In Laake v. Benefits Committee, et al. the United States Court of Appeals for the Sixth Circuit affirmed the district court’s decision and awarding judgment in favor of Laake. Laake was a participant in her employer’s ERISA employee welfare benefit plan. She sued the plan and plan administrator when her claim for long-term disability benefits was denied. Laake argued that she was entitled to extended benefits and stated that she had not received copies of the plan and other requested documents in a timely manner. She argued that her claim had been improperly decided by the employer’s benefits department instead of the plan’s benefits committee, which was given discretionary authority under the plan to determine eligibility for benefits. For this reason, Laake argued that the denial of her claim should be reviewed using the de novo standard of review instead of the arbitrary and capricious standard. The appeal court decision can be found here.
The trial court determined that the participant was eligible for extended long-term disability benefits and determined that the plan failed to provide the requested documents in a timely manner, imposing penalties on the plan administrator and awarding attorney’s fees and costs to the participant.
The Defendants appealed the district court’s decision, with the central issue on appeal being whether or not Laake qualified for long-term disability benefits beyond 24 months pursuant to the terms of the plan. On appeal, the Sixth Circuit upheld the trial court’s decision, agreeing that the de novo standard of review applied. Although the benefits committee may have delegated the decision to the benefits department, it was not permitted to do so by the plan document, so the department’s adverse benefit determination was subject to the de novo standard. In addition, the court upheld the decision by the trial court to impose penalties on the plan administrator for failure to provide requested documents in a timely manner.
This case highlights the importance of clearly drafting and following procedures related to delegation of authority. To reduce the chances of de novo review by courts, delegation of discretionary authority needs to be done in accordance with the terms of the plan. In addition, final decisions should only be made by those parties that are authorized to do so under the terms of the plan. Finally, this case is an important reminder that plan administrators risk penalties in court if they fail to furnish certain requested documents in a timely manner which generally means within 30 days of request by the plan participant.
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