the plan for an administrative review. Brunoli v. Fred Brunoli & Sons, 993 F. Supp. 66, 72 (D.Conn. 1997). Judge Squatrito discussed the "futility doctrine" at length in Cole v. Aetna Life and Cas, 2002 U.S. Dist. LEXIS 19656, *45 (March 28, 2002):

The 'futility doctrine' frees a claimant from the exhaustion requirement if he makes a "clear and positive showing" that exhausting his administrative remedies would have been futile. Kennedy, 989 F.2d at 594; Barnett v. I.B.M. Corp., 885 F. Supp. 581, 588 (S.D.N.Y. 1995). A plaintiff invoking this doctrine has a heavy burden, however. It is not enough for the plaintiff to argue that a claim would have been denied. Barnett, 885 F. Supp. at 588-89. Instead, there must be a "clear and positive" indication of futility. Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410 (6th Cir. 1998). For example, the plaintiff must "show that it is certain that [his] claim will be denied on appeal," or that the plan made some affirmative failure that denied him full access to the administrative procedure. Wilczynski v. Lumbermens Mut. Cas. Co., 93 F.3d 397 (7th Cir. 1997). For example, a plan's failure to inform a claimant of his appeal right, refusal to respond to a request for review, or engagement in some other irregularity has established that a further review would have been futile. Id.; see also Ludwig v. NYNEX, 838 F. Supp. 769, 781-82 (S.D.N.Y. 1993).

•2. The plan language does not sufficiently advise the claimant of the existence of the administrative appeal procedure or that the claimant must pursue the process before bringing suit. Burke v. Kodak Retirement Income Plan, 336 F.3d 103, 108 (2003) (where denial letter did not discuss the administrative procedure or refer the claimant to the section of the SPD that discussed the procedure, administrative exhaustion was excused); Watts v. Bellsouth Telcomms., 316 F.3d 1203 (2003) (claimant's interpretation of the SPD as giving her the option of either pursuing and administrative appeal or filing suit was reasonable, so failure to pursue required second-level appeal was excused.)

•3. If the plan's administrative procedures don't comply with the regulations, then the claimant is excused from pursuing the administrative process, and may proceed directly to file suit. 29 C.F.R. § 2560.503-1(l).

•4. The plan fails to comply with the time deadlines for making a decision. Gilbertson v. Allied Signal, 328 F.3d 625 (10 th cir. 2003)

•5. Attorneys' fees for the administrative appeal. While the courts require exhaustion of plan appeal procedures, they don't award fees incurred during the process. Peterson v. Continental Cas. Co., 282 F.3d 112, 120 (2 nd Cir. 2002) Anderson v. P&G, 220 F.3d 449, 453 (6 th Cir. 2000).

•D. What to Do With A Claim: Regulations Governing the Claims and Appeal Process, and Practical Considerations

This section discusses the claim procedure and the regulations applicable to it. The Department of Labor has issued requirements for claims procedures for benefit plans in 2003. 29 C.F.R. § 2560.503-1 (all section references below are to this regulation). As discussed above, the PPACA introduced additional requirements for group health insurance plans. Most of the matters summarized below are discussed in more detail in the regulations, so you should review the regulations each time you take an administrative appeal. The regulations deal with many aspects of the claims process, particularly time deadlines.

The first thing you should do in dealing with any benefit claim, whether as an initial application or a denial, is get the plans documents and the summary plan description (the "SPD"). Once you get the plan and the SPD, you want to first determine the following:

  • What standard of disability applies? After an employee has received benefits for twenty-four month, plans commonly change the definition of disabled from an "own occupation" standard, where the employee is disabled if he cannot perform his occupation, to an "any occupation " standard, in which a claimant is only disabled if he cannot perform any occupation to which he is suited by education or experience.
  • Does the plan require the claimant to be disabled from all of the material duties of the position, or just be unable to perform some of them. Hersee v. First Allmerica Fin. Life Ins. Co., 28 Employee Benefits Cas. (BNA) 1623 (D. Mass. 2002) ("each and every duty" means the claimant cannot perform any of the material duties); cites McClure v. Life Ins. Co. of North America, 84 F.3d 1129 (9th Cir. 1996) ("every duty" means claimant is disabled if can't perform any single material duty of the position).
  • Does the plan reserve sufficient discretion to interpret the plan and make factual determinations such that a court will apply an arbitrary and capricious standard of review rather than a de novo standard of review? Is the language just in the SPD but not in the plan, in which case the de novo standard of review will apply. Clark v. Bank of New York, 801 F.Supp. 1182 (S.D.N.Y. 1992); Reinertsen v. The Paul Revere Life Ins. Co., 127 F.Supp. 2d 1021 (N.D. Ill. 2001) Carter v. General Electric Co., 2001 U.S. Dist. LEXIS 1724 (N.D. Ill. 2001).
  • What is the exact benefit to which the claimant is entitled?
  • Are their material differences between the SPD and the plan document, and which provides greater benefits? This issue was recently addressed by the Supreme Court in the case of Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011). Amara addressed two major issues in ERISA litigation: the effect of provisions that are in the SPD but not the plan; and the types of equitable relief available for plaintiffs under ERISA. These issues are dealt with in more detail in the materials on the merits of benefit appeals, but discussion of the relations between the SPD and the plan documents will be briefly reviewed here.

The SPD. In any ERISA benefit plan, the two most important documents are the plan document itself, which is the lengthy, legalese-filled document that actually governs the plan and benefits, and the summary plan description, which is intended to tell participants in plain language what benefits they are entitled to. There has always been a tension between requiring information to be included in the SPD to let participants know the most important facts about their benefits but not including so much information that it no longer serves its purpose of clearly and simply explaining the benefit plan. Any lawyer who does residential closings knows how ineffective notices are when they go on for pages and pages.

The Amara court overruled the law of some circuits that plan in the event of an inconsistency between the SPD and the plan, the SPD provisions could be enforced as part of the plan. The significance of this holding is that if the SPD provision is part of the plan, then it can be enforced under Section 502(a(1)(B), which is ERISA's breach of contract provision.

.

•1. Filing the Claim

The regulations define a "claim for benefits" as a request for plan benefits "made by the claimant in accordance with a plan's reasonable procedure for filing benefit claims." Reg § (e). Each plan has a timetable and procedure for applying for benefits that you will have to follow. With long-term disability benefits, there is often an automatic process where the short-term disability administrator will submit the request directly to the long-term disability administrator.

•2. Decision on the Claim

A chart with all the deadlines involved in filing and appealing a benefit claim is attached. The time deadlines differ depending on the type of claim.

•3. Claim Processing and Appeal Regulations

Assuming that you client's claim for benefits was denied, you will receive a benefit denial letter. The contents of the denial letter will frame most of what goes on in the administrative appeal process. The letter is important, because the insurer is unlikely to be permitted to present a reason for the denial that is not contained in the denial letter. Vizcaino v. Microsoft Corp., 120 F.3d 1006, 1016 (9th Cir. 1997) Section (g) requires that the claim denial letter contain the following:

  • A specific reason or reasons for the denial;
  • Reference to the specific plan provision on which the denial is based;
  • A description of any additional material or information necessary for the claimant to perfect the claim, and an explanation of why the information is necessary;
  • A description of the plan's review procedures; and
  • If the claim involves a group health or disability benefit claim, the letter must describe any internal procedure or protocol used, and if the decision is based on lack of medical necessity or an experimental treatment limitation, the letter must describe the clinical judgment made, or offer to provide it.
  • If the claim is for health benefits, the letter must also contain the information required by the PPACA, discussed on page 1 of these materials.

Frequently, the denial letter will not satisfy these requirements, and will generically state something like "No objective evidence of the existence of the disability has been presented." If there are any deficiencies in the denial letter, you should point them out in your appeal to preserve your right to contest the deficiencies in any subsequent suit.

Appealing the Denial

Time deadlines for filing an appeal are listed on the chart below. Plans commonly give extensions of 60 -120 days if you need more time to assemble the information for the appeal. If you have time before the appeal period expires, you should start gathering the materials for the appeal before filing the actual appeal. Once you file the appeal, the time limits for responding to the appeal start running, and you can have a harder time getting extensions of time after the appeal is filed.

As soon as the client hires you, start working to get the medical records. Getting the records in a timely manner is a nightmare, so have your secretary or paralegal start following up a week after you send the requests.

Grounds to Appeal the Denial - What to Include in the Appeal Letter

Benefit appeal letters need to be comprehensive and detailed. Every basis for the denial must be addressed in detail. To avoid the problem of leaving out potential grounds for the denial, plans are issuing lengthy, many-page denial letter, restating verbatim large portions of the claim file. This greatly increases the burden of responding, but is necessary. You should think of the appeal letter as the first draft of your summary judgment motion. To give just a few examples of issues that are commonly addressed:

  • If the plan has misinterpreted a doctor's statement, you need a clarifying statement from the doctor. The file reviewing physician will often cherry-pick the medical records. For instance, in one appeal, he cited a medical record saying the claimant was doing better, while ignoring a record from a year later saying the claimant was much worse.
  • If the plan states that the claimant has not satisfied the standard diagnostic criteria for the condition, you need to research what the actual criteria are, review the medical records to find support for the diagnosis, and consult with the treater to discuss how to establish that the diagnostic criteria were met, or what additional testing must be done to establish it.
  • If the denial is based on a surveillance video, you need to analyze the actual activity shown in the video and how misstates the diagnostic conditions for the claimant's condition. For instance, in one case, the video showed a total of 1 ¼ hours of walking with occasional bending to pick up after a dog, and 3 hours of driving over a four-day period, which hardly showed that she could do her job.
  • If the plan has based the denial on an independent file review, you need to determine if certain medical records helpful to your client were not sent to the reviewer, or that the reviewer ignored parts of the reports he did review. Make sure that all the information is accurate. One file reviewer said, in supporting a denial, that the claimant moved like a normal 62 year old woman. The problem was the claimant was only 48 years old! Even after I pointed out the error, he re-issued the report with the same mistake.
  • If the denial is based in whole or part on a functional capacity exam or a neuropsych exam, review the results of the individual tests and make sure that they are not inconsistent with the conclusions of the evaluator.
  • It is common that benefits are denied on the basis that there is not objective evidence of the condition, or more commonly, objective evidence of the degree of the impairment. If you can establish, through on-line medical research or a physician statement, that the condition can only be establishing by subjective, non-objective factors, point out that requiring objective evidence of a condition that is established by subjective factors is an abuse of discretion. For instance, in Kelly v. Reliance Std. Life Ins. Co., 2011 U.S. Dist. LEXIS 147133, *24-25 (D.N.J. Dec. 21, 2011), the court stated:

The defendants are not free to ignore the plaintiff's chronic and severe pain under the apparent theory that MRIs or EMGs must demonstrate some structural deformity for a person to be disabled because of back pain. Unfortunately for all parties involved, back pain, even severe pain, is not so simple.

You can also have the client do a functional capacity exam, which is expensive, but can provide objective evidence of the impairment.

  • You need to examine and research each of the reasons stated in the denial letter. For instance, if the claimant reports cognitive problems with a complicated job like accounting, an insurer may try to cast doubt on the validity by stating that no doctor performed a "mini mental status exam" of the claimant. As you can see on a web site describing it, http://www.lawandpsychiatry.com/html/mini_mental_status_examination.htm, the purpose of the exam is to test for dementia. The test seeks to find out whether the patient is oriented as to time place and person and can follow simple written and oral instruction, and has little to say whether an executive could perform a high-powered job.

Health Benefit Claims. As discussed above, there are new regulations governing the processing of health benefit claims. You should be familiar with these new requirements, as the failure of the plan to comply with them can be grounds for obtaining de novo review of the decision when you file suit.

Getting approval for denied treatments or out-of-network providers depends on the cooperation of the treating physicians, and you should work with the doctor's office in coming up with grounds for appeal. Search the name of the particular procedure in Google, and you should be able to come up with useful information, including articles and advocacy groups. Most new treatments or medical procedure have some drug-company financed group behind them, and their information will be on the web.

Sources of Medical Information. Google is invaluable in locating medical and vocational information to respond to a denial of benefits. No matter how obscure an illness or treatment, I have always found extensive information on the web. A useful resource for introductory information on a medical procedure or condition, or to get definitions of unfamiliar words, is www.webmd.com. Once you wade through the weight-loss ads, you can get a quick introduction to the medical issues involved. You can get a free ten-day trial, which is plenty of time to download everything you need for a given condition. The UConn Med School library is useful too, but I have never found the librarians to be very helpful.

Disability Benefit Denials

Disability claims are typically denied for one or more of the following:

  • The medical records do not support the diagnosis.
  • Whether or not the diagnosis is proper, there is not sufficient "objective medical evidence" of the claimed restrictions and limitations in the medical records.
  • The claimant can still perform the job, even if the restrictions and limitations are valid.
  • Surveillance videos show activities the insurer claims are inconsistent with the claimed disabilities.
  • If the claimant is in the "any occupation" standard, that there are jobs available in the labor market that the claimant is suited by training and experience.

Medical Records. Disability benefit claims rise and fall on the quality of the medical records. You should make sure your clients tell their doctors the problems their conditions cause in their daily life, and that they ask for the information to be included in the record. Also, they should ask the doctor to put his own observations of impairments in the records. While the disability insurers refuse to recognize this fact, doctors do not use medical records to document disability. If the patient does not ask them to, they might not include the information in the records if there is no issue of diagnosis. Observations of impairment recorded by a doctor in medical records are worth far more than any statement that you prepare for the doctor to sign. Even subjective complaints included in the regular medical records are more valuable than statements prepared in connection with the appeal.

Diagnosis and Evidence of Impairment. Go to the websites referred to above, and conduct a Google search of condition involved in your case so you can make your own determination if the medical records support the diagnosis. You can also have your client obtain a functional capacity evaluation, which is expensive, but can provide objective evidence of the degree of impairment.

Additional Medical Evidence - Medical/Legal Consultations. Working with the claimant's treating physicians is crucial in preparing an effective appeal. Simply obtaining a letter that states that the doctor is of the opinion that the claimant is disabled to a reasonable degree of medical certainty is not sufficient. I commonly set up 15 minute telephone consolations with the doctors whose records played a role in the denial. I will give them the relevant portions of the denial letter, and ask for their response to how the plan interpreted their records or opinions, and what additional testing may confirm the diagnosis and the degree of impairment. I try to have as little involvement as possible in the actual drafting of the statement. Avoid giving them a letter that you prepare that they sign. Statements the lawyer prepares for doctors to sign have less little influence than statements the doctor prepares. If you do prepare the statement, do it in the form of reciting what you discussed and asking the doctor to confirm it.

You may consider having additional medical tests done. One common test is a neuropsychological exam. Disability insurers will rarely accept claims of cognitive impairment unless there is a neuropsych exam to substantiate them. Try to get a treater to subscribe one, because they cost $1,500 to $2,000. Other tests include cardiac capacity tests for claimants with heart problems.

Ability to Perform Position - Vocational Information. You should get the client's job description. Most plans define disability in terms of the claimant's "regular occupation," which the Second Circuit interprets to mean that the claimant must be disabled from performing her occupation as it exist in the general labor force, not the particular job she performed. Kinstler v. First Reliance Standard Life, 181 F.3d 243, 253 (2 nd Cir. 1999) (court does need to look at the actual job to make sure it uses the proper occupation). A great source for vocational information is http://online.onetcenter.org. It is an on-line version of the Department of Labor's Dictionary of Occupational Classifications. It has detailed ranked lists of skills and abilities required for thousands of job. You can go through the skills and abilities required, and explain how the claimant can't do them, citing any objective evidence you have to support it. You can compare the list to the claimant's disabilities to establish that she is unable to perform the most important functions of the position.

If you have a claim that is subject to the "any occupation" standard (see page 7), you may need to contest the insurer's claim that your client can perform certain jobs. One way to address this is to obtain a statement from a recruiter experience in placing people in the types of jobs the insurer claims your client could do that your client would not be a viable candidate for placement in such a position. Also, you can have the client do a functional capacity exam to provide objective evidence of what his capacity is.

How Many Levels of Appeal to Take

The plan cannot require more than two levels of appeal (sub§(c)(2)). The plan can have a voluntary third level of appeal, including arbitration. One of the appeal levels can be a "mandatory" arbitration process, but no fees can be imposed on the claimant, and the process must not preclude a suit under ERISA.

While two levels of appeal are commonly required, you can submit more information more than two times. Particularly if the client comes to you after pursuing the required two levels of appeal, you should ask for the opportunity to submit additional information to you can make sure the record is complete. Immediately request the claim file and ask for an additional sixty days to submit additional information. I have never been denied permission to do this.

Concluding the Administrative Process

Send a letter state you consider the administrative process to be exhausted, and that unless you hear from the insurer, you will file suit within thirty days.

Time Limits Governing Appeals

With respect to all these time limitations, the regulations require that the notification be within a reasonable time, but no more time than provided in the regulations. If you have a claim that needs to be decided in less time than provided in the regulations, you can argue that quicker notification is required. The time limits start when the claim is submitted, not when all the information in support of the claim is received.

Inform of Failure to Follow Procedures

To Issue a Decision

To File Initial Appeal Deadline

To Issue Decision After Appeal

Pre-Service Health Claims

5 days ((c)(1)(i))

15 days, with 15 extension ((f)(2)(iii)(A)

180 Days after denial (h)(3)(i)

30 days, unless 2 levels of appeal req'd, then 15 days for each. (i)(2)(ii)

Urgent Care Health Claims

24 Hours ((c)(1)(i))

72 hours, or 48 hours if the plan requested more information ((f)(2)(i)). [2]

180 Days after denial (h)(3)(i)

72 hours (i)(2(i)

Post-Service Health Claims

30 days ((f)(2)(iii)(B))

180 Days after denial (h)(3)(i)

60 days, unless 2 levels of appeal req'd, then 30 days for each. (i)(2)(iii)*

Disability Claims

45 days, with two 30 day extension

180 Days after denial (h)(4)

45 days, with one 45 day extension (i)(3)

All Other Claims

90 days, with one 90 day extension ((f)(1))

60 days (h)(2)(i)

60 days, with one 60 day extension ((i)(1)*

* Special rules are set forth in subsection (i) apply if the reviewing body is a committee or board of trustee with regularly scheduled meetings.

If a plan reduces or terminates a continuing course of treatment, the plan must give the participant sufficient notice to appeal the denial and obtain a determination before the benefit is reduced or terminated.

Failure to Comply with Time Limits

For the effect of failing to meet time deadlines for health benefit claims, see the discussion of the PPACA above.

For other types of claims, failure to comply can also result in de novo rather than arbitrary and capricious review. St. Onge v. UNUM Life Ins. Co. of Am., 2010 U.S. Dist. LEXIS 98101 (D. Conn. Sept. 20, 2010) (Martinez). Holding that failure to complete review within the time provided by ERISA's regulations meant the claim denial would be reviewed de novo rather than under the arbitrary and capacious standard. The insurer had argued that the regulations issued in 2001 setting forth timeframes for deciding claims, established a good faith defense that failure to comply with the deadlines did not result in de novo review, and effectively overruled Nichols v. Prudential Ins. Co., 406 F.3d 98 (2d Cir. 2005), the case establishing the rule in the Second Circuit that failure to make a timely decision converted the standard of review from arbitrary and capricious to de novo. Other cases holding Nichols is still good law include the following: Fershtadt v. Verizon Communications Inc., 2010 U.S. Dist. LEXIS 13937 (S.D.N.Y. Feb. 9, 2010); Towner v. CIGNA Life Ins. Co., 419 F. Supp. 2d 172, 179 (D. Conn. 2006) .


[1] As discussed in other parts of this seminar, ERISA benefit denials are reviewed under either an arbitrary and capricious standard of review that is deferential of the plan's decision, or a de novo standard of review, in which the court acts as the claims administrator and does not defer to the plan's decision.

[2] Urgent care claims must be made as soon as possible, and must be made sooner consistent with medical exigencies. The plan must defer to the physician's determination of what are urgent medical claims.