Bank Manager Awarded Long Term Disability Benefits After Plan Administrator Failed to Follow ERISA’s Procedural Requirements
Feb. 6, 2023
Employer-sponsored long term disability plans are governed by a federal statute commonly referred to as ERISA. After Congress enacted the statute, regulations were put in place to provide procedural safeguards to employees seeking benefits under the disability policy. Disability insurers or claim administrators are quick to deny benefits to a disabled employee. When this happens, the employee, after exhausting all administrative remedies, can sue the insurer in federal court. If a denial happens, it is important to determine if the insurer complied with all of ERISA’s procedural requirements as a failure to do so may lead the court to overturn the insurer’s claim denial.
An employee recently sued her employer for the wrongful denial of long term disability benefits. The court ultimately ruled in the employee’s favor, finding that the claim administrator had abused its discretion in terminating the employee’s benefits. The court listed many reasons for its decision, one being that the administrator failed to comply with ERISA’s procedural requirements. This is important as it illustrates how employees can defeat an insurer’s disability claim denial not just on substantive grounds (i.e. proving the employee was disabled), but also on procedural grounds if the insurer or administrator fails to play by the rules.
The employee in this case was a bank manager who had the misfortune of slipping on stairs while on a cruise vacation, fracturing her ankle in multiple places. This was no minor slip and fall. As a result of her injuries, the employee had to undergo four surgeries because of her injuries as well as eighteen months of physical therapy. To no one’s surprise, she had limitations in her ability to stand for long periods of time as is often required of bank employees.
Initially, the claim administrator for her disability plan approved her long term disability. Soon after, however, the administrator had a doctor conduct a “paper review” of the employee’s medical records. Based on that review, and without ever having the employee examined by a doctor, the insurer terminated the employee’s disability benefits. After exhausting all appeals, the employee sued her employer and the matter ultimately came before the court for decision.
After considering the record evidence, the judge found the claim administrator abused its discretion and awarded the employee her disability benefits. The court provided several reasons for its decision, one being that the administrator failed to comply with the notice provisions within ERISA and within the employee’s disability plan. Under ERISA regulations, “if your claim is denied, the notice of denial will include … discussion of the decision, including an explanation for disagreeing with or not following … the views presented by you of healthcare professionals treating you and vocational professionals who evaluated you.” The court found that the administrator’s letters to the employee failed to comply with this regulation.
The court also noted that the claim administrator made several other procedural blunders. For example, the administrator failed to assess whether the employee could perform her “own occupation” as provided for under her policy and failed to give appropriate consideration to the employee’s treating physicians. The court also found it significant that the claim administrator failed to address the employee’s receipt of Social Security benefits and failed to provide the employee with the additional criteria required for her to continue to receive benefits under the plan.
If you wish to read the court’s decision, it is available on the court’s docket. See Hawks v. PNC Fin. Services Group, Inc., No. 2:21-cv-00612, 2022 WL 6218781 (W.D.Pa. Aug. 29, 2022).