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Seventh Circuit Rules Substantial Compliance Doctrine Inapplicable to Missed Claim Deadlines



Fessenden v. Reliance Standard Life. Ins. Co., 2019 WL 2589122 (7th Cir. 2019)

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After a plan administrator failed to issue a final decision on a participant’s disability claim within the deadline set forth in DOL regulations, the participant sued. Eight days after the suit was filed, the plan administrator issued its final decision denying the participant’s claim. The district court, applying a deferential standard of review, upheld the plan administrator’s decision. On appeal, the participant argued that the plan administrator’s decision was not entitled to deference, because it was issued after the regulatory deadline. Conversely, the plan administrator argued it was entitled to deferential review, because it substantially complied with the deadline. (Under the doctrine of substantial compliance, technical noncompliance with the ERISA claims procedure rules will be excused so long as the purpose of the rules has been fulfilled.)

On appeal, the Seventh Circuit reversed the district court, holding that the administrator forfeited the deferential standard of review by failing to strictly comply with the deadline set forth in the regulations. According to the court, the regulatory deadline imposes a “hard stop,” providing that “in no event” may the deadline be extended beyond a specified number of days. Although the substantial compliance doctrine may apply to other aspects of claims processing, it does not apply to missed deadlines because “substantial compliance with a deadline requiring strict compliance is a contradiction in terms.” The court declined to follow case law from other circuits that applied the substantial compliance doctrine to missed deadlines as well as other procedural violations. As a result, the court reversed the judgment in favor of the plan and sent the case back to the district court.

EBIA Comment: Plan administrators must be mindful of the deadlines applicable to claims and appeals if they want to avail themselves of a deferential standard of review. While the substantial compliance doctrine does not apply to any aspect of disability claims filed after April 1, 2018 (see our Checkpoint article), this court’s rationale remains relevant for non-disability and non-health claims. (In general, group health plan claims are also subject to a strict compliance standard.) As such, there now exists a split in the circuits regarding whether a plan administrator’s decision is entitled to deference where regulatory deadlines are missed. For more information, see EBIA’s ERISA Compliance manual at Sections XXXV.B (“Claims Procedures for Disability and Other Non-Health Claims: Compliance Considerations and Consequences of Noncompliance”) and XXXV.E (“Timelines for Disability and Other Non-Health Decisions”).

Contributing Editors: EBIA Staff.

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