Three Easy Steps to Avoid Unnecessary Claims Litigation

In our fast-paced world of “Go! Go! Go!” it’s easy for us to miss the detail, to overlook the fine print.  When it comes to claim administration, however, missing details is a too large a risk for a plan administrator.  A recent Tenth Circuit decision reminds us of this important, yet often overlooked truth:  start with your plan language when reviewing claims and claim appeals to save a stitch in time—it really does save nine.

In McMillan v. AT&T Umbrella Benefit Plan No. 1, No. 17-5111, (10th Cir. August 13, 2018), the District Court sternly reminds plan administrators reviewing appealed claims to mind their p’s and q’s.  McMillan appealed his denied STD claim. After a Grand Tour of every possible claims review level, the plan administrator’s delegated claims management service denied his claim by simply stating (summarized here) “none [of the findings] are so severe as to prevent performance of duties.”

McMillian sued, and the court supported him, finding their decision as “arbitrary and capricious.” Note: to find a claim as “arbitrary and capricious” the decision must “lack substantial evidence, mistake of law, bad faith, and conflict of interest by the fiduciary.” Heavy terms indeed. And, as courts do, they went straight to the source to support their decision: the text of the plan document. In sum, the court criticized the medical experts’ reports for failing to be thorough and precise when interpreted according to plan document language.

Whether you administer your plan claims procedures or contract this service, be sure to follow these three steps to reduce the incidence of claims litigation:

  1. Understand your plan document regarding descriptions of each benefit plan. Carefully consider language used to draft such a keystone document. Be sure to consult capable counsel.
  2. Ensure your claims procedure for each plan is followed and regularly reviewed—you want this process to run like a well-oiled machine.
  3. If you receive a claim appeal, be meticulous in its review—follow it to its end, making sure to compare plan document language with the nature and circumstances surrounding the claim. *

Supporting your final claim decision or that of your service provider with a thorough review of your plan document and the facts and circumstances of the claim is never a waste of time, and always worth the time.

*In McMillan, much of the court’s discussion focused on the plan administrator’s failure to “make adequate findings or to explain adequately the grounds of its decision.”

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