ERISA-Tenth Circuit Rules That A Plan Administrator’s Decision To Deny Benefits Must Be Reviewed De Novo Since It Was Not Made By The Plan’s Deadline

In Rasenack v. AIG Life Insurance Company, No. 07-1521 (10th Cir. 2009), the plaintiff had requested accidental paralysis and rehabilitation benefits from AIG Life Insurance Company, the insurer, and AIG Claim Services, the plan administrator with discretionary authority to decide claims (collectively, “AIG”), under a plan which was maintained by the plaintiff’s employer, and which was funded with an accidental death and dismemberment (“AD&D”) policy issued by AIG (the “Plan”). AIG denied the plaintiff’s initial request for these benefits, on the grounds that the plaintiff had not been paralyzed within the meaning of the insurance policy funding the Plan. The plaintiff submitted to AIG a timely administrative appeal of this denial. The Plan required AIG to render a decision on this appeal within 60 days, unless special circumstances require an additional 60 days. After this 120 day period expired, but before AIG rendered its decision on the appeal, the plaintiff filed in court this suit against AIG under ERISA. AIG did render its decision, again denying the benefits, after the suit was filed. The district court upheld AIG’s denial of the benefits, and granted summary judgment in AIG’s favor.

In reviewing the case, the Court noted that the Plan’s time limit for AIG to render its decision on the appeal was in accordance with ERISA regulations. It said that, since AIG’s decision was not made by the Plan’s deadline, the plaintiff’s claim was automatically deemed to be denied, and his administrative remedies automatically deemed to be exhausted, so that he could file a suit with a court. Further, since the Plan and the ERISA regulations place time limits on the plan administrator’s discretion, and in this case the plan administrator failed to render a decision within those time limits, the plan administrator’s “deemed denied” decision is by operation of law, rather than by the exercise of discretion. As a result, the Court may review the plan administrator’s decision de novo, rather than according it a deferential review.

The Court ultimately reversed the District Court’s summary judgment, and remanded the case back to the district court to review AIG’s decision to deny the plaintiff’s claim for benefits under a de novo standard.

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