Halo v. Yale Health Plan, No. 14-4055 (2d Cir. 2016)Annotate this Case
Congress empowered the Department of Labor to issue rules and regulations governing claims procedures for employee benefit plans under Sections 503 and 505 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1133, 1135. The United States District Court for the District of Connecticut held that, when exercising discretionary authority to deny a claim for benefits, a plan’s failure to establish or follow reasonable claims procedures in accordance with the regulation entitles the claimant to de novo review of the claim in federal court, unless the plan “substantially complied” with the regulation, in which case an arbitrary and capricious standard applies to the federal court’s review of the claim. The district court further held that a plan’s failure to follow the Department’s regulation results in unspecified civil penalties. The court disagreed, holding that, when denying a claim for benefits, a plan’s failure to comply with the Department of Labor’s claims‐procedure regulation, 29 C.F.R. 2560.503‐1, will result in that claim being reviewed de novo in federal court, unless the plan has otherwise established procedures in full conformity with the regulation and can show that its failure to comply with the regulation in the processing of a particular claim was inadvertent and harmless; civil penalties are not available to a participant or beneficiary for a plan’s failure to comply with the claims‐procedure regulation; and a plan’s failure to comply with the claims‐procedure regulation may, in the district court’s discretion, constitute good cause warranting the introduction of additional evidence outside the administrative record. Accordingly, the court vacated and remanded.