An Oregon Federal District Court  recently issued a decision that helps illuminate the issues related to the requirement that a claimant exhaust administrative remedies prior to filing suit, specifically, when a long-term disability (“LTD”) claimant can consider a claim to be denied, when he exhausts his administrative remedies and when an insurer may properly extend deadlines and delay issuing a decision. In Witt v. Intel Corporation Long-Term Disability Plan, 2024 WL 687928, at *7, 10 (D. Or. Feb. 16, 2024), the claimant filed suit before the Plan had issued a decision on his appeal of his previously denied LTD claim. The Plan, who was the Defendant, hired ReedGroup to administrator the claims. The Plan moved to compel exhaustion of administrative remedies and argued that the claimant had filed suit prematurely because it had not issued a decision on the appeal of his LTD denial. Plaintiff responded that he had exhausted administrative remedies because the Plan had failed to issue a decision within the time required by the Employee Retirement Income Security Act of 1974 (ERISA). The court denied the Plan’s motion and concluded that plaintiff had exhausted his administrative remedies.

For disability plans, the claims regulations that govern ERISA allow a claimant to consider his administrative remedies to be exhausted if the plan violates its requirements. A plan generally has 45 days to issue a decision of a claimant’s appeal; it may take up to an additional 45 days, but it must provide plaintiff with written notice of the extension before the expiration of the 45-day period, and the extension must be warranted by “special circumstances.” In Witt, plaintiff had faxed his appeal, then also mailed it, so ReedGroup received it once by fax, then again in the mail several days later. ReedGroup acknowledged that it had received the earlier, faxed copy of the appeal. ReedGroup then sent plaintiff a letter stating that it required additional time to issue a decision because the medical reviews had to be corrected based on the Plan provisions for medical evidence. ReedGroup sent the letter after 45 days had passed since plaintiff’s faxed appeal but less than 45 days since it received the mailed appeal.

The Plan argued that because 45 days had not passed since it received plaintiff’s mailed appeal, its notice to plaintiff that it needed additional time to issue a decision did not violate the ERISA requirement. However, that argument failed because ReedGroup had previously acknowledged receipt of the earlier faxed appeal.

The Plan relied on Peck v. Aetna Life Insurance Company, 495 F.Supp.2d 271 (D. Conn. 2007), for the proposition that submission of additional materials to support an appeal tolls the appeal decision deadline. The court found the case distinguishable as it found that the defendant plan administrator’s request for an extension of time was a “special circumstance” because it requested the extension after plaintiff submitted additional materials that the plan had requested. Id. at 276-77. Although the appeal deadline may be tolled when an extension is requested “due to a claimant’s failure to submit information necessary to decide the claim,” or when a plan administrator requests additional information, that was not the case in Witt. 29 C.F.R. § 2560.503-1(i)(4). ReedGroup never requested additional information from plaintiff, nor did ReedGroup indicate that it needed the extension because plaintiff failed to submit necessary information. Plaintiff’s appeal was effectuated on May 25, 2023, making the 45-day determination deadline July 10, 2023. In turn, ReedGroup’s July 12, 2023 extension request was not timely. Therefore, the court concluded that ReedGroup committed a procedural violation by requesting an extension after the 45-day deadline to issue a determination had passed.

The Plan argued that there were “special circumstances” present because it needed time to correct the medical reports it had received. The court reviewed numerous cases and determined that there were no “special circumstances” present because medical reviews occur in almost all disability cases and ReedGroup engaged in a 29-day delay to initiate the medical review.  ReedGroup itself had created its need for more time to decide on plaintiff’s appeal and therefore, its need for more time did not meet the statute’s requirement of being warranted by “special circumstances.”

Next, the Plan argued that while it had waited longer than 45 days to send written notice to plaintiff of its need for more time, it was only two days and therefore was a de minimus violation of the claims regulations that should not impact plaintiff’s requirement to exhaust administrative remedies. The Plan also argued that it was required by ERISA to issue a decision on the proper evidence, so it needed to be sure that the medical records were correct. The court noted that 29 C.F.R. § 2560.503-1(l)(2)(ii) states that de minimis violations that do not prejudice or harm the claimant will not deem administrative remedies exhausted so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan. The court explained that:

Read as a whole, this sentence indicates that, even if a violation does not prejudice or harm a claimant, the de minimis exception does not apply unless the plan demonstrates that the violation was for good cause or due to matters beyond its control.

Witt can serve as a reminder to insurers that ERISA time requirements are to be taken seriously and they may not get away with simply coming up with any feasible reason for extending the time it takes to issue an appeal decision on an LTD claim. For claimants and their attorneys, Witt is a reminder to be diligent and closely examine the insurer’s actions and motivations for an extension. In this case, diligence paid off and plaintiff’s case moved forward more quickly and efficiently than it otherwise might have. McKennon Law Group PC has made similar arguments in numerous disability and accidental death insurance cases to the great benefit of its clients.