District Court Limits Lincoln Life’s Ability to Expand Administrative Record for Failure to Comply with ERISA Regulations

The Eastern District of New York Court recently decided Fredrich v Lincoln Life And Annuity Company of New York, . 21-cv-5482 (JMA)(SIL), 2022 WL 1537162 (E.D.N.Y. May 13, 2022). The response to Mr. Stephen Fredrich’s ERISA long-term disability (“LTD”) suit was especially intriguing, and the nuances of this case are ones that many claimants can benefit from learning.

Mr. Fredrich had enjoyed a long career with his company, having worked with them from April 1976 through his retirement in July 2020. In early 2014, Mr. Fredrich suffered a heart attack. In May 2014, Mr. Fredrich required a cardiac catheterization, which revealed that he required stenting. Mr. Fredrich’s second cardiac catheterization was performed in October 2016, during which it was revealed that he required angioplasty and restenting. In July 2018, Mr. Fredrich required an additional cardiac catheterization, during which it was discovered that was suffering with artery disease. At that time, Mr. Fredrich’s physician advised him to stop working, and his last day of work was July 31, 2020. Pursuant to his employer’s disability policy, Mr. Fredrich applied for LTD benefits. Unfortunately, not long after applying for his LTD benefits, the insurer and claim’s administrator, Lincoln Life & Annuity Company of New York (“Lincoln”), denied Mr. Fredrich’s claim. Subsequently, Mr. Fredrich submitted an appeal imploring Lincoln to approve the claim. But as you might have guessed, Lincoln denied Mr. Fredrich’s appeal. Thus, in August 2021, Mr. Fredrich filed a second-level appeal. Per the ERISA regulations, Lincoln’s deadline to render their decision on the second-level appeal was October 1, 2021. Mr. Fredrich’s counsel confirmed this deadline in their correspondence dated September 28, 2021 when they stated, “[n]o extension of time is requested, so a decision is still expected within the 45 days.” It was not until October 26, 2021 that Lincoln rendered their decision on Mr. Fredrich’s second-level appeal. October 26 ,2021 was more than three weeks after the 45-deadline of October 1, 2021 had passed. Because Lincoln failed to adhere to deadlines under ERISA, Mr. Fredrich was able to proceed with filing a lawsuit, which he did on October 4, 2021.

ERISA Take Away: Under ERISA, deadlines are of paramount importance—for both the claimant and the claim’s administrator. The Department of Labor has established that if a deadline is missed, by even a day, the claimant may be denied the right to have their claim reconsidered, and also be denied the right to pursue litigation. Adhering to deadlines goes both ways: Under ERISA, a plan must resolve a claimant’s appeal within 45 days. The plan may take one 45-day extension for special circumstances, and a request for an extension must be provided to the claimant in writing, prior to the termination of the first 45 days, and it must include the special circumstances. However, ERISA is also clear that the plan must notify the claimant of its their decision on an appeal, within 45 days. If they fail to reach a decision within the 45-day window, this permits a claimant to consider the claim as having been denied, and they are thus free to move forward with filing a suit, immediately.

Lincoln’s response to Mr. Fredrich’s complaint was to attempt to expand the administrative record (“AR”), to include information beyond October 1, 2021 (the date that Lincoln’s decision on Mr. Fredrich’s appeal was due). To expand the record, Lincoln had to show there was good cause to do so. #Spoileralert, the Court found there was not good cause, and they granted Mr. Fredrich’s motion that the AR was closed on October 1, 2021. In short, Lincoln lost, and the Court concluded that Lincoln’s failure to issue a decision on Mr. Fredrich’s second level appeal within the 45 days served as a denial, and thus, the AR was closed as of October 1, 2021.

Lincoln attempted to persuade the Court with its letter sent to Mr. Fredrich in response to his second level appeal. In that letter, Lincoln stated, “[i]f you require our decision by the 45 day ERISA timeframe…please notify us immediately.” Mr. Fredrich’s counsel duly responded and informed Lincoln that they still expected the decision by the 45-day mark, October 1, 2021. However, in court, Lincoln purported that their letter to Mr. Fredrich was itself an inherent request for an extension of time to review the second level appeal. The Court rejected Lincoln’s defense finding that the letter did not contain either a request for an extension or the special circumstances requiring an extension.

Lincoln also argued that Mr. Fredrich had not exhausted his administrative remedies because Lincoln had not violated ERISA, in particular the 2018 revisions of ERISA which state: “the administrative remedies available under a plan with respect to claims for disability benefits will not be deemed exhausted base on de minimis violations that do not cause, and not likely to cause, prejudice or harm to the claimant so long as a the plan demonstrates that the violation was for a good causes…” Lincoln argued that Mr. Fredrich was wrong to assert that his administrative remedies had been exhausted because the reasons on which he based the exhaustion were merely technical, de minims, and caused Mr. Fredrich no harm or prejudice. Again, the Court rejected Lincoln’s defense, finding that Lincoln failed to demonstrate good cause, that their failure to adhere to ERISA was not de minimis, and that their failure to issue a decision by October 1, 2021 functioned as a denial of the second-level appeal.

ERISA Take Away: Lincoln’s failure to comply with the extension requirements and the appeal deadlines were not de minimis violations because they did not demonstrate “good cause” that their violation was due to “matters beyond its control.”

Although Lincoln attempted to persuade the Court that they had good cause to expand the AR, the Court concluded that Lincoln failed to do so. Lincoln claimed that they needed additional time to respond to Mr. Fredrich’s September 28, 2021 letter. However, Lincoln failed to inform Mr. Fredrich that they needed additional time, per the requirements of ERISA. Thus, the Court found that, “This failure is Lincoln’s own fault and is insufficient to…” claim a good cause for the expansion of the AR beyond October 1, 2021. The Court continued, “…such a position would contravene ERISA’s stated purposed of “promot[ing] the interest of employees and their beneficiaries…the Court concludes that Lincoln has failed to establish “good cause” sufficient to expand the AR to include documents created after October 1, 2021, and declines to do so.”

ERISA Take Away: A plan must send a notice of extension prior to the expiration of the first 45-day review period, and they must identify the “special circumstances” that warrant the need for an extension. Note that a plan’s desire to obtain another medical review and subsequent decision is not considered a “special circumstance” that permits a 45-day extension.

We hope our blog summarizing this case reaches claimants far and wide because no doubt, ERISA is a complicated law, the appeal process is not a simple process, and deadlines per ERISA are extremely important. If you have any questions about this case, or if you have been denied your LTD claim, contact us for assistance.