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ERISA: When Can Plan Administrators Get Into Trouble by Deciding a Disability Claim Too Quickly?

By Mike Reilly on August 20, 2019
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ERISA plan administrators are constantly pressured by claimants to render decisions quickly…. This is especially true with short term disability claims.

You already know that ERISA regulations require that disability claim benefit decisions be made “within a reasonable time but not later than 45 days after receipt of the claim.” 29 CFR § 2560.503-1. This period may be extended “for up to 30 days” twice, under certain circumstances.

So, what does “within a reasonable time but not later than 45 days” really mean? 

Can one get into trouble by deciding a claim too quickly?  Yes!  “Slowing down is sometimes the best way to speed up.”

Here’s the case of Speca v. Aetna Life Ins. Co., 2019 WL 3754210 (D. Nev. August 8, 2019)(Initial claim denial made within 14 days of claim submission: “Defendant should have—at a minimum—waited a few more days to gather medical records before denying Plaintiff’s initial claim.”)

FACTS: On November 7, 2015 Speca submitted a claim for ERISA-governed short term disability benefits. The Plan terms stated that decisions on claims for disability would be made “as soon as possible but not later than 45 calendar days after the claim is made.” The Plan also had the right to “extend the 45 day window twice, by 30 days each time,” if the claimant was notified “within the first 45 days of its intent to extend.”

-November 9, 2015: Aetna began attempting to obtain records from physicians. There was some difficulty reaching Speca to obtain information to retrieve records. Aetna informed Speca that it intended to make its decision on his claim within 14 days from the date he first submitted the claim, and urged him to call Aetna to provide further information.

-November 20, 2015:  Aetna denied the claim in part because Aetna had not received records from Speca’s treating physicians. Speca appealed, and submitted additional records.  And, Aetna retained a doctor to perform an independent record review of the records provided. Aetna then denied the appeal, and Speca brought suit.

ISSUE: Whether Speca was afforded a “full and fair” review of his claim?

DISTRICT COURT HELD: NO.

  1. “[N]othing in the Policy required Defendant to decide within 14 days….Therefore, Defendant’s argument that it had to deny Plaintiff’s claim at the conclusion of a 14-day investigation even while it was waiting on medical records is unpersuasive.”  Op. at 6-7.
  2. “While Defendant left Plaintiff several messages stating it would decide his claim by November 20, the administrative record reflects that he did not understand those messages, or may have not received them.”  Op. at 7.
  3. “Defendant should have—at a minimum—waited a few more days to gather medical records before denying Plaintiff’s initial claim.” Op. at 7.
  4. “[E]ven if Defendant ultimately made the right decision on the merits during Plaintiff’s appeal, it never reached the merits of the claim until that appeal….Plaintiff essentially received his initial claim review during his appeal with Defendant [and this denied Plaintiff] a full and fair review….”  Op. at 7-8.
Photo of Mike Reilly Mike Reilly

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment…

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment advice, and has represented clients in more than 75 jury trials, arbitrations, bench trials and claims before the EEOC and Washington State Human Rights Commission.

Small and large employers retain Mike for his strategic advice and decades of experience in employment issues and litigation, business decisions and litigation avoidance. Mike provides advice in claims involving discrimination, retaliation, wrongful discharge, disability accommodation, ERISA and non-ERISA employee benefit claims, and wage/hour claims. He served as lead counsel in an employee raiding/trade secret case as reported in the Wall Street Journal, and defends employers in class action claims.

Mike’s remarks on employment issues have been quoted in Newsweek, Corporate Legal Times, Seattle Times, Employee Relations Law Journal, Puget Sound Business Journal, CFO.com, and other professional journals and management publications. Chambers USA’s Guide to America’s Leading Lawyers for Businessrates Mike in the top ranking (band one) for his work in labor and employment law, and has described him as “one of Seattle’s top-rate attorneys” who is “truly phenomenal [with] superb legal instincts” and “an amazingly assertive litigator.” His clients include Nordstrom, Seattle Seahawks, Home Depot, KeyBank, Starbucks, Fred Hutchinson Cancer Research Center, Red Robin and Seattle Chamber of Commerce, among others.

Read more about Mike ReillyEmail
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  • Posted in:
    Employment & Labor
  • Blog:
    Boom: The ERISA Law Blog
  • Organization:
    Lane Powell PC
  • Article: View Original Source

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