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Mesker v. Reliance Standard Life Insurance Co.

United States District Court, S.D. Indiana, Indianapolis Division

June 22, 2017



          LARRY J. McKINNEY, United States District Court Judge

         This matter comes before the Court on Plaintiff Michael Mesker's (“Mesker's”) Motion to Determine Standard of Adjudication (the “Motion”). Dkt. No. 12. On January 10, 2017, Mesker initiated this action pursuant to the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (“ERISA”), in order to obtain disability insurance benefits from Defendant, Reliance Standard Life Insurance Company (“Reliance”). See generally, Dkt. No. 1. In the Motion, Mesker requests that this case be adjudicated under a de novo standard of review in light of Reliance's failure to timely render a decision regarding Mesker's disability benefits. Dkt. No. 12 at 1. Reliance opposes the Motion and asserts that the Court should apply an arbitrary and capricious standard of review because it substantially complied with ERISA's procedural regulations. See generally, Dkt. No. 21. For the reasons stated herein, the Court DENIES the Motion to the extent it seeks application of a de novo standard of review.

         I. BACKGROUND

         Mesker worked for the Indiana State Teachers Association (“ISTA”) until June 2010. Dkt. No. 7, ¶ 7. Through his employment with ISTA, Mesker participated in an employee welfare benefit plan with long term disability benefits through a group insurance policy provided by Reliance (the “Plan”). Id. at ¶¶ 4, 7. Under the Plan, Reliance was required to pay monthly disability benefits for 60 months in the event that an insured was unable to work due to illness. Dkt. No. 21, Ex. A at 13. The Plan also granted Reliance “the discretionary authority to interpret the Plan and the insurance policy to determine eligibility for benefits.” Id. at 17.

         On June 16, 2010, after being diagnosed with HIV/AIDS, Mesker left his job with ISTA due to severe symptoms related to his condition. Dkt. No. 7, ¶ 7. Pursuant to the Plan, Mesker applied for disability benefits with Reliance on December 8, 2010. Dkt. No. 21 at 2. On January 24, 2011, Reliance approved Mesker's application for disability benefits, to be effective as of December 14, 2010. Id.; Dkt. No. 7, ¶ 8. Following this approval, Mesker received regular monthly disability payments from Reliance until May 3, 2016. Dkt. No. 7, ¶ 8.

         On April 22, 2016, Reliance informed Mesker that it would be discontinuing his disability benefit payments on May 3, 2016, because Mesker's condition would no longer be considered a “disability, ” as defined by the Plan. Id.; see also, Dkt. No. 21, Ex. A at 13. Mesker appealed Reliance's decision to discontinue his disability benefits on October 6, 2016. Dkt. No. 7, ¶ 9. With his appeal, Mesker included some medical evidence, including a summary of the medical records provided by his treating physician, Dr. Steven Norris (“Dr. Norris”). Dkt. No. 12, Ex. 3.

         Reliance acknowledged Mesker's appeal in a letter dated October 18, 2016, and explained that “[t]o the extent that additional information is needed, Reliance … will toll the relevant time frames for reaching an appeal determination from the time of [its] request for additional information until such time as [it] receive[s] the requested information.” Dkt. No. 21, Ex. B at 2. On October 20, 2016, Reliance sent another letter to update Mesker that Reliance “determined that additional medical documentation from [Mesker's] treatment providers will be required prior to the conclusion of [its] assessment” and required such information from Dr. Norris. Dkt. No. 12, Ex. 2. Reliance further informed Mesker that it had “tolled the statutory time allotted to [it] in order to complete [its] review [of Mesker's appeal], pending receipt of the requested information.” Id. On November 16, 2016, Reliance advised Mesker that it still had not received the information it requested from Dr. Norris regarding Mesker's treatments. Dkt. No. 21, Ex. C at 2-3. In a letter dated January 9, 2017, Reliance informed Mesker that it had received the information requested from Dr. Norris on November 29, 2016, but that it required “beyond 45 days to make a final decision on [Mesker's] appeal, pending the results of [an] Independent Peer Review.” Dkt. No. 21, Ex. D at 2.

         On January 10, 2017, one day after receiving this letter from Reliance, Mesker filed the instant action, seeking past and future long-term disability benefits. See generally, Dkt. No. 1. On January 19, 2017, Reliance upheld its prior determination to terminate Mesker's disability benefits. Dkt. No. 7, ¶ 9.


         Generally, a de novo standard of review is applied to disability benefit determinations under ERISA “unless the benefit plan [at issue] gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). When a benefit plan reserves such discretionary authority, a disability benefit determination is reviewed only for an abuse of discretion. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008) (citing Firestone, 489 U.S. at 111, 115).

         Despite the existence of a discretionary authority provision in the Plan, Mesker asserts that the Court should review Reliance's denial of his disability benefits using a de novo standard of review because Reliance failed to comply with the timing procedures set forth in 29 C.F.R. § 2560.503-1. See generally, Dkt. No. 12. Under 29 C.F.R. § 2560.503-1, a plan administrator must respond to a claim for disability benefits within 45 days of receiving the claim. 29 C.F.R. §§ 2560.503-1(h)-(i). A plan administrator may receive an extension of up to an additional 45 days to respond to such a claim if the plan administrator determines special circumstances exist to justify the extension and provides the claimant with written notice of the extension prior to the termination of the initial 45-day time period. Id. When an extension is properly obtained, “the period of time for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.” 29 C.F.R. § 2560.503-1 (i)(4).

         Prior to 2000, if a plan administrator did not issue a timely decision regarding a claimant's appeal of a denial of disability benefits, the appeal would be “ʻdeemed denied, '” and the claimant would be allowed to bring a civil action against the plan administrator to evaluate the merits of his application. Lundsten v. Creative Cmty. Living Serv., Inc. Long Term Disability Plan, No. 13-C-108, 2014 WL 2440716, at *4 (E.D. Wis. May 30, 2014) (quoting Nichols v. Prudential Ins. Co. of Am., 406 F.3d 98, 106 (2nd Cir. 2005)). However, in 2000, the Department of Labor (“DOL”) made amendments to this regulation and eliminated the “deemed denied” provision. Lundsten, 2014 WL 2440716 at *4. In its place, 29 C.F.R. § 2560.503-1 provided that if a plan administrator fails “to establish or follow claims procedures consistent with the requirements of [29 C.F.R. § 2560.503-1], a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under [ERISA §] 502(a).” 29 C.F.R. § 2560.503-1(1).

         When § 2560.503-1 was amended in 2000, the DOL provided additional guidance in a preamble to the amended regulation, in which it explained that “the new standards are intended to ensure more timely benefit determinations, to improve access to information on which a benefit determination is made, and to assure that participants and beneficiaries will be afforded a full and fair review of denied claims.” Employee Retirement Income Sec. Act of 1974, Rules & Regulations for Admin. & Enforcement; Claims Procedures, 65 Fed. Reg. 70, 246 (Nov. 21, 2000)). With respect to 29 C.F.R. § 2560.503-1(1) specifically, the DOL noted that it intended for this provision “to clarify that the procedural minimums of the regulation are essential to procedural fairness and that a decision made in the absence of the mandated procedural protections should not be entitled to any judicial deference.” Id. at 70, 255.

         In response to Mesker's claim that a de novo standard of review should apply, Reliance argues that its disability benefit decision is still entitled to a more deferential standard of review, pursuant to the substantial compliance doctrine. Dkt. No. 21 at 5-7. “In general the doctrine of substantial compliance means that a plan administrator who has violated a technical rule under ERISA … may be excused for the violation if the administrator has been substantially compliant with the requirements of ERISA.” Edwards v. Briggs & Stratton Retirement Plan, 639 F.3d 355, 361-62 (7th Cir. 2011) (citing Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 693-94 (7th Cir. 1992)). When applying the substantial compliance doctrine, a plan administrator that has retained discretionary authority through an applicable benefits plan, “notwithstanding his or her error, is given the benefit of deferential review of [his or her] determination about a claim under the arbitrary and capricious standard … rather than more stringent de novo review.” Edwards, 639 F.3d at 362 (citing Rasenack v. AIG Life Ins. Co., 585 F.3d 1311, 1317 (10th Cir. 2009)). A plan administrator who does not render a decision within the time specified by the applicable ERISA regulations “can only be in substantial compliance with ERISA's procedural requirements if there is an ...

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