Things to Know Before Filing a Lawsuit Against a Disability Insurance Company

Has your disability insurer failed to decide on your claim? Long delays can leave you without income when you need it most. ERISA sets strict deadlines to ensure claims are handled fairly. If an insurer fails to meet these deadlines, you have legal options—including the right to file an ERISA disability lawsuit for delayed claim decisions. This article explains what happens when an insurer misses deadlines, the legal remedies available for you under ERISA, and how you can take action to enforce your rights.

Understanding ERISA’s Role in Disability Claims

If you are covered by an ERISA-governed disability insurance plan, the law provides certain protections to ensure that claims are processed fairly and in a timely manner. ERISA establishes strict guidelines for employer-sponsored disability insurance plans in the private sector. It defines fiduciary duties, claim processing requirements, and legal remedies available to claimants. disability insurers must review claims promptly and communicate their decisions within ERISA’s required timeframes. Failure to comply may give claimants the right to pursue legal action to enforce their benefits.

ERISA Timelines for Disability Claims

ERISA imposes strict deadlines for insurers to process and decide disability claims. Specifically, under the Department of Labor’s regulations at 29 C.F.R. § 2560.503-1, the following timelines apply:

• Initial Claim Decision: When you submit an initial claim for disability benefits, the insurer must make a decision within 45 days. This period may be extended by up to two additional 30-day extensions if special circumstances require more time, but the insurer must notify you in writing of the need for an extension, the reason for the delay, and the anticipated decision date.
• Appeal of Denied Claim: If your claim is denied and you file an internal appeal with the insurer, they must make a decision on the appeal within 45 days. As with the initial claim decision, this period may be extended by another 45 days (for a total of no more than 90 days), but the insurer must notify you in writing of the delay and provide a reasonable explanation for it.

The purpose of these timelines is to prevent insurers from dragging out the claims process indefinitely. ERISA also requires insurers to provide detailed reasons for any claim denials and to give claimants the opportunity to appeal those denials before pursuing further legal action.

What Happens if the Insurer Misses the Deadline?

When a disability insurer fails to decide on your claim within the time allowed under ERISA, the delay may be considered a deemed denial. A deemed denial occurs when the insurer’s failure to act effectively amounts to a denial of your claim, even though no formal decision has been made.

If your claim is “deemed denied,” this opens the door for you to take further steps, such as:

1. Filing an Administrative Appeal: ERISA generally requires claimants to exhaust all administrative remedies, including filing an internal appeal with the insurer, before they can file a lawsuit in court. If the insurer fails to respond to your initial claim within the required timeframe, you may be able to file an appeal based on the deemed denial. The same 45-day deadline applies to the insurer’s response to your appeal.

2. Filing a Lawsuit in Federal Court: If the insurer fails to act on both your initial claim and your appeal within the required deadlines, or if your claim is denied at the appeal stage, you may have the right to file a lawsuit under ERISA. While ERISA mandates an administrative appeal process, once you have exhausted this process (or if it becomes futile due to the insurer’s inaction), you can take your claim to court.

ERISA Lawsuits for Delayed or Non-Action

ERISA permits claimants to file a lawsuit in federal court to challenge the denial or non-action on their disability claim. Under 29 U.S.C. § 1132(a)(1)(B), a participant or beneficiary of an ERISA-governed plan can bring a civil action to:

• Recover benefits due under the plan,
• Enforce their rights under the plan, or
• Clarify future benefits under the plan.

In cases where the insurer fails to make a timely decision, you can argue that their delay constitutes a breach of their obligations under ERISA. Here’s how the process typically unfolds:

1. Exhausting Administrative Remedies

Before you can file a lawsuit, ERISA generally requires you to go through the plan’s administrative appeal process. However, if the insurer consistently fails to meet deadlines, this requirement may be waived under the doctrine of futility. Courts have recognized that if an insurer is unresponsive and administrative remedies are unlikely to provide any relief, claimants do not need to wait indefinitely and can proceed directly to court.

2. Filing a Lawsuit

Once you have exhausted administrative remedies or if pursuing an appeal would be futile, you can file a lawsuit in federal court. You would typically file under 29 U.S.C. § 1132(a)(1)(B) to recover benefits or challenge the denial (or lack of decision) by the insurer. In such cases, courts will review whether the insurer acted reasonably and in accordance with the plan’s terms and ERISA’s requirements.

3. Standard of Review

In most ERISA disability cases, courts apply a deferential standard of review, meaning they give weight to the insurer’s decision unless it is shown to be arbitrary or capricious. However, if the insurer fails to make any decision at all, courts may apply a more stringent review, considering the lack of action as evidence of procedural violations or bad faith.

Courts also have the discretion to remand the case back to the insurer for further review, order the payment of benefits, or impose penalties if the insurer’s delay was egregious.

4. Other Remedies Available Under ERISA for Non-Action

If your lawsuit is successful, several remedies may be available under ERISA:

• Recovery of Benefits: The court may order the insurer to pay the benefits you are entitled to under the plan, including any past-due benefits that accumulated during the period of delay.
• Clarification of Future Benefits: The court can also clarify your rights to future benefits under the plan, ensuring that the insurer adheres to the plan’s terms moving forward.
• Interest and Penalties: In some cases, the court may award interest on unpaid benefits and require the insurer to pay penalties for their failure to follow ERISA’s requirements.
• Attorney’s Fees and Costs: ERISA allows for the recovery of attorney’s fees and court costs if the claimant prevails in their lawsuit, helping to alleviate the financial burden of litigation.

Avoiding Delays in the Disability Claims Process

While ERISA provides important protections for claimants when insurers fail to act, delays in the claims process can be frustrating and financially burdensome. Here are some steps you can take to avoid unnecessary delays and protect your rights:

• Keep Records: Document all communications with your insurer, including the dates when you submit claims and receive responses. This documentation can help you track whether the insurer is adhering to ERISA’s deadlines. A best practice is to send all communications to the insurer via two different methods: registered mail, and email or fax (and be sure to save the fax confirmation to show your communication was received).
• Follow Up: If the insurer fails to make a decision within the required timeframe, follow up with written requests for a status update. Sometimes, insurers may need additional documentation to process your claim, and timely communication can help prevent delays.
• Seek Legal Assistance: If your insurer fails to respond or delays the process indefinitely, consider consulting an attorney who specializes in ERISA and disability claims. An attorney can help you navigate the administrative process, evaluate your legal options, and file a lawsuit if necessary.

You don’t have to wait indefinitely for a decision on your disability claim. ERISA gives you the right to challenge insurer delays and demand the benefits you are entitled to. Taking action quickly is crucial, delays can impact your financial security and legal options. If your insurer isn’t complying with ERISA’s deadlines, consult an experienced ERISA attorney today to protect your rights and move your claim forward.