Late Decision Did Not Alter Standard of Review of Long-Term Disability Claim

Employees in Chicago with claims for long-term disability benefits receive certain protections under ERISA. One of them ensures claims, and appeals of denied claims, are decided expeditiously. Under ERISA regulations, a claim administrator has a maximum of 105 days to render a decision on a long-term disability claim. 29 C.F.R. § 2560.503-1(f)(3). After appealing a denied claim, the claim administrator has a maximum of 90 days to render a decision on the appeal. 29 C.F.R. § 2560.503-1(i)(3). These deadlines have no teeth absent consequences for failure to comply. Another section of the regulation states that if the insurer or claim administrator fails to strictly adhere to the procedures in the regulations, the claimant is deemed to have exhausted administrative review and can file a lawsuit under ERISA § 502(a), without the exercise of any discretion by the insurer or claim administrator. But a recent case held an insurer’s late decision did not forfeit this exercise of discretion, in contrast with some other decisions holding the opposite.

In Taylor v. Unum Life Insurance Co. of America, No. 21-331, 2023 WL 2766018 (M.D. La. Mar. 31, 2023), Taylor made a claim for long-term disability in 2017 due to early onset Alzheimer’s Disease. Unum approved his claim under the regular occupation definition of disability, but terminated benefits when the definition changed to being based on ability to perform any “gainful occupation.” Taylor appealed the benefit termination on February 22, 2021. After more than 90 days passed, Taylor filed a lawsuit on June 6, 2021. Unum then rendered a decision upholding the benefit termination on July 18, 2021. Taylor argued the failure to render a decision within 90 days deemed administrative review exhausted and forfeited any exercise of discretion by Unum.

The United States District Court for the Middle Districts of Louisiana disagreed with Taylor, and reviewed the case under the deferential, or arbitrary and capricious, standard of review. The Court explained that the regulations stating failure to strictly adhere causes no exercise of discretion were not effective until 2018, while Taylor filed his initial claim for long-term disability benefits in 2017. This holding directly contradicts the position of the Seventh Circuit in Zall v. Standard Insurance Co., covered in our previous blog post here. So for now, if you went on disability before 2018 in Louisiana, you may not receive all the protections of ERISA regulations.

If your claim for long-term disability benefits has been denied or terminated, contact a knowledgeable ERISA long-term disability lawyer today.