This week we discuss the importance of establishing good claims procedures and the benefits of following those procedures.

A plan’s claims procedures should be spelled out clearly in both the plan document and the summary plan description (where the two documents are not one in the same).  In addition to setting all of the applicable deadlines for submitting claims and appeals (as we discussed last week), the procedures should inform claimants of:  optional levels of appeal or review (if any); procedures for designating an authorized representative; the requirement to exhaust the plan’s claims procedures before commencing an action; and their right to review documents relevant to the claim decision.  Good claims procedures also will confer final, decision-making authority on one or more people, or a committee.  Importantly, the claims procedures must be made known to all participants because, of course, without knowledge of what the claims procedures are, a participant cannot reasonably be expected to utilize them.

The claims process, contrary to what may be intuitive to many, is not generally viewed by the courts to be an adversarial process—at least not at the beginning stages.  That is because plan fiduciaries—such as those responsible for deciding claims and appeals—owe a fiduciary duty of loyalty to participants.  Now, that is certainly not to say that claims decisions must always be in the participant’s favor.  It does mean, however, that participants must be given an opportunity to present their position on why they believe they are entitled to benefits and that the plan fiduciary should consider and evaluate all of their arguments at the claim and appeal stages.  The fiduciary should give careful consideration to the evaluation of a participant’s claims and arguments, particularly since the participant is generally entitled to all documents that are considered by the claims fiduciary in making its decision—even if the documents are not relied upon in reaching the decision.

There are many benefits to making sure the claims fiduciary follows the plan’s claims procedures.  For instance, a court (or arbitrator) will require a claimant to first exhaust the plan’s administrative process before s/he brings an action for benefits under ERISA section 502(a).  And, if after exhausting the claims procedures, the participant pursues a claim for benefits in court (or arbitration), the judge (or arbitrator) is required to defer to the claims fiduciary’s decision unless it was arbitrary and capricious.  Unlike giving the claim a fresh review, the arbitrary and capricious standard of review is highly deferential to the plan fiduciary’s decision.  Furthermore, the participant generally will not be entitled to discovery in litigation (or arbitration) outside of the administrative record.  This has the added benefit of reducing litigation (or arbitration) costs.

Next week, we’ll discuss the mechanics of benefit claim administration, including dealing with the fiduciary exception to attorney-client privilege.

You can find our previously published best practices here:

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Photo of Russell Hirschhorn Russell Hirschhorn

Russell L. Hirschhorn, co-head of the ERISA Litigation Group, represents plan fiduciaries, trustees, sponsors and service providers on the full range of ERISA and state law benefit and fiduciary issues. From single plaintiff litigation and arbitration to complex class action litigation, he provides…

Russell L. Hirschhorn, co-head of the ERISA Litigation Group, represents plan fiduciaries, trustees, sponsors and service providers on the full range of ERISA and state law benefit and fiduciary issues. From single plaintiff litigation and arbitration to complex class action litigation, he provides practical guidance, develops unique litigation defense strategies and, when appropriate, mediates successful resolutions.

Russell represents clients across a wide array of publicly-held, multi-national companies and privately owned companies across a multitude of industries including, banking, finance and investments, pharmaceuticals, retail products and construction, to name just a few. In addition, he also counsels benefit plan clients on a host of compliance and federal and state government agency enforcement matters, including complex and lengthy investigations and audits by the U.S. Departments of Justice and Labor.

Russell is management co-chair of the American Bar Association Employee Benefits Committee as well as management co-chair of the Trial Institutes Committee of the American Bar Association’s Labor and Employment Law. He also writes on cutting-edge ERISA litigation issues, serving as a contributing author and a past chapter editor to Employee Benefits Law (BNA Third Edition).

Deeply dedicated to pro bono work, Russell was a principal drafter of several amicus briefs for the Innocence Project, a legal non-profit committed to exonerating wrongly convicted people. Russell has been recognized on several occasions for his commitment to pro bono work including by President George W. Bush in receiving the U.S. President’s Volunteer Service Award.

Photo of Malerie Bulot Malerie Bulot

Malerie L. Bulot is an associate in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group. She counsels clients on a myriad of issues related to employee retirement and health plans.  Malerie assists single employer…

Malerie L. Bulot is an associate in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group. She counsels clients on a myriad of issues related to employee retirement and health plans.  Malerie assists single employer and multiemployer plans with legal compliance, plan administration, and design and qualification.

Malerie received her J.D. and diploma in comparative law, magna cum laude, from Louisiana State University Paul M. Hebert Law Center, where she was a senior editor of the Louisiana Law Review and Order of the Coif. While at LSU, she served as a judicial extern to United States District Judge Shelly D. Dick, Middle District of Louisiana.