This Appeal is Taking Forever: a Look at “Special Circumstances” Justifying Extensions in ERISA Appeal Decisions

This Appeal is Taking Forever: a Look at “Special Circumstances” Justifying Extensions in ERISA Appeal Decisions

By 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 Sixth Circuit’s position on what circumstances are special enough to justify an extension under ERISA. Future articles in this series will discuss the views of other Circuits, including the Seventh and Eighth Circuits. 

  1. The ERISA Regulations 

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). 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. 

  1. The Sixth Circuit Provides Some 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. Although the Sixth Circuit itself has not decided this question, a number of district courts within the circuit have provided some guidance about two common scenarios.  

A common reason that insurers give for needing more time is completion of a medical review. But a medical review is completed on nearly every disability benefits case. In Bustetter v. Standard Life Ins., Reliance contended that its request for an extension was appropriate because it required more time to conduct a medical review of the file. But the Eastern District of Kentucky definitively stated that the need to conduct a medical review is not a special circumstance. 529 F. Supp. 3d 693 (E.D. Ky. March 29, 2021). See also Salisbury v. Prudential Ins. Co. of Am., 238 F. Supp.3d 444, 449-50 (S.D.N.Y. 2017); see also Aitken v. Aetna Life Ins., No. 16 Civ. 4606 (PGG), 2018 WL 4608217, at *13 (S.D.N.Y. Sept. 25, 2018); Hancock v. Aetna Life Ins., 251 F. Supp.3d 1363, 1374 (W.D. Wash. 2017). 

Other district courts have held that even on remand, the administrator must provide a special circumstance requiring an extension. In Card v. Principal Life Ins., 2022 WL 15512209 (E.D. Ky 2022) the case was remanded to the administrator for further consideration. See also Bustetter, 529 F. Supp. 3d 693 (E.D. Ky March 29, 2021). But when it failed to decide within 45 days, it wrote to the Plaintiff, stating that it required another 60 days to decide the claim. The court applied the ERISA regulations and noted that the insurer not only did not provide a special circumstance, but it gave no indication at all as to what the reason was that it required more time. This type of notification cannot comply with the regulations, whether the case was being considered on remand or during the appeal.  

So Courts have clarified that needing to conduct a medical review and simply giving no information are not special circumstances. Although there are only limited opinions, this provides some guidance for claimants wondering whether the insurance company’s extension notice is appropriate. 

  1. Remedies for failing to properly request an extension 

After determining that an extension request does not contain special circumstances, the next question is what is the consequence for the plan? The Sixth Circuit has also not provided guidance to the district courts as to what the consequences are for failing to make an appropriate extension request. But the regulations state that  if the plan fails to strictly adhere to all the requirements” then the claim is deemed denied, and the denial is considered to be without the exercise of discretion. 29 CFR §2560.503-1(i)(i).

 Because the general rule is that unless a plan grants discretion to the administrator, the claim is reviewed de novo, then any denial deemed to be without the exercise of discretion would be reviewed de novo. Failing to decide on time should therefore result in de novo review, and the Bustetter court notes a general trend across the country agreeing with this position. 

As far as other possible remedies are concerned, one possibility is that any evidence that was generated after the date that the decision would have been deemed denied should be stricken from the record. There is some past case law excluding this evidence, but one District Court recently ruled that it could be included in the record where the claimant waited to file his lawsuit until after the insurer sent its late written decision.  In Martin v. Guardian Life Ins. Co. of Am., the Plaintiff alleged that it should also result in portions of the record after the date that the decision should be made being stricken. 2021 WL 1994229 (E.d. Ky 2021).  In that case, the Plaintiff argued that the defendant’s late decision and the reviews supporting it should be excluded from the record. However, the court rejected that argument, noting that instead of suing immediately after the date that the decision was due, the plaintiff waited to receive the decision. Although this reasoning does leave the door open for a similar argument when the Plaintiff files suit before receiving a late decision, the Court did not address whether it would have agreed with Martin had that been the situation. 

  1. 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 Sixth Circuit have clarified that the need to conduct a medical review, for instance, is not a special circumstance. Even better for claimants, if a carrier does not provide special circumstances in its extension notice, there is a general trend in courts to interpret the regulations to grant claimants de novo review. 

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