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.

Background

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.

Proskauer’s Perspective

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.

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Photo of Seth Safra Seth Safra

Seth J. Safra is chair of Proskauer’s Employee Benefits & Executive Compensation Group. Described by clients as “extremely knowledgeable, practical, and strategic,” Seth advises clients on compensation and benefit programs.

Seth’s experience covers a broad range of retirement plan designs, from traditional defined…

Seth J. Safra is chair of Proskauer’s Employee Benefits & Executive Compensation Group. Described by clients as “extremely knowledgeable, practical, and strategic,” Seth advises clients on compensation and benefit programs.

Seth’s experience covers a broad range of retirement plan designs, from traditional defined benefit to cash balance and floor-offset arrangements, ESOPs and 401(k) plans—often coordinating qualified and non-qualified arrangements. He also advises tax-exempt and governmental employers on 403(b) and 457 arrangements, as well as innovative new plan designs; and he advises on ERISA compliance for investments.

On the health and welfare side, Seth helps employers provide benefits that are cost-effective and competitive. He advises on plan design, including consumer-driven health plans with HSAs, retiree medical, fringe benefits, and severance programs, ERISA preemption, and tax and other compliance issues, such as nondiscrimination and cafeteria plan rules.

Seth also advises for-profit and non-profit employers, compensation committees, and boards on executive employment, deferred compensation, change in control, and equity and other incentive arrangements. In addition, he advises on compensation and benefits in corporate transactions.

Seth represents clients before the Department of Labor, IRS and other government agencies.

Seth has been recognized by Chambers USA, The Legal 500, Best Lawyers, Law360, Human Resource Executive, Lawdragon and Super Lawyers.

Photo of Daniel Wesson Daniel Wesson

Daniel Wesson is an associate in the Labor Department and a member of the ERISA Litigation Group.