This month's Friday Five covers recent cases addressing: (1) the impact on the standard of review of a failure to adhere to regulatory deadlines for claims decisions; (2) foreign nationals’ ability to avail themselves of claims under ERISA; (3) whether a “root cause” diagnosis is necessary to demonstrate disability; (4) removal; and (5) equitable tolling of the statute of limitations for mental incapacitation.

1. Is the "substantial compliance" standard applicable, such that an arbitrary and capricious standard governs, when a claims administrator fails to comply with ERISA regulatory deadlines? Courts have applied the arbitrary and capricious standard of review in ERISA disability litigation when the subject plan gives the insurer discretion to administer the plan. When the administrator commits a procedural violation, however, it loses the benefit of deference and a de novo standard applies. Still, courts have recognized that when the administrator "substantially complies" with the procedures – that is, the violation is relatively minor – then the de novo standard may not be imposed. But the Seventh Circuit Court of Appeals has now held in Fessenden v. Reliance that the "substantial compliance" exception does not apply when an administrator misses the 90-day deadline to make a claim decision. Here, there was disagreement between the parties regarding exactly when the 90-day deadline passed due to possible application of ERISA’s tolling provisions, but the parties agreed that Reliance made its final decision after the 90-day window had closed. The Court held that the "substantial compliance" standard is inapplicable to ERISA regulatory deadlines, therefore it did not matter how late the decision was but only that it was late at all. The Court reasoned that a deadline is a bright line rule and creates a "hard-and-fast obligation." Accordingly, the Court of Appeals held that the plaintiff’s claim should have been reviewed de novo, and vacated the District Court’s grant of summary judgment in favor of Reliance and remanded for an analysis under that standard. Fessenden v. Reliance Standard Life Ins. Co., No. 18-1346, 2019 WL 2589122 (7th Cir. June 25, 2019).
2. Can a foreign national working outside of the United States bring a claim under ERISA? The extraterritoriality doctrine provides that unless a statute clearly states otherwise, federal legislation applies only within the territorial jurisdiction of the United States. In In re Reliance (Mehmeti), the Eastern District of Pennsylvania affirmed its September 2018 decision in Bajrami v. Reliance that held, based on the extraterritoriality doctrine, that foreign nationals working outside the United States did not come within the scope of ERISA. In Mehmeti, 12 individual foreign plaintiffs who are citizens of Kosovo working in Afghanistan each filed lawsuits in the Philadelphia Court of Common Pleas against Reliance stemming from Reliance’s denial of their disability benefits. Reliance removed the action to federal court, asserting federal-question jurisdiction under ERISA. The Court determined that ERISA does not contain any explicit language clearly providing for extraterritorial reach and that since the enactment of ERISA, no court has held that a foreign national working abroad can bring a claim under ERISA. Accordingly, the plaintiff’s motion to remand due to lack of subject matter jurisdiction was granted. In re Reliance Standard Life Ins. Co., No. CV 19-331, 2019 WL 2577478 (E.D. Pa. June 24, 2019).
3. Should a claim be denied when medical records do not identify the root cause of a claimant’s disabling condition? The Northern District Court of Georgia held in Lesser v. Reliance that a claimant is not required to establish the root cause of his illness in order to qualify as disabled. The claimant’s medical providers diagnosed him with hypersomnolence and ruled out various possible causes but did not definitively rule in any one cause. The Court held that it was unreasonable for Reliance to require the claimant to furnish proof of the root cause of his illness when the illness is not one that is easily diagnosed by objective tests and where there is no evidence that the claimant is malingering. Moreover, the terms of the plan required satisfactory proof of disability, not etiology. The Court concluded that Reliance’s focus on etiology was therefore arbitrary and capricious. Lesser v. Reliance Standard Life Ins. Co., No. 1:18-CV-824-TWT, 2019 WL 2416926 (N.D. Ga. June 4, 2019).
4. Was an insurer’s removal to federal court based on defensive or complete preemption? The Eleventh Circuit Court of Appeals in Garcon v. United Mutual examined whether removal to federal court on the basis of preemption was proper. The plaintiff initially brought his action in Georgia state court, alleging that United wrongfully denied his claims for long-term and short-term disability benefits. United removed the action to federal court on the basis of complete preemption under ERISA and the plaintiff filed a motion to remand. The Court of Appeals held that removal would have been improper if it was based on "defensive preemption," which arises from ERISA’s express preemption provision, § 514(a), and preempts any state law claim that merely "relates to" an ERISA plan. Here, however, removal was based on "complete preemption," which is jurisdictional in nature rather than an affirmative defense. Complete preemption derives from ERISA’s civil enforcement provision, § 502(a), and converts an ordinary state common law complaint into one stating a federal claim. Applying a two-prong test, the court determined that the plaintiff’s claim was completely preempted by ERISA because (1) the claim could have been brought under § 502(a), and (2) no other legal duty supported the plaintiff’s claim. Based on this analysis, removal to federal court was proper. Garcon v. United Mut. of Omaha Ins. Co., No. 18-12220, 2019 WL 2577418 (11th Cir. June 24, 2019).
5. Does equitable tolling apply to delay the statute of limitations on a claim when the claimant is mentally incapacitated? The Seventh Circuit Court of Appeals in Di Joseph v. Standard considered whether a three year contractual statute of limitations should be tolled based on a plaintiff’s claim of mental incapacity during the limitations period. The court recognized that ERISA permits equitable tolling of a contractual time limit in extraordinary circumstances but held that it was the plaintiff’s burden to show that her mental incapacity prevented her from managing her affairs and acting upon her legal rights. The Court of Appeals affirmed the District Court’s finding that the plaintiff failed to meet her burden because she admitted in her complaint that there was never a time when her disabilities prevented her from managing her affairs or acting upon her legal rights, her mother was available to act as her caregiver and to manage her financial and legal affairs, and she failed to present factual allegations sufficient to raise a claim for equitable tolling above the speculative level. Di Joseph v. Standard Ins. Co., No. 18-2178, 2019 WL 2406629, at *1 (7th Cir. June 7, 2019).