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Demystifying an ERISA Disability Insurance Claim: A Timeline for a Misunderstood Employee Benefit

The McKennon Law Group PC periodically publishes articles on its California Insurance Litigation Blog that deal with frequently asked questions in the insurance bad faith, life insurance, long term disability insurance, annuities, accidental death insurance, ERISA and other areas of the law.  To speak with a highly skilled Los Angeles long-term disability insurance lawyer at the McKennon Law Group PC, call (949) 387-9595 for a free consultation or go to our website at www.mckennonlawgroup.comand complete the free consultation form.

Disability insurance provides you with income in the unfortunate circumstance that your earnings are halted by disability.  Employers often offer disability insurance in the benefits packages they provide to their employees, but many employees fail to take advantage of the benefit.  The Employment Retirement Income Security Act of 1974, otherwise known as ERISA, governs most employer-sponsored benefit plans, including disability insurance plans.  The legislature enacted ERISA to protect employees from abuse of their employer-sponsored benefits.  As such, ERISA requires that the plan administrator, which is usually the insurance company, employer, or both, adhere to a strict standards and deadlines.  This blog post demystifies the general timeline of a disability insurance claim under ERISA.  First, we briefly explain the basics of a disability benefits plan and when a disability benefits plan will be governed by ERISA.  Next, we cover the life of a disability insurance claim under ERISA, including some of the important deadlines that apply.

What is a disability insurance plan and when is it governed by ERISA?

First, what is a disability insurance plan?  Generally, long-term disability insurance covers a portion of your income when a disability permanently halts your ability to work.  Long-term disability insurance pays a portion of your previous monthly salary, subject to certain offsets for state and federal disability benefits.  Before the provider pays the benefits, disabled employees must satisfy certain eligibility requirements.  For many disabled employees, the following requirements typically apply:

  • a minimum length of service;
  • a minimum waiting period before benefits begin; and,
  • qualifies under the plan’s definition of total disability.

The next question to address is whether the disability insurance plan is governed by ERISA?  When making a disability claim, you will first want to determine whether ERISA applies to your claim.  Just like health insurance, employers often provide disability insurance as part of an employee’s benefits package.  Unlike purchasing an individual plan directly from the insurance company, ERISA usually governs such employer-sponsored benefit plans.  However, it is important to keep in mind that ERISA does not apply to some employers, such as government entities or a churches.

Some of the Important Dates and Deadlines in an ERISA Case.

If ERISA applies to your long-term disability or short-term disability insurance plan, the following timeline is generally applicable after you file your initial claim.

The Initial Claim

  • Within forty-five days of receipt, a claim should be approved or denied. 29 C.F.R. § 2560.503-1 (f)(3).
  • But, the plan may extend the forty-five-day time frame by up to thirty days. The insurer must inform the insured of its request for an extension within the initial forty-five-day period.  That request for an extension must also explain why the insurer needs additional time, what additional time or information is necessary, whether there are unresolved matters, and when a final decision will be made.  29 C.F.R. § 2560.503-1 (f)(3).
  • If the insurer requests new or additional information, the insured has forty-five days to respond to the request. 29 C.F.R. § 2560.503-1 (f)(3).
  • Once the insured has provided the requested information, the claim should be decided no later than thirty days or as required by the plan, whichever date comes first. See 29 C.F.R. § 2560.503-1 (f)(3).

Appeal of the Initial Claim

  • If the insurer rejects your request for disability benefits, you have 180 days following receipt of a notification of an adverse benefit determination to file an appeal. 29 C.F.R. § 2560.503-1 (h)(3)(i).  If you fail to adhere to this time limit, you may have no avenue to further pursue your claim.
  • An appeal should be decided within forty-five days of receipt by the insurer. 29 C.F.R. § 2560.503-1 (i)(3).
  • In special cases, review of the appeal request may require additional time. The plan may request up to an additional forty-five days, but must provide an explanation of the circumstances and an expected date when the decision will be rendered.  29 C.F.R.§ 2560.503-1 (i)(3).  Additionally, some plans may allow for a second appeal.

The Statute of Limitations to File Suit

If your appeal is denied and once you have exhausted all available administrative remedies, you may file suit in court.  However, your ability to file suit is also subject to a separate time limit that is important to keep in mind.  If you fail to adhere to this time limit, you may have no avenue to pursue your claim.

  • Prior to the Supreme Court’s decision in Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S. Ct. 604 (2013), California ERISA lawsuits could be brought up to four years after the denial on appeal. After the Supreme Court’s ruling, an ERISA plan may impose a shorter time frame on an ERISA claim so long as the time frame is reasonable and no controlling statute prevents the limitations period from taking effect.  For disability insurance claims in California, it is likely that California Insurance Code Section 10350.11’s three-year time limit will apply and override any shorter limitations period.  Section 10350.11 applies a statute of limitations of three years after you are required to provide written proof of loss to the insurer.

How the Department of Labor’s New Regulations may affect the timeline

The Department of Labor (the “Department”) regulates disability and health insurance claims subject to ERISA.  Recently, the Department finalized new regulations codified at 29 C.F.R. § 2560.503-1 and discussed at 81 Fed. Reg. 92316.  The regulations hope to reduce the potential for a conflict of interest in managing an ERISA plan and better inform the insured as to why their disability benefits were denied.  As far as the timeline goes, the following four points are important to remember.

  • The regulations only apply to claims for disability benefits filed on or after January 1, 2018.
  • Per the new regulations, the insured may file suit when a claim is “deemed denied” even if the administrative remedies have not been exhausted. The regulations outline that a claim is “deemed denied” once the plan fails to comply with the appropriate regulations.
  • The regulations also outline the insured’s ability to request the administrator’s written rationale for the alleged violation. The administrator must respond to such a request within ten days, including a written explanation addressing the alleged violation.
  • Finally, the new regulations require that the final denial adequately describe any applicable contractual limitations period, including the specific date that the statute of limitations to file ends.

For a full discussion of the Department’s new regulations, see our article in the Daily Journal, available at https://mslawllp.com/robert-mckennon-and-scott-calvert-publish-article-in-the-los-angeles-daily-journal-new-regulations-will-benefit-claimants-in-disability-insurance-cases/.

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