This Appeal is Taking Forever: Another Look at “Special Circumstances” Justifying Extensions in ERISA Appeal Decisions
by Associate Attorney Kaci Garrabrant
One of the most vexing issues for ERISA benefits claimants is the insurance company “dragging its feet” when making its decision. Claimants often ask whether there is any way to prevent the insurance company from taking more time to decide their claim. Similarly, claimants often tell me that the insurance company took what seems like too much time to decide their claim, taking multiple extensions, but that they did not know if there was anything they could do about it.
The good news for claimants is that there are limits to the insurance company’s right to extend their time to make a benefit determination under the Department of Labor’s regulations. The regulations provide that administrators must make a determination within 45 days, but may have one additional extension if special circumstances outside their control require additional time. Unfortunately, the regulations do not provide an exhaustive list of what constitutes “special circumstances.” This leaves some claimants at the mercy of insurance companies to act reasonably when taking extra time to make determinations.
Although the regulations do not provide an exhaustive description of “special circumstances,” the courts in each Circuit have started to provide some guidance on the scope of “special circumstances,” giving ERISA benefits attorneys a basis to challenge the insurance companies’ claims. This article summarizes the courts within the Seventh and Eighth Circuits’ position on what circumstances are special enough to justify an extension under ERISA. This is a continuation of a previous article discussing what circumstances are special enough to justify an extension in the Sixth Circuit.
I. The ERISA Regulations
As a refresher, ERISA empowers the Department of Labor to make regulations as necessary to govern the claims administration process. The Department of Labor’s regulations governing ERISA were last updated in 2018. The updated regulations provide more relief and guidance for claimants than their predecessors. The regulations provide that when a disability claimant applies, the plan should provide a decision within 45 days. But “This period may be extended by the plan for up to 30 days, provided that the plan administrator both determines that such an extension is necessary due to matters beyond the control of the plan and notifies the claimant, prior to the expiration of the initial 45-day period, of the circumstances requiring the extension of time and the date by which the plan expects to render a decision.” The plan must describe in its notice what additional information that it requires, and allow the claimant up to 45 days to provide it. 29 CFR §2560.503-1(f)(3).[1] In other words, if the insurance company cannot make a decision within 45 days, it must notify the claimant what specifical circumstances justify taking extra time. If those circumstances exist, it can take up to sixty more days to decide the claim, but must allow the claimant up to 45 days to provide any outstanding information.
If the claim has already been denied, and the claimant is awaiting a decision on appeal, the regulations provide for a slightly different time frame, but again, the plan must explain what special circumstances justify an extension of time:
Except as provided in paragraphs (i)(1)(ii), (i)(2), and (i)(3) of this section, the plan administrator shall notify a claimant in accordance with paragraph (j) of this section of the plan’s benefit determination on review within a reasonable period of time, but not later than [45] days after receipt of the claimant’s request for review by the plan, unless the plan administrator determines that special circumstances (such as the need to hold a hearing, if the plan’s procedures provide for a hearing) require an extension of time for processing the claim. If the plan administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial [45]-day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the plan expects to render the determination on review.
Here, the regulation provides an example, needing to hold a hearing, but does not explain whether there are other “special circumstances” that could require an extension or give any other details about what other special circumstances might exist.
II. The Seventh Circuit Provides Guidance
Because the regulations themselves do not provide many details about what constitutes a special circumstance, the courts have been asked to resolve disputes between claimants and claims administrators over this issue. The Seventh Circuit Court of Appeals has provided guidance on this topic in Fessenden v. Reliance Standard Life Ins. Co. 927 F.3d 998 (7th Cir. 2019). In Fessenden, the Seventh Circuit also addresses the consequences of missing the decision deadline without a special circumstance requiring an extension.
Reliance did not make a decision on Mr. Fessenden’s appeal within the forty five days allowed by the ERISA regulations, and did not request an extension or provide an explanation for its delay. Id. Only after Fessenden had filed his lawsuit did Reliance provide its decision. First, the Court clarified that no excuse was not a good reason to make a late decision. Id. This is very similar to the reasoning in the Sixth Circuit, and represents a common trend amongst the Circuits. As many courts have pointed out, it follows logically that because the regulation requires a special reason for the administrator to take extra time to decide, simply giving no explanation cannot be sufficient, and does not qualify as a special circumstance.
Next, the Court turned its attention to the consequences for Reliance’s violation. Based on an interpretation of the prior version of the claims regulations, Reliance argued that it had substantially complied with the claims regulations by making a decision, although it was late. Based on the idea that it had substantially complied, even if it did not strictly follow the regulations, Reliance argued that it should not lose its discretion. The Court first explained that substantial compliance was a judge made exception, but it cannot override the explicit requirements of the DOL’s regulations. Simply put, the very point of a deadline is to impose a hard stop. Fessenden v. Reliance Standard Life Ins. Co. 927 F.3d 998 (7th Cir. 2019). The Seventh Circuit explained:
A court that excused even more administrative delay would upset the careful balance that the regulations strike between the competing interests of administrators and claimants.4 It would also run afoul of § 2560.503-1(i)(1)(i), which says that “in no event” can a deadline be extended further. That language excludes nothing—no event, however reasonable or harmless—from its scope. Substantial compliance with a deadline requiring strict compliance is a contradiction in terms. Cf. Burns, 657 F.3d at 575 (holding that the doctrine of substantial compliance “cannot cure” the violation of an “explicit statutory requirement” in ERISA’s text). The very point of a deadline is to impose a hard stop. Cf. United States v. Marcello, 212 F.3d 1005, 1010 (7th Cir. 2000) (“Foreclosing litigants from bringing their claim because they missed the filing deadline by one day may seem harsh, but courts have to draw lines somewhere ….”).
Ultimately, the Seventh Circuit held that based on both the regulations and the very concept of a full and fair review, that it was appropriate for Fessenden’s decision to be reviewed de novo, rather than under the arbitrary and capricious standard of review. the Seventh Circuit ordered that Fessenden’s case should be evaluated under the de novo standard and remanded it back to the district court. This decision comports with the language of the regulations, and makes clear that the Court evaluated the effect of the missed deadline on the standard of review first, then decides the merits of the case.
III. The Eighth Circuit takes a different approach
The Eighth Circuit takes a different approach to reviewing what constitutes a special circumstance requiring an extension and what the consequences are when an administrator does not provide a good reason. In the Eighth, the court reviewed this issue in McIntyre v. Reliance Standard Life Ins. Co. 973 F. 3d 955 (8th Cir. 2020).
In that case, the Court acknowledged that Reliance’s decision was not made until well past its deadline. In fact, the court explained that Reliance’s decision was pending for 154 days, which is far beyond the 45-day deadline and one 45 day extension that administrators are permitted under the regulations. Although it acknowledged that Reliance did not provide any reason for its delay that would constitute a good reason for an extension, the Court did not conclude that McIntyre’s case was entitled to de novo review.
Instead, it explained that in the Eighth Circuit, the administrator’s decisional delay did not automatically trigger a change in the standard of review. instead, the delay only triggered a change if the administrator “wholly failed to act” on the appeal. Even a very long delay like the delay in McIntyre, the Court said, did not necessarily justify changing the standard of review. The Court would instead look at the decision that was ultimately made and evaluate whether the late decision made any difference under the abuse of discretion standard, if not, then the standard of review was not changed.
This approach is different from the approach taken by the Seventh Circuit. Here, the Court looked at the ultimate decision that was made, and reviewed whether or not the apparent delay in the decision had any effect on the decision. Since the court found that it did not, the standard of review was not changed just because there was a tardy decision. The Seventh Circuit also did not apply the “wholly failed to act” standard. The difference between the two circuits highlights the different approaches taken by various Circuit Courts.
IV. Conclusion
Ultimately, there is hope for claimants who are vexed by their LTD carrier’s delay. Although the ERISA regulations allow the carrier to extend their initial 45-day deadline to make a decision on appeal, the regulations also provide that the extension is only allowed when the carrier can show special circumstances outside their control. Although the regulations do not define what constitutes special circumstances beyond one example, the regulations are not meant to allow insurers to extend their deadline in every situation. Courts in the Seventh Circuit have confirmed that a carrier must provide some reason, and simply taking extra time is not sufficient. The Seventh Circuit has also confirmed that late decisions are not entitled to discretionary review. On the other hand, claimants in the Eighth Circuit contend with a difficult standard, only getting relief when the administrator does not render a decision at all.
End notes:
[1] For other benefits governed by ERISA, the time period that applies differs, but this article focuses on the procedures that are relevant to long term disability benefits cases.
