In Witt v. Intel Corp. Long-Term Disability Plan, the United States District Court for the District of Oregon refused to dismiss a long term disability (”LTD”) benefits lawsuit when the plan seemingly made a minor mistake in administering its claims procedure.
Law. Every ERISA-covered pension or welfare benefit plan must establish a claims procedure for determining benefits claims and appeals of denied claims. In general, a plan is required to establish and maintain a “reasonable” claims procedure that complies with the Department of Labor’s (“DOL’s) regulations.
In certain plans, such as LTD plans, the DOL claims procedure obligate a claims administrator to render a determination on appeal within 45 days of submission, with an additional 45 days if the administrator requests additional information from the participant necessary to decide the claim, or if the administrator demonstrates “special circumstances” requiring an extension of time for processing the claim. If the administrator determines that an extension is necessary, written notice of the extension must be provided to the claimant prior to the termination of the initial 45-day period.
ERISA authorizes a plan participant to bring a civil action in federal court to recover benefits due under the terms of the plan. However, before bringing such an action, the participant must exhaust the plan’s administrative remedies. When a claimant fails to pursue and exhaust these administrative remedies, the claim for judicial relief is barred.
Facts. An LTD plan participant applied for, and received, LTD benefits for a period of three months after which the plan said he was no longer eligible for benefits. On May 25, 2023, the participant appealed the plan’s decision and on July 12, 2023, the plan notified the participant that it needed an additional 45 days to make a decision. The participant responded that, among other things, the plans extension notice was two days late and therefore ineffective. The participant sued in federal court and the plan asked for the court to dismiss the case because the participant had failed to exhaust the plan’s administrative remedies.
Court Decision. The plan argued that the two-day delay in requesting an extension is a de minimis violation of the DOL’s claims procedure regulations because the participant did not allege that he was prejudiced or harmed in any way by the delay.
The court noted that the DOL’s claims procedure regulations state that de minimis violations that do not prejudice or harm the claimant will not deem administrative remedies exhausted…but only if the plan demonstrates that the violation was for good cause or due to matters beyond its control. However, in this case the plan provided no explanation or basis substantiating that it had good cause for its two-day delay in requesting an extension, or that the delay was due to matters beyond its control.
The court noted that the DOL’s claims procedure regulations state that, “[I]f the plan fails to strictly adhere to all the requirements of this section with respect to a claim, the claimant is deemed to have exhausted the administrative remedies available under the plan[.]”
The court also observed that another court had previously held that, “[a] plan administrator’s failure to issue a timely decision [ ] goes to the heart of the claims process.” Interpreting untimeliness as de minimis “would encourage plan administrators to (1) blow the deadline, (2) wait for the claimant to file suit, (3) issue an untimely decision, and then (4) argue that its untimeliness was de minimis and that, as a result, the claimant had not exhausted administrative resources when [the participant] filed suit.” Put another way, “[f]orgiving late decisions would [ ] encourage plan administrators to ‘sandbag’ the claimant by issuing a decision tailored to combat [the] complaint.”
Therefore, the court ruled that the July 12, 2023 extension request was not timely and the plan committed a procedural violation by requesting an extension after the 45-day deadline to issue a determination had passed. Because this meant that the participant had exhausted the plan’s administrative remedies, the court refused to dismiss his lawsuit.