Should You Appeal a Long-Term Disability Denial that Provides No Explanation for the Denial?

Employees in Chicago and the rest of Illinois with claims for long-term disability insurance benefits often receive a denial from the insurer that contains little explanation of the basis for the denial. Frequently, the denial letter will state in conclusory fashion that the evidence does not show functional impairment from performing the material and substantial duties of the occupation, without discussing what those duties are. Such terse denial letters likely do not meet the notice requirements for an adverse benefit determination set by ERISA regulations, 29 C.F.R. § 2560.503-1. The regulations state that if the insurer fails to strictly comply with the requirements of the regulation, administrative remedies are deemed exhausted and the claimant may proceed to litigation regarding the claim. In such a circumstance, should you appeal the deficient denial anyway, or file a lawsuit? A recent case revealed the pros and cons of each strategy.

In Halleron v. Reliance Standard Life Insurance Co., No. 22-cv-633, 2024 WL 3585139 (W.D. Ky. July 30, 2024), Halleron was a physician diagnosed with Postural Orthostatic Tachycardia Syndrome (“POTS”) and submitted claims for short-term disability and long-term disability benefits under employer-sponsored disability plans. Reliance Standard denied the short-term disability claim under a pre-existing condition exclusion, stating during the lookback period an office visit note documented fainting and tachycardia. But Reliance Standard gave no further explanation for why this met the pre-existing condition exclusion. Likewise, Reliance Standard denied the long-term disability claim without discussing Halleron’s treating doctor’s opinion she was disabled from her occupation as a physician. After the denials, Halleron declined to submit any appeals and immediately sued Reliance Standard under ERISA § 502(a).

The United States District Court for the Western District of Kentucky considered cross motions for summary judgment and ruled in Halleron’s favor. But the catch is in the relief. The Court held both benefit denials were arbitrary and capricious. The short-term disability denial did not address whether Halleron was disabled, and just stated the pre-existing condition exclusion applies, but failing to explain how the language of the policy’s exclusion applied to the facts. Regarding the long-term disability claim, the decision was arbitrary and capricious because Reliance Standard summarized medical evidence and baldly stated the evidence does not show any functional impairment, without addressing the opinion of Halleron’s treating doctor that she was disabled, in violation of 29 C.F.R. § 2560.503-1(g)(1)(vii)(A)(i). Because there was a problem with Reliance Standard’s reasoning process, however, the court remanded the matter back to Reliance Standard to issue proper benefit determinations in compliance with the regulations. So in the end, Halleron sued immediately for failure to comply with the regulations, but she had to go back and go through the review and appeal process anyway.

If you have a claim for long-term disability benefits call an experienced ERISA long-term disability lawyer right away.