Office of Regulations and Interpretations,

Employee Benefits Security Administration

Room M-5655

U.S. Dept. of Labor

200 Constitution Avenue NW

Washington D.C. 20210

Re: Re-Examination of Claims Procedure Regulations for Plans Providing 

Disability Benefits

RIN No.: 1210-AB39

Regulation: 29 C.F.R. §2560.503

Dear Deputy Assistant Secretary Hauser:

I am writing to discourage the Department from modifying or further delaying the final 

disability claims regulations (Final Regulation on Claims Procedure for Plans Providing 

Disability Benefits, 81 Fed. Reg. 92316 (Dec. 19, 2016)) that are now scheduled to go 

into effect on April 1, 2018. 

I am interested in the content of these regulations because, as a partner at McMahan Law 

Firm, LLC, I primarily litigate ERISA disability, health and life insurance claims on 

behalf of individuals who have been wrongfully denied their benefits. I also have a 

Social Security disability practice and am certified as a specialist in Social Security 

Disability Law by the National Board of Social Security Disability Advocacy. I am a 

1996 graduate of Washington University School of Law and am licensed in Georgia, 

Tennessee and Illinois. I have been a leader in prominent organizations such as the 

American Association for Justice (AAJ), Tennessee Association of Justice (TAJ) and the 

Tennessee Bar Association (TBA). I am past-Chair of AAJ’s Disability law Section, a 

former member of TAJ’s Board of Governors, past-Chair of TBA’s Disability Law 

Section and past-President of the Chattanooga Trial Lawyers Association (CTLA). AAJ, 

TAJ, TBA and CTLA are all associations of lawyers who advocate on behalf of disabled 

or injured individuals. Additionally, I have lectured regularly on disability issues to other 

attorneys in multiple jurisdictions.

I appreciate the opportunity to comment on the Department’s re-examination of the costs 

of the final rules governing disability claims. However, the concerns raised by the 

industry are not new but simply a re-argument of the merits of the final rules. Because 

those rules are based on policy choices made by Congress, this Department, and the 

federal courts interpreting ERISA, another argument about the merits is unnecessary. 

Nevertheless, I will address the industry’s objections that I feel are most in need of a 

response.

Insurance Companies are ERISA Fiduciaries 
Before I respond in earnest, let me respectfully remind the Department that an insurance 

company, as the party obligated to pay benefits and the administrator given discretion in 

construing and applying the provisions of a group health or disability plan and assessing a 

participant’s entitlement to benefits, is a fiduciary. See 29 U.S.C. § 1002(21)(A)(i) and 

(iii); Aetna Health Inc. v. Davila, 542 U.S. 200, 220, 124 S. Ct. 2488, 2502 (2004); 

Mondry v. Am. Fam. Mut. Ins. Co., 557 F.3d 781, 803 (7th Cir.), cert. denied, 130 S. Ct. 

200 (2009). This cannot be stressed too strongly. As a fiduciary, an insurance company 

is required to carry out its duties with respect to the plan “solely in the interest of the 

participants and beneficiaries and—(A) for the exclusive purpose of: (i) providing 

benefits to participants and their beneficiaries;...[and] (B) with the care, skill, prudence, 

and diligence under the circumstances then prevailing that a prudent man acting in a like 

capacity and familiar with such matters would use in the conduct of an enterprise of a like 

character and with like aims...” 29 U.S.C. § 1104(a)(1). Under the law of ERISA an 

insurance company owes the participants in its plan and their beneficiaries a duty of 

loyalty like that borne by a trustee under common law, § 1104(a)(1)(A), and it has to 

exercise reasonable care in executing that duty, 1104(a)(1)(B). Mondry, 557 F.3d at 807. 

The final rules should be reviewed in this context.

Costs Will Not Increase

The industry claims the final rules will increase costs that will increase premiums

resulting in less access to disability benefits. The industry is wrong. This costs argument 

was made in various industry comments to the proposed rules before final adoption. The 

Department concluded that costs would not outweigh the benefits. The current complaint

of increasing costs has already been considered and rejected. The Department should 

rely upon information supplied by its own Bureau of Labor Statistics.

https://www.bls.gov/opub/btn/volume-4/disability-insurance-plans.htm. The data shows 

that access and participation in employer-based disability insurance has increased, not 

decreased, between 1999 and 2014. One should therefore be skeptical of any data 

supplied by the industry now that suggests employers would abandon disability coverage 

due to the costs of codifying these principles. The BLS document shows that the cost of 

disability insurance is extremely modest. Thus, even if costs did increase, the increase 

would be small and make little, if any, difference. The Department should not change the 

final rules in response to the industry’s evidence-free argument that the costliness of the 

final rules will impact access to disability benefits in the workplace. 

 

The Benefits Outweigh the Costs

Whatever the costs of the final rules, they could never outweigh the benefits. The 

Department’s articulated purpose is to ensure claims are fairly adjudicated and to prevent 

unnecessary financial and emotional hardship. Or, in other words, the Department is 

simply requiring the industry to accept its obligations as a fiduciary. The Department 

must not abandon these purposes. Moreover, these benefits cannot be outweighed by 

costs where the ERISA process is already so slanted in favor of the plan administrators. 

In ERISA there is no right to a jury trial, punitive damages are prohibited, there is a 

closed record from the claims process that can rarely be supplemented in litigation, and 
discovery is extremely limited. Indeed, under ERISA an insurance company can win a 

case even if its decision was wrong because a plaintiff has to prove that the insurance 

company’s decision was both wrong and unreasonable. Accordingly, ERISA will never 

be a level playing field much less one that favors plan participants. United States v. 

Aegerion Pharmaceuticals, Inc., 2017 WL 5586728, at *7 (D.Mass. 11/20, 2017)("The 

insurance industry found it could largely immunize itself from suit due to the Employee 

Retirement Income Security Act (“ERISA”).) Even with the final rules in place, plan 

participants will not have achieved the “higher-than-marketplace standards” that the 

Supreme Court insists are required in processing ERISA claims. MetLife v. Glenn, 554 

U.S. 105, 115 (2008). Any consideration the Department makes about the benefits of the 

final rules relative to costs should take this “higher-than-marketplace” expectation into 

account and acknowledge that ERISA exists to protect plan participants. 

Requiring the Plan to Discuss the Basis for Disagreement with Social Security 

Decisions or Other Contrary Opinions is Not Costly.

This rule merely requires disability plans to observe a fundamental due process principle 

imbedded in ERISA—that a claimant is entitled to a well-articulated explanation for the 

adverse benefits decision so that the participant may fairly dispute it. The 2000 

regulations require no less. Many individuals who have long-term disability (“LTD”) 

ERISA claims also have claims for Social Security Disability benefits. Moreover, many 

insurance companies require LTD claimants to file for Social Security disability. This is 

done because most plans offset the LTD benefit by the Social Security disability benefit 

and this reduction is considered by the insurers to be one of the most important cost 

containment features of their LTD contracts (and is usually termed “recovery of an 

overpayment”). In fact, insurance companies that issue LTD plans will commonly direct 

an insured to contact a specific representative to assist him or her in obtaining Social 

Security disability benefits. However, when the Social Security Administration finds

favorably for a claimant the insurance company will commonly reject the analysis of the 

Administration. It is as bad as it sounds. In other words, it is not unusual for an insurer 

to require that an insured file for Social Security disability benefits, suggest a specific 

representative to hire, recover the “overpayment” from its insured once the Social 

Security Administration finds in the claimant’s favor, and then deny the LTD claim 

though it is based on nearly identical arguments that the suggested representative made in 

front of the Administration. Insurance companies can get away with doing this because 

under the law an ERISA decision-maker is not automatically bound by the findings of the 

Social Security Administration that a person is disabled. See, e.g., Whitaker v. Hartford 

Life and Acc. Ins. Co., 404 F.3d 947, 949 (6th Cir. 2005). 

Fortunately, however, at least for the moment, an ERISA decision-maker is not free to 

ignore the decision of the Social Security Administration, and the fact that a person has 

been found disabled by the Administration is a factor a court should consider, in the 

context of the record as a whole. Calvert v. Firstar Finance, Inc., 409 F.3d 286, 295 (6th 

Cir. 2005). Significantly, in DeLisle v. Sun Life Assur.Co of Canada, 2009 FED App. 

0082P (6th Cir. March 4, 2009), the court explained that while a Social Security award 

does not automatically mean the claimant is entitled to benefits under a private disability 
plan, the court cited Bennett v. Kemper Nat’l Servs., 514 F.3d 547, 554 (6th Cir. 2008) 

for the proposition that “[i]f the plan administrator (1) encourages the applicant to apply 

for Social Security disability payments; (2) financially benefits from the applicant’s 

receipt of Social Security; and then (3) fails to explain why it is taking a position different 

from the Social Security Administration on the question of disability, the reviewing court 

should weigh this in favor of a finding that the decision was arbitrary and capricious.” 

DeLisle, 2009 FED App. 0082P at 5-6. This is not problematic – it is the essence of 

fairness. In any case, as the Department has already noted, it is doubtful that there are 

costs associated with the requirement of discussing the reasons for disagreeing with a 

favorable Social Security decision. A rule clarifying that an explanation of the basis for 

disagreeing with a Social Security decision is a requirement will increase uniformity and 

predictability in the process, which is generally associated with costs savings and not cost 

increases. 

The Deemed Exhausted Rule is Not Costly

The industry’s concern about this rule seems to be that plaintiffs and their attorneys will 

race into court, increasing the volume of ERISA litigation and hence the overall costs of 

administering disability claims. This is preposterous. Under the final rule, a plaintiff will 

typically get a remand with instructions for the plan to do its job. Because plaintiff’s 

attorneys normally work on a contingent fee basis they will not litigate unless it is

absolutely necessary. Remember, a plaintiff’s attorney must prove that the insurance 

company’s decision was both wrong and unreasonable – not a simple task in even the 

most compelling circumstances. In any case, as with most of the other final rules, this 

rule simply codifies existing judge-made law. Claimants are already able to get into 

court when the claims process has failed them in a meaningful way. See e.g. Brown v. 

J.B. Hunt Transp. Servs., 586 F.3d 1079, 1085-86 (8th Cir. 2009) (failure to respond to 

request for documents excused claims from exhaustion requirement because there was no 

full and fair review). It is not likely that additional costs will result from this regulation.

Hall v. National Gypsum Co., 105 F.3d 225, 231-32 (5th Cir. 1997); LaAsmar v. Phelps 

Dodge Corp. Life, 605 F.3d 789 (10th Cir. 2010); Nichols v. Prudential Ins. Co. of Am., 

406 F.3d 98 (2d Cir. 2005); Jebian v. Hewlett-Packard Co. Employee. Benefits Org. 

Income Prot. Plan, 349 F.3d 1098 (9th Cir. 2003); Dunnigan v. Metropolitan Life Ins. 

Co., 277 F.3d 223, 231 n.5 (2d Cir. 2002). See also, Barboza v. Cal. Ass'n of Prof'l 

Firefighters, 651 F.3d 1073, 1076 (9thCir. 2011) (When a plan fails to establish or follow 

reasonable claims procedures consistent with the requirements of ERISA, a claimant need 

not exhaust because her claims will be deemed exhausted.); Linder v. BYK Chemie USA 

Inc., 313 F.Supp.2d 88, 94 (D. Conn. 2004) (regulation is unequivocal that any failure to 

adhere to a proper claims procedure is sufficient to deem administrative remedies 

exhausted). 

Providing the Right to Review and Respond to New Evidence or Rationale From the 

Plan During the Appeal Review is Not Costly.

This rule is fundamental to full and fair review. The Department has acknowledged the 

importance of this rule and it is already the standard in many jurisdictions. The industry 
complains that providing the claimant with new evidence or rationales before making a 

final decision is costly. How, exactly? Whether they provide this information to the 

claimant during the ERISA appeal process, they will have to provide it eventually in one 

form or another because new reasons or evidence must be included in the claim file and 

likely again in 26(a)(1) disclosures. If the issue is the cost of mailing, such a concern 

should not be permitted to interfere with such basic a due process right. 

The rule is important. It permits a claimant to respond to a disability claims 

administrator’s assertions in a way that will make the response a part of the record if the 

claimant has to go to court to vindicate his/her rights. Most ERISA cases are decided on 

a closed record. Without this rule, the claims administrator’s new evidence or rationale 

will be included in the record that the court reviews, but the claimant’s rebuttal will not. 

Accordingly, the industry is really complaining about its loss of the ability to strategically 

withhold information that would help the claimant obtain a reversal or win his/her case in 

court – something it cannot do as a fiduciary. “The duty to disclose material information 

is the core of a fiduciary’s responsibility, animating the common law of trusts long before 

the enactment of ERISA.” Eddy v. Colonial Life Ins. Co. of Am., 919 F.2d 747, 750 (D.C. 

Cir. 1990). "The administrator of an employee welfare benefit plan...has no 

discretion...to flout the...fiduciary obligations imposed by ERISA, or to deny benefits in 

contravention of the plan's plain terms." Blau v. Del Monte Corp., 748 F.2d 1348, 1353 

(9th Cir.1984). That is what the industry is trying to do here and the Department should 

not let it. 

Other Provisions

The Impartiality Rule

Few industry commenters complained about the proposed rule requiring consulting 

experts be impartial. Comment #76 (UNUM), Comment #92 (NFL), Comment #129 

(AHIP). This muted objections is understandable as it is hard to argue that disability 

claims administrators should be free to hire biased experts. The majority of those who 

object to this rule admitted that the proposed rule reflects the existing law. Comment 

#76, (UNUM), Comment #92 (NFL). The industry complaints are really based on the 

fear of increased litigation, particularly in the form of discovery. First, federal judges are 

well versed at limiting discovery in ERISA cases in proportion to the needs of the case.

See e.g. Paquin v. Prudential Ins. Co. of Am. 2017 WL 3189550 (D. Colo. 7/10/2017); 

Heartsill v. Ascension Alliance, 2017 WL 2955008 (E.D. Mo. 7/11/2017; Ashmore v. 

NFL Player Disability and Neurocognitive Benefit Plan, 2017 WL 4342197 (S.D. Fla. 

9/27/2017); Baty v. Metropolitan Life Ins. Co., 2017 WL 4516825 (D. Kan. 10/10/2017); 

Harding v. Hartford Life and Accident Ins. Co., 2017 WL 1316264 (N.D. Ill. 4/10/2017); 

Hancock v. Aetna Life Ins. Co., 321 F.R.D. 383 (W.D. Wash. 2017); Kroll v. Kaiser 

Foundation Health Plan Long Term Disability Plan, 2009 WL 3415678 (N.D. Cal. 

10/22/2009). The courts typically state that ERISA discovery must be limited such that it 

is “reasonably calculated to lead to the discovery of admissible evidence” under Rule 

26(b) of the Federal Rules of Civil Procedure, and “facilitate[s] the prompt and 

inexpensive resolution of disputes.” See, e.g., Mulligan, 271 F.R.D. 584, 588 (E.D. Tenn. 
2011). Indeed, if the impartiality rule is already the law, how would more discovery 

result from codifying it? The answer: it will not.

The Rule Requiring Disclosure of any Internal Limitations Period

Few industry commenters focused on the final rule requiring claims administrators to 

provide the claimant with the date when any internal time limit for filing suit will expire. 

I am assuming, therefore, that these objectors are not claiming that this rule has a cost 

impact. The claims administrators are in a position to satisfy this rule, since the 

expiration date of an internal limitations period is essentially a plan term that should be 

accessible to the plan administrator and not be hidden from unsuspecting plan 

participants. As with most of the final rules, information respecting the period of 

limitations is required to be disclosed in several jurisdictions, so it is unlikely to incur 

additional costs to create uniformity. Santana-Diaz v. Metro. Life Ins. Co., 816 F.3d 172, 

179 (1st Cir. 2016); Moyer v. Metro. Life Ins. Co., 762 F. 3 503, 505 (6th Cir. 2014); 

Mirza v. Ins. Adm'r of America, Inc., 800 F. 3d 129, 134 (3d Cir. 2015). 

The Rule Requiring Disclosure of Internal Guidelines

Few commenters objected to the proposed rule requiring claims administrator to disclose 

internal guidelines or certify that none exist. Comment #50 (DRI), Comments #76 

(UNUM). These commenters complained that internal guidelines tend to be procedural 

rather than substantive, implying that the guidelines are irrelevant. As this lengthy 

rulemaking process has shown, procedure affects substantive outcomes. So even if 

internal guidelines are procedural, that is no reason to withhold those guidelines from 

claimants. The disclosure of claims manuals and internal guidelines, which often contain 

additional plan terms that are hidden from the ERISA participants, will ultimately cut 

down on litigation, since discovery of these documents is often disputed. See Glista v. 

Unum Life Ins. Co. Of Am., 378 F.3d 113, 123-125 (1st Cir. 2004); Mullins v. AT&T 

Corp., 290 Fed. Appx. 642, 646 (4th Cir. 2008). 

Thank you for considering my comments,

D. Seth Holliday, Partner

McMahan Law Firm, LLC

700 S. Thornton Avenue

P.O. Box 1607

Dalton, Georgia 30722