Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
June 2 — Declining to defer to Department of Labor interpretive guidance, a federal judge found that Aetna Life Insurance Co.'s 182-day span in denying a disability benefits claim didn't cause the insurer to forfeit the benefit of deferential judicial review .
Specifically, the court afforded no deference to the preamble of a 2000 DOL regulation, in which the Department expressed its intention that decisions made by plan administrators “in the absence of the mandated procedural protections” shouldn't be entitled to judicial deference.
The participant, Jill M. Lundsten, argued that Aetna's failure to strictly comply with DOL regulations imposing a 45- or 90-day deadline for reviewing claims caused the insurer to forfeit the benefit of deferential judicial review, while Aetna argued that the extra time was appropriately extended and tolled under the regulations.
In a May 30 opinion, Judge Rudolph T. Randa of the U.S. District Court for the Eastern District of Wisconsin found that Aetna's delay didn't warrant the application of de novo judicial review, because the insurer substantially complied with the relevant regulations.
Under the substantial compliance doctrine, a court will decline to penalize a plan administrator for minor procedural violations.
The court first found that the substantial compliance doctrine wasn't invalidated by an amendment to the relevant regulations. In 2000, 29 C.F.R. § 2560.503-1 was amended to provide that a plan's failure to follow claims procedures resulted in a claimant being deemed to have exhausted administrative remedies, rather resulting in a deemed claim denial.
According to the court, the majority of courts considering this issue have found that the substantial compliance doctrine survived the 2000 amendment. Further, the court said that the statement of intention contained in the agency's preamble wasn't persuasive, because § 2560.503-1 was “completely silent” regarding the standard of review applicable in federal court.
Next, the court considered whether the substantial compliance doctrine applied to the facts of the case.
Specifically, the court said that Aetna's decision was delayed “pending the receipt of additional information” from Lundsten, her doctors or her family. Other delays resulted from Aetna's use of independent peer reviewers, the court said, finding that none of these delays were “excessive or unreasonable.”
Further, the court said that Aetna sent Lundsten six letters about the status of her appeal throughout the review process, and the parties spoke on the phone multiple times.
“The Plan should not be penalized for affording Lundsten the time and opportunity to submit information in support of her claim, and Lundsten should not be rewarded for failing to submit evidence that she promised to provide,” the court reasoned.
Given this, the court denied Lundsten's motion for partial summary judgment and held that arbitrary and capricious review applied.
Lundsten was represented by von Briesen & Roper SC and Cabaniss Law. Aetna was represented by Gonzalez Saggio & Harlan LLP.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)