An Insurance Company May Not Raise New Defenses In The Litigation That It Did Not State In Its Denial Letters
When an insurance company denies a claim, it will purport to state the reasons on which it bases its denial. The insurance company’s reasons are all too often no more than a pretext for denying a claim it knows it should pay. If the case proceeds to litigation, the insurance company will then assert any number of additional defenses that it never asserted at the time of its denial.
In an ERISA case, the law is clear that an insurance company cannot assert defenses during a litigation that it did not assert at the of its denial. As the 9th Circuit Court of Appeals stated in Harlick v. Blue Shield of Cal., 686 F.3d 699, 719-20 (9th Cir. 2012), quoting another 9th Circuit case, an ERISA insurer must state all of the “specific reasons” for its denial during the administrative process to enable the claimant to meet those reasons directly during the administrative process or in court:
“A plan administrator may not fail to give a reason for a benefits denial during the administrative process and then raise that reason for the first time when the denial is challenged in federal court, unless the plan beneficiary has waived any objection to the reason being advanced for the first time during the judicial proceeding.” Harlick v. Blue Shield of Cal., supra at 719.
In stressing that the insurer is barred from asserting in a litigation any reasons not stated in the denial, the Court stressed that allowing such defense would defeat the purpose of the ERISA appeals process. As the 9th Circuit stated:
“Requiring that plan administrators provide a participant with specific reasons for denial “enable[s] the claimant to prepare adequately for any further administrative review, as well as appeal to the federal courts.” … ERISA and its implementing regulations are undermined “‘where plan administrators have available sufficient information to assert a basis for denial of benefits, but choose to hold that basis in reserve rather than communicate it to the beneficiary.'” Harlick v. Blue Shield of Cal., supra at 720.
If your claim was denied, beware that the insurance company will try to present new reasons for its denial in a litigation that it never asserted originally. Be ready to argue that it has forfeited its right to so.
-Posted by Bennett M. Cohen on July 6, 2017
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