ERISA Plan Administrator Denies STD Claim Too Quickly

The United States District Court for the District of Nevada, in Speca v. Aetna Life Ins. Co., has ruled that a ERISA plan administrator did not provide a full and fair review when it denied a short term disability ("STD") claim in just 14 days and before receiving medical records from the plaintiff's treating physicians.

Law. ERISA requires initial disability claim benefits decisions to be made within a reasonable time but not later than 45 days after the receipt of the claim. This time period may be extended for two 30-day periods, under certain circumstances.

Background. The plaintiff filed a claim for benefits under his employer's STD plan. The STD plan's terms provided that the plan administrator's decisions on claims would be made as soon as possible but not later than 45 calendar days after the claim is made. The plan administrator had the right to use the two 30-day extensions if the plaintiff was notified "within the first 45 days of its intent to extend."

Both the plan and ERISA required that the plan administrator give the plaintiff 45 days to provide any medical records that it requested to support his STD claim. The plan administrator began attempting to obtain medical records from the plaintiff's physicians, and it informed the plaintiff that it would issue a decision on his claim within 14 days from the date of its submission. However, after the plan administrator experienced difficulty in accessing the information it needed to obtain the plaintiff's medical records, it attempted to contact him to request that he provide it.

After 14 days following the date of its initial submission, the plan administrator denied the plaintiff's claim on the basis that it had not received records from the plaintiff's treating physicians. The plaintiff appealed this decision and provided medical records to support his STD claim. In response, the plan administrator retained a doctor to perform an independent review of the records that the claimant provided, and it upheld its decision to deny the claim. In turn, the plaintiff sued the plan administrator in federal district court.

District Court. In reviewing the matter, the court concluded that the plan administrator should have allowed more than 14 days for the plaintiff to gather medical records before initially denying the plaintiff's claim. In particular, the court noted that "ERISA was enacted to promote the interests of employees," and that the plan administrator's decision to deny the claim on arbitrary procedural grounds, unsupported by the plan's terms, did not promote the plaintiff's interests.
The court further explained that ERISA requires a plan administrator to "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." In this case, the court observed that the plan administrator's decision to collapse the review of the plaintiff's claim from two levels into one violated the "spirit of ERISA" because it resulted in the plaintiff presenting his evidence for the first time on appeal, which did not allow for a full and fair review of his claim. As a result, the court concluded that the plan administrator had violated ERISA and the terms of the plan by denying the plaintiff's STD claim without providing a full and fair review of the claim. Accordingly, the court remanded the plaintiff's STD claim to the plan administrator for further consideration.