How to litigate an Erisa disability claim

• Author: Scott M. Riemer/Jennifer L. Hess
• Pages: 145-204

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Chapter 10

HOW TO LITIGATE AN

ERISA DISABILITY CLAIM

§10.0 INTRODUCTION

ERISA was enacted to promote the interests of beneciaries in

employee benet plans and to protect their contractually dened ben-

ets. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 104 (1989). To

achieve this, ERISA provides key remedial measures, including the right

to bring private actions. ERISA 502(a)(1)(B), 29 U.S.C. 1132(a)(1)(B).

See also Salovaara v. Eckert, 222 F.3d 19, 28 (2d Cir. 2000).

is chapter provides an overview of how to litigate an ERISA long

term disability claim from beginning to end. Litigating these matters as

a plaintis’ attorney can be a complicated, time-consuming, and stress-

ful process. After all, it is you and your client—who lacks critical xed

disability income—against an administrator with copious resources at its

ngertips. e role you will play as a plaintis’ attorney is an important

one. In addition to helping your client, you also are helping to keep plan

administrators’ abusive and wrongful tactics in check. A win also may

help future claimants by deterring plan administrators from engaging

in similar tactics.

§10.1 LOGISTICS

Before commencing any long term disability litigation, there are sev-

eral logistics you must consider. ese include when to le, who to sue, and

where to sue. is section will address these pre-litigation considerations.

§10.1.1 ERISA Disability Claims and Litigation 10-128

§10.1.1 When to File

It may be tempting to le an action at the rst sign of trouble for

your client. ERISA, 29 U.S.C. §1001, et seq., enables claimants to le an

action to recover benets under employee benet plans, to clarify their

rights under such plans, and to recover attorneys’ fees and costs. Section

502(a)(1)(B), 29 U.S.C. §1132(a)(1)(B). Unfortunately, you can le the

action in federal court only after all administrative remedies have been

exhausted. Burke v. PriceWaterHouseCoopers LLP Long Term Disability Plan,

572 F.3d 76, 79 (2d Cir. 2009) (per curiam); Kennedy v. Empire Blue Cross

and Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993); McFarlane v. First Unum

Life Ins. Co., 274 F. Supp. 3d 150, 154 (S.D.N.Y. 2017). In other words,

your client must go through the claim and appeal process before ling

suit. Note that “ERISA itself does not contain an exhaustion require-

ment; the requirement is instead judge-made.” Kirkendall v. Halliburton,

Inc., 707 F.3d 173, 179 (2d Cir. 2013).

ere are two narrow exceptions to the court-created exhaustion

requirement.

First is where a plainti shows that exhaustion would be futile. Ken-

nedy, 989 F.2d at 594-95. “Usually, the futility exception is applied in a

context in which there has been, in some form, an unambiguous applica-

tion for benets and a formal or informal administrative decision denying

benets and it is clear that seeking further administrative review of the

decision would be futile.” Barnett v. Int’l Bus. Machines Corp., 885 F. Supp.

581, 588 (S.D.N.Y. 1995). Under these circumstances, a plainti must

show that no purpose would be served by requiring further exhaustion

before judicial review. See id. See also Elizabeth W. v. Empire Healthchoice

Assurance, Inc., 2016 U.S. Dist. LEXIS 129880, at *19-20 (S.D.N.Y. Sep.

15, 2016). is is an uphill battle. Caution always should be exercised if

you decide not to exhaust remedies.

Second is where the administrator failed to follow a reasonable

claims procedure. is exception was created by the Regulations eective

April 1, 2018. Under this exception, if the administrator “fails to strictly

adhere to all the requirements in this section with respect to a claim,

the claimant is deemed to have exhausted the administrative remedies

under the plan….” 29 CFR 2560.503-1(l)(2)(i). is exception, however,

does not apply if the failure was: (i) de minimis; (ii) non-prejudicial;

(iii) attributable to good cause or matters beyond the plan’s control;

(iv) in the context of an ongoing good-faith exchange of information;

10-129 How to Litigate an ERISA Disability Claim §10.1.1

and(v)notreective of a pattern or practice of non-compliance. 29 CFR

§2560.503-1(l)(2)(ii). If you elect to le for immediate relief as a result

of this exception, but guess wrong, “the claim shall be considered as

re-led on appeal upon the plan’s receipt of the decision of the court.”

Id. erefore, the downside of this exception is a substantial delay in

time, rather than being dismissed with prejudice.

Whether or not you could invoke one of the exceptions to the exhaustion

requirement, be aware a lawsuit still must be commenced within the applica-

ble statute of limitations. e need to exhaust administrative remedies does

not toll the statute of limitations. Indeed, courts are quick to dismiss ERISA

actions where the statute of limitations has not been satised. ERISA sets

forth a statute of limitation for breach of duciary duty claims, but not for

benet claims. As a result, the courts have looked to the analogous state stat-

ute of limitation, which usually is for breach of contract. However, because

most states permit parties to alter the statute of limitations by contract, the

courts often have applied any limitations period found in the policy.

Unfortunately, even if you locate a limitations period in the policy,

the date the statute of limitations begins to run often is unclear. “Absent a

controlling statute to the contrary, a participant and a plan may agree by

contract to a particular limitations period, even one that starts to run before

the cause of action accrues, as long as the period is reasonable.” Heimesho v.

Hartford Life & Acc. Ins. Co., 134 S. Ct. 604, 610 (2013) (emphasis added).

Such terms are enforceable unless the court determines “either that the

period is unreasonably short, or that a controlling statute prevents the

limitations provision from taking eect.” Id. at 611. Indeed, most policies

state that an action must be brought within three years of the date proof

of loss is required, and the Supreme Court has held that such a provision

is enforceable because it is not unreasonably short. See id. at 612-13.

To be safe, calculate the applicable statute of limitations from the

date “proof of claim” was due, rather than the date of the claim or appeal

denial. If the litigation only would be timely using the date of the claim

or appeal denial, the claim may not be precluded but you should be

prepared to face a motion to dismiss. Check to see how courts in your

ling jurisdiction have handled similar situations.

Recognizing that unwary claimants could fail to satisfy a statute of lim-

itations, the Department of Labor specied in its regulations issued eective

in 2018, that insurance companies must specify in the nal denial letter the

date by which the statute of limitations will run. 29 C.F.R. §2560.503-1(g)(1)

(iv); see also Mirza v. Ins Adm’r of Am., Inc., 800 F.3d 129, 136 (3d Cir. 2015).