Tennessee Disability and Life Insurance Blog
Most ERISA disability plans require claimants to file an administrative appeal of any denial of long-term disability benefits prior to filing a lawsuit. Under Sixth Circuit case law, if you fail to file an administrative appeal (also referred to as failing to exhaust administrative remedies), the court will likely dismiss your action regardless of the merits of your case. There are exceptions, however, that allow you to challenge a denial of benefits in court, even if you did not exhaust your administrative remedies.
In a ruling that will provide immediate help to many ERISA disability claimants, the United States Court of Appeals for the Sixth Circuit recently held that a plan administrator cannot require a claimant to exhaust his or her administrative remedies unless the relevant plan document specifically discusses required internal appeal procedures. In its opinion in Wallace v. Oakwood Healthcare, Inc. (Mar. 31, 2020), the Sixth Circuit does not go so far as to hold that the plan documents “affirmatively require exhaustion.” Practically speaking, however, the Wallace decision will make it difficult for plan administrators to deny a disability claim due to a disability claimant’s failure to appeal a denial of benefits if the policy did not require the claimant to submit an appeal before bringing suit.
Recently, our law firm represented a client who was discouraged after her disability case manager told her it would be a “waste of time” to appeal her denial of long-term disability benefits since she had already been turned down for short-term benefits. Long after her appeal deadline had passed, the client contacted us to file a lawsuit challenging the insurer’s denial of her claim.
After we brought suit on behalf of the claimant, the plan administrator filed a motion for summary judgment requesting that the court dismiss her case due to her failure to exhaust her administrative remedies. In our response, we argued that the client’s lawsuit was allowed under the “futility doctrine” based on the case manager’s discouraging comments. Under the futility doctrine, you can be relieved of the obligation to file a mandatory appeal if you can show that your appeal would have been unsuccessful based on how the plan administrator handled your claim.