A recent federal appeals court case clarifies that, under ERISA, the regulations governing disability plans’ claims review procedures apply to claims that predate the 2018 changes to the regulations. The decision also serves as a reminder for plan administrators to review their claims review procedures to ensure compliance with the current requirements for a “full and fair review” benefits appeal process.

The Claims Review Regulations

The Department of Labor (DOL) regulations that the court reviewed in Zall v. Standard Insurance Co., No. 22-1096 (7^th Cir. Jan. 19, 2023) govern ERISA plans’ claims review procedures. Under the prior and current versions of the regulations, a plan must provide a “full and fair review” in a participant’s appeal of an adverse benefit determination. Until 2018, “full and fair review” under a plan that provides disability benefits included the requirement to provide copies of all documents, records, and other information that the plan relied on to make the benefit determination—but only if the participant requested them.

Effective 2018, new regulations took effect. Under the new regulations, “full and fair review” requires the plan to provide the participant with any new or additional evidence that the plan (or other person deciding the claim) considers, relies on, or generates in connection with the claim, subject to two requirements. First, a plan must provide these items before making an adverse determination in a review of a disability benefit claim. Second, it must do so “as soon as possible and sufficiently in advance” of the due date of the notice of the adverse benefit determination under review “to give the claimant a reasonable opportunity to respond prior to that date” (quoting the regulation, 29 CFR § 2560.503-1(h)(4)). Under a narrow exception, disability claims filed between January 18, 2017, and April 1, 2018, are subject to the prior regulation instead of the new one.

The Zall Case

Before the Zall decision, it was unclear whether the 2018 regulations applied to claims appeals initiated, determined, or terminated before 2018. The specific facts of the Zall case highlight this problem.

In November 2013, a participant applied for benefits under his employer’s long-term disability plan. In late 2014, the plan approved the participant’s claim and began paying benefits retroactive to the date of his initial claim (after initially denying the claim, and the participant appealing the denial).

A provision specific to the plan imposed a 24-month limit on benefits for certain conditions. In 2015, the plan began reviewing whether the participant’s condition was subject to this 24-month limit. The plan continued to pay the participant’s benefits during its review. At the end of 2019, the plan completed its review, determined that the participant’s benefits were subject to the 24-month limit, and, on this basis, terminated the participant’s benefits.

The participant appealed. During the appeal, the plan considered a new report from a consulting physician dated August 3, 2020. This physician concluded that the participant’s condition was subject to the 24-moth limit. On August 20, 2020, the plan notified the participant that it needed additional time to review a report from a doctor who had not previously reviewed his file. On August 29, 2020—nine days later—the plan notified the participant that it had decided his appeal, was terminating his benefits, gave him the reason (his condition was subject to the 24-month limit), and offered to provide him with copies of all documents, records, and other information relevant to his claim if he requested them.

The 2018 Regulations Changed What “Full and Fair Review” Means

The plan’s offer to provide the participant a copy of the file upon request may have complied with the regulations in effect before 2018, described above. However, in 2018, between the time that the plan began reviewing the claim and the time that the plan made a determination on his claim, the DOL changed these regulations. The question the court decided was whether the 2018 regulations (or the exception to them) applied to this claim, which the participant filed in 2013 and the plan granted in 2014, reviewed beginning in 2015, and terminated in 2020.

The court decided that the 2018 regulations applied, and that the narrow exception did not, because the participant originally filed his claim in 2013 (or, alternatively, if the court treated the date of the benefit termination as the operative date).

Having decided that the 2018 regulations applied, the court concluded that the plan’s offer to provide copies upon request did not satisfy the requirements of the 2018 regulation. In addition, the court concluded that the nine days between the time that the participant received notice that the plan considered the new 2020 report, and the time that the plan notified him that it was terminating his benefits, was not reasonable under those circumstances, because it did not allow the participant enough time to respond (by reviewing the report, obtaining new tests, obtaining new doctors’ reviews, and submitting these new items to the plan).

Without the 2020 report and a reasonable opportunity to respond to it before the plan decided to terminate his benefits, the participant did not have the full and fair review required under the 2018 regulations. The court’s remedy was to reverse the claim determination and have the district court remand it to the plan for a full and fair review of his claim.

The Takeaway

The impact of the Zall decision is that plan administrators of plans providing disability benefits should confirm that their claims review procedures comply with the following requirements for full and fair review:

• Provide evidence without request: Require the administrator to send, automatically, any new or additional evidence that the plan considers to a participant whose appeal of an adverse benefit determination it will be denying, even if the participant does not request it, and
• Provide evidence sufficiently in advance: Require the administrator to send this evidence sufficiently in advance of the notice to allow the participant sufficient time to take steps to respond to the adverse benefit determination.