A New York federal trial court held that it would apply no deference to First Reliance Standard Life Insurance Company’s (“First Reliance”) decision to terminate a bank executive’s disability benefits.
After suffering a traumatic brain injury, William Rhodes brought a claim for long-term disability (“LTD”) benefits under his employer’s LTD Plan. Initially, First Reliance approved Mr. Rhodes’ claim. A mere 8 months later, however, First Reliance determined that Mr. Rhodes no longer met the Plan’s definition of disability and terminated his benefits.
LTD Appeal and Lawsuit
Mr. Rhodes timely appealed First Reliance’s decision. In response, First Reliance advised Mr. Rhodes that:
- it would require him to undergo an independent medical examination (“IME”);
- he was invited to submit any additional documentation he wished;
- it was purportedly providing notice of its “intention to take beyond 45 days to make a final decision on your appeal, as we await the receipt of the above referenced physician’s review and the receipt of the above-requested information, if applicable.”
After First Reliance sent Mr. Rhodes this letter on June 7, 2021, it paused its review of his appeal until August 31, 2021. A neuropsychologist conducted Mr. Rhodes’s IME, and First Reliance received the initial report and an addendum on August 6, 2021, and December 22, 2021, respectively. First Reliance did not provide the addendum report to Mr. Rhodes until after it denied his appeal on January 7, 2022. Mr. Rhodes then filed suit against First Reliance challenging its denial of his LTD claim.
The court sided with Mr. Rhodes, holding that:
- The neuropsychologist was not a medical doctor and therefore, was not sufficiently qualified to satisfy ERISA’s full and fair review requirement;
- First Reliance’s failure to provide Mr. Rhodes with an addendum and the opportunity to respond to it prior to making its final decision violated ERISA claims procedure regulations;
- First Reliance’s failure to timely obtain an IME could not be invoked to extend ERISA’s decision deadlines;
- First Reliance’s letter merely informing Mr. Rhodes that he could provide additional information if he so wished was not a “request for additional information” that would toll 45-day window to make a final decision, nor did it qualify as a special circumstance warranting a 45-day extension of ERISA’s 45-day decision deadline; and
- First Reliance did not provide sufficient notice to invoke a 45-day extension of the decision deadline, even if special circumstances existed.
Ultimately, the court concluded that the standard of review more favorable to Mr. Rhodes, known as de novo, would apply to the court’s review of his application for benefits, stripping First Reliance of the deference the court would have otherwise given its decision to terminate benefits.
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