ERISA regulations require plans to outline how they will decide claims for medical and disability benefits, along with any subsequent appeals. The regulations also set certain minimum standards for the plan’s procedures, including setting a maximum number of days that the plan must make a decision after receiving the claim or appeal. If a plan follows these procedures and a participant later sues the plan because of the denial of benefits, the court will give deference to the plan’s decision and only overturn if the plan’s denial was arbitrary and capricious. If the plan does not follow the procedures, then the court will review the claim de novo, which means it affords no deference to the plan’s previous decision.
The Sixth, Ninth, and Tenth Circuits have previously held that, even if a plan does not strictly meet decision deadlines, the court will not review a subsequent civil case de novo—as long as the plan was in “substantial compliance” with the deadlines. Recently, however, the Court of Appeals for the Seventh Circuit held in Fessenden v. Reliance Standard Life Ins. Company that a plan must comply with the “bright line” of deadlines and will not afford deference to plans that fail to strictly meet deadlines, even if they are in “substantial compliance.”
This case acts as a warning to plans in the Seventh Circuit that they must take claims and appeals deadlines seriously, otherwise their decisions to deny claims will be heavily scrutinized by the courts.