Exhaustion Not Required As a result of Plan Paperwork Did Not Embrace Claims Course of

After her partner’s demise because of a heroin overdose, a participant introduced profit claims underneath her employer’s ERISA life insurance coverage and unintentional demise and incapacity (AD&D) insurance policies, which lined the partner. The insurer paid the life insurance coverage profit however denied the AD&D declare, asserting that the coverage’s “deliberately self-inflicted damage” exclusion utilized. A earlier trial court docket dominated in favor of the insurer, holding that the participant had didn’t exhaust administrative cures (i.e., the plan’s inside claims course of) earlier than bringing the lawsuit. On reconsideration granted on the participant’s request, the court docket held that exhaustion was not required and that the participant was entitled to AD&D advantages.

The court docket defined that contributors typically should exhaust a plan’s administrative cures earlier than submitting go well with, however courts might excuse the exhaustion requirement in sure circumstances (see our Checkpoint article). On this case, neither the insurance coverage coverage offered to the employer nor the advantages certificates offered to contributors included an exhaustion requirement—or any description of the plan’s claims evaluation course of. The insurer argued that its process was detailed within the profit denial letter, however the court docket concluded that this was inadequate, declaring that ERISA’s written plan requirement is meant to permit contributors to grasp their plan-related rights and obligations at any time, together with earlier than a denial of advantages. Absent a claims process for the participant to exhaust, exhaustion was not required, and the insurer’s denial letter couldn’t impose the requirement outdoors the plan. Alternatively, the court docket dominated that the participant was deemed to have exhausted administrative cures as a result of the plan doc didn’t include any details about evaluation procedures or cures for denied claims. Turning to the deserves, the court docket disagreed with the insurer’s conclusion that the demise was not unintentional as a result of it was brought on by the intentional use of heroin. Below that logic, the court docket mentioned, any damage ensuing from a voluntary act could be “moderately foreseeable” and due to this fact not an accident within the insurer’s eyes. The court docket concluded that the deliberately self-inflicted damage exclusion didn’t apply with out proof that the partner supposed or ought to have anticipated his motion to lead to demise. Thus, the participant was entitled to the profit.

EBIA Remark: As this court docket famous, the plan doc is on the heart of ERISA. Whereas it’s typically acceptable, and most handy, to set forth a plan’s claims procedures in a doc that’s separate from the formal plan doc, it’s essential to expressly incorporate these procedures by reference—in any other case they aren’t truly a part of the plan. The abstract plan description should additionally reference the claims procedures. For extra info, see EBIA’s ERISA Compliance guide at Sections VIII.E (“ERISA-Required Plan Provisions”), VIII.G (“Different Vital Plan Provisions”), and XXXVI.B (“Exhaustion of Plan Administrative Claims Procedures”).

Contributing Editors: EBIA Workers.