In McQuillin v. Hartford Life and Accident Ins. Co., 36 F.4th 416 (2d Cir. 2022), the U.S Court of Appeals for the Second Circuit restored a claimant’s action for disability benefits due to the plan administrator’s failure to adhere to a procedural deadline. The Court concluded that the administrator’s failure resulted in automatic exhaustion of the claimant’s administrative remedies—which meant the claimant could go straight to court.
Under ERISA, a claimant generally may not bring a suit for benefits unless the claimant has timely exhausted his or her rights under the plan’s administrative claims procedure. When this process is followed, a court’s review of the administrative decision is generally subject to an “arbitrary and capricious” standard—which means that the court defers to the plan administrator’s decision and will not overturn it unless the court finds an abuse of discretion.
In contrast, if the administrator does not follow the requirements of the Department of Labor’s regulation on claim and appeal procedures, the claimant will be deemed to have exhausted his or her administrative rights. When this happens, the claimant may go straight to court, where the court can review the claim without an administrative record to guide the court’s review.
The McQuillin Case
In McQuillin, the claimant had appealed the plan administrator’s denial of his application for long-term disability benefits. Under the appeal procedures, the administrator was required to render a decision on review within 45 days after the claim was received. The administrator timely informed the claimant that it had made a decision and that the claimant’s application would be forwarded to a claims department for further consideration. But the administrator did not provide any further follow-up. After the 45-day review period had passed, the claimant filed a complaint in federal court.
The Second Circuit held that the administrator’s response lacked finality and therefore did not satisfy the procedural requirement to render a decision within 45 days after the claim was received. As a result of the failure to “strictly adhere” to the procedure, the claimant was deemed to have exhausted his administrative remedies. Consequently, the case was remanded to the District Court for further proceedings.
The Second Circuit’s decision illustrates the importance of carefully following the regulatory requirements for administrative claims procedures. Had the procedures been strictly followed, the court would have been obliged to defer to the administrative record and the administrator’s decision. By failing to adhere strictly to the procedural requirements, the plan’s administrator lost an opportunity to develop a record to guide the court’s review.
The Second Circuit’s decision did not specify a standard of review for the District Court to apply and the plan administrator’s views might still be relevant. But the lesson is clear: the process matters, and a misstep can take the decision out of the administrator’s hands.