When insurance companies deny long-term or short-term disability, life or health insurance claims, it is vital that the plan participants and their beneficiaries be able to receive the claim file (also known as the Administrative Record) and ERISA Plan documents so that they can review them and challenge these claim denials. It is therefore not surprising that ERISA Plan administrators are required to comply with certain claims procedures and requests for information from plan participants, otherwise, under ERISA, they could be fined up to $100 per day for each day they fail to comply. Pursuant to 29 U.S.C. § 1332(c)(1), a plan administrator:
… who fails or refuses to comply with a request for any information which such administrator is required to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court’s discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper.
The Ninth Circuit Court of Appeals, in Lee v. ING Groep, N.V., No. 14-15848, No. 14-15936, 2016 WL 3974176 (9th Cir. 2016), recently joined all other Circuits except for the Fourth and Fifth Circuits, in finding that only on the plan itself, not the claims administrator, can be penalized under 29 U.S.C §1332(c)(1).
In Lee, Mr. Lee, a former employee of ING Management, LLC, filed a claim with his long-term disability plan governed by ERISA and initially received long-term disability benefits before his claim for benefits was later terminated. ING North America Insurance Corporation (“ING”) was the plan administrator of Mr. Lee’s long-term disability plan, and the claims administrator was ReliaStar Life Insurance Company (“ReliaStar”). On February 5, 2010, Mr. Lee’s attorney requested from ReliaStar copies of all communications, including e-mails, from ING’s attorney, and a copy of all documents including the Plan Documents. ING did not produce the requested e-mails until November 9, 2011 (over 1.5 years later) and did not produce the Plan Documents until March 11, 2013 (over 2 years later). The district court imposed a penalty of $27,475.00 on ING for failing to timely produce the Plan Documents and the requested e-mails. ING subsequently appealed this decision.
The Ninth Circuit Court of Appeals affirmed the district court’s decision to impose a penalty on ING for its failure to timely produce the Plan Documents, but reversed the district court’s decision to impose a penalty on ING for its failure to produce the requested e-mails. The Court of Appeals noted that the e-mails were only required to be provided to Mr. Lee pursuant to C.F.R. §2560.503-1(h)(2)(iii), which imposed requirements on benefit plans and not plan administrators, and 29 U.S.C. §1332(c)(1) only applies to documents that plan administrators are required to produce. The Court of Appeals noted that a failure to follow claims procedures imposed on benefits plans, such as those outlined in C.F.R. §2560.503-1(h)(2)(iii), does not give rise to penalties under 29 U.S.C. §1332(c)(1). The Court of Appeals further noted that “Plans” and “plan administrators” are separate entities with separate definitions under ERISA and penalties under 29 C.F.R. §1132(c)(1) can only be assessed against “plan administrators.” Because C.F.R. §2560.503-1(h)(2)(iii) does not impose any requirements on plan administrators, it cannot form the basis for a penalty under 29 U.S.C. §1332(c)(1). The Court remanded the case to the district court to assess a penalty based solely on the failure to timely produce the Plan Documents.
Given that many of the claims procedures governing the handling of an ERISA claim are imposed upon benefit plans and not on plan administrators, ERISA plan participants might not have the opportunity to seek penalties when they are unable to obtain claim related documents. However, they can expect that when a claims administrator fails to comply with ERISA regulations designed to protect the integrity of the claims and appeal process, their claims will be given the appropriate review before a judge. Claim and plan administrators are aware that they face significant liability at trial, even without statutory penalties, such a plan benefits due under long-term or short-term disability policies or life and/or health insurance policies. This is why seeking out highly experienced ERISA attorneys such as the McKennon Law Group PC will substantially increase the chance of obtaining the disability, health and life insurance benefits to which plan participants and their beneficiaries are entitled.