The Employee Retirement Income Security Act of 1974 (“ERISA”) provides an exclusive remedial scheme for insureds who have been denied benefits. 29 USC section 1001 et seq. Under ERISA, a plan participant may sue “to recover benefits due to him under the terms of their plan, to enforce their rights under the terms of the plan, or to clarify their rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). However, before plan participants can pursue a lawsuit against the plan/plan administrator for benefits, attorneys’ fees and costs, they must first pursue their ERISA appeal rights under the doctrine of exhaustion of administrative remedies. 29 USC section 1133. If they do not do so, they may lose all of their rights to pursue an appeal or litigation of a disability, life or health insurance claim denial.

Although not expressly set out in ERISA, federal courts require that an ERISA plan participant avail himself of a plan’s own internal review procedures before bringing suit in court. This generally means that if a claim for benefits is denied or adversely decided, the plan participant must timely file an administrative appeal with the plan administrator within the time period provided by the plan. Under ERISA, plan participants have at least 180 days to file an appeal. It is crucial for plan participants/claimants to note that, failure to request an administrative appeal within the time period provided will be deemed a waiver of their future rights to dispute the decision, including the right to file suit against the plan.

If a plan participant files a lawsuit without exhausting his administrative remedies first, the plan/plan administrator may file a motion under Federal Rules of Civil Procedure 12(b) to dismiss the case for failure to exhaust administrative remedies. The plan may even seek to dismiss the action with prejudice. Typically, courts will likely either remand the case to the plan’s administrative appeals board with instructions to hear the plan participant or dismiss the case without prejudice where it finds that the plaintiff failed to exhaust their administrative remedies prior to filing suit.

However, courts may find that administrative remedies have been exhausted even if a formal appeal was not filed where an ERISA plan fails to establish or follow the claims procedures required under ERISA. The plan participant is deemed to have exhausted the administrative remedies available under the plan and may pursue a lawsuit against the plan where: (1) the initial claims was not completed within 90 days, or 45 days for disability claims; (2) the plan administrator did not give the beneficiary written notice stating the specific reasons for the denial, and “written in a manner calculated to be understood” by the beneficiary; or (3) the plan failed to afford a reasonable opportunity to the beneficiary whose claim has been denied for a “full and fair review by the appropriate named fiduciary.” 29 USC section 1133. Additionally, because the general rule of exhaustion of administrative remedies is not a statutory requirement, a court may waive the exhaustion requirement where exhaustion would be futile.

Given the complexities involved in the ERISA claims and litigation process, it is absolutely crucial for claimants to seek the advice to attorneys who have knowledge and experience in this highly specialized area of law. The attorneys at McKennon Law Group PC specialize in handling ERISA disability insurance claims, in litigation or on appeal, and we have successfully litigated hundreds of disability insurance cases over the past 28 years.

For additional information, please see our Disability Insurance FAQs and Insurance Bad Faith FAQs.