Stuck in the Middle With Your LTD Claim?
Ms. Wallace was a nurse who became disabled. She was covered by long term disability insurance through Hartford in 2012. The coverage was taken over in 2013 by Reliance Standard Insurance Life Insurance Company. Ms. Wallace quit working in 2012 due to her disability. Fighting her limitations, she tried to return to work in 2013. She simply couldn’t do it.
She filed a claim for long-term disability with Hartford, as that is when she originally quit working because of her disability. It denied the claim because she finally stopped working in 2013. Hartford put it on Reliance Standard. Reliance Standard denied the claim asserting that her disability was a pre-existing condition under its policy (a weak position as there is usually a takeover provision when an employer switches carriers).
Ms. Wallace found herself in the un-enviable position of being stuck between two insurers, both of whom had excuses from paying her claim. She appealed Hartford’s claim denial but did not appeal Reliance’s.
Cue up the Stealers Wheel song:
"Clowns to the left of me
Jokers to the right
Here I am stuck in the middle with you…"
Ms. Wallace sued Reliance Standard. Reliance Standard argued that Ms. Wallace failed to exhaust her claim remedies (it abandoned the pre-existing condition “defense”) thus her case was due to be dismissed. Counsel for Ms. Wallace had carefully reviewed the Reliance Standard plan document and it did not say anything at all about a claim process that Ms. Wallace was required to follow before she filed a lawsuit. Without a claim process in place what else could she have done?
The District Court agreed with Ms. Wallace and ruled against Reliance Standard and in favor of her long-term disability claim. Reliance Standard appealed to the 6th Circuit, brazenly arguing “… exhaustion is required whether or not it is explicitly stated in a plan document.” Wallace v. Oakwood Healthcare, Inc., No. 18-2316, at *6 (6th Cir. Mar. 31, 2020). “It’s my way or the highway.”
The 6th Circuit didn’t sing along:
“For the reasons set forth below, we conclude that, because Defendant did not describe any internal claims review process or remedies in its plan document, the plan did not establish a reasonable claims procedure pursuant to ERISA regulations; therefore, Plaintiff's administrative remedies must be deemed exhausted.” Id. at *6.