If you have disability insurance through your employer, it is likely governed by the Employee Retirement Income Security Act (ERISA), a federal law regulating employee benefit plans. Under ERISA, courts have determined that claimants cannot immediately sue an insurance company or plan administrator after a disability claim denial. Instead, the employee must ‘exhaust’ the plan’s prelitigation appeal process by submitting a claim denial appeal and waiting for a final determination.
But what happens, if the disability insurance claim or an appeal is simply ignored? If that should happen, claimants do not have to wait in limbo forever. ERISA protects claimants in these situations, giving them the right to sue their disability insurer if the company fails to make a timely decision on their claim
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When Can I File a Lawsuit Against My Disability Insurer?
The U.S. Department of Labor has issued comprehensive regulations governing the claim and appeal process. One of those regulations states:
[I]n the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.
So, according to this federal regulation, if your disability insurance company fails to decide your claim or appeal within the required timeframe, you have the right to take legal action. In other words, you can sue your disability insurer for failing to provide a timely decision on your claim.
How Do the Timing Rules Work?
ERISA sets strict deadlines for how disability insurers must process claims and appeals, preventing unnecessary delays that could harm claimants. Federal regulations require insurers to respond promptly, and if they fail to meet these deadlines, claimants may have the right to sue for a decision.
ERISA Deadlines for Claims and Appeals
Disability insurers must adhere to specific timeframes when deciding claims:
1. Initial Claim Decisions: Insurers must decide an initial disability claim within 45 days of receiving it.
- A 30-day extension may be granted only if the insurer faces circumstances beyond their control (e.g., waiting on medical records). However, the insurer must notify the claimant of the extension before the 45-day period ends.
- In rare cases, a second 30-day extension may be allowed, but only under similarly exceptional circumstances.
2. Appeal Decisions: If a claimant appeals a denial, the insurer must decide the appeal within 45 days.
- A 45-day extension may be granted, but only if “special circumstances” exist, and the insurer provides notice within the initial timeframe
What Happens When Insurers Miss Deadlines?
While there is no default rule mandating the payment of benefits if a decision is delayed, a disability insurer that fails to issue a timely decision loses the advantage of the ‘arbitrary and capricious’ standard of court review. This standard protects insurers by making it difficult to overturn their decisions The loss of this advantage incentivizes insurers to comply with ERISA deadlines. The case of Rappaport v. Guardian Life Insurance Company of America highlights what happens when insurers miss their deadlines.
In Rappaport v. Guardian Life Insurance Company of America, a New York federal judge rejected a disability insurer’s effort to excuse its tardiness in deciding a disability benefit appeal on the claimed ground that it needed to perform a financial review. The court ruled that Guardian’s excuse failed to meet the “special circumstances” standard, which allows extensions only for issues beyond the plan’s control. The court found the extension request improper because the insurer did not even engage a consultant to perform a financial review until after the 45-day deadline had expired. Thus, the court concluded that the claimant had the right to file a suit before the claim appeal process had concluded.
What Should I Do if I Believe My Disability Insurer Has Taken Too Long to Decide My Claim? What If My Insurer Misses the Deadline?
There are severe consequences for claimants if they initiate a lawsuit prematurely. If the court finds that the claimant failed to exhaust the procedures set forth in the plan, it will likely dismiss the case without considering the merits of their claim. Anyone who is out of work and has applied for disability benefits is understandably anxious about receiving a prompt claim determination. However, disability insurers have the right to carefully review every submitted claim to make sure that benefits are due under the terms of the plan or policy. Sometimes, through no fault of the disability insurer, doctors or hospitals fail to promptly process requests for records. Or there may be a delay due to the pendency of a medical test or examination that is critical to the claim determination.
Claimants can help speed the claim process along by alerting their treating doctors to forthcoming requests from the insurance company and urging a prompt response.
Related Article: What Should I Expect When I File a Disability Insurance Claim?When Should I Seek Legal Assistance for My Disability Claim?
If a claim has been pending beyond the deadlines listed above and there has been no communication from the disability insurer, claimants should seek legal advice about when they can file a suit against their insurance company. If your disability insurer is delaying or denying your claim, you don’t have to face the process alone. The attorneys at DeBofsky Law have decades of experience successfully handling ERISA disability claims and litigation. Contact us today to learn how we can help protect your rights and determine the best time to take legal action.
