Opinion
CASE NO. 4:06 CV 920.
November 30, 2006
ORDER
This matter is before the Court upon the Motion of Hartford Life and Accident Insurance Company for a Judgment on the Statute of Limitations Defense. (Dkt. #14).
I. BACKGROUND
On March 22, 2006, the Plaintiff, Sandra Davidson ("Davidson") filed her Complaint, alleging claims pursuant to the Employee Retirement Income Security Act ("ERISA"), as amended, 29 U.S.C. sections 1301- 1461 (2000), against the Defendant, Hartford Life and Accident Insurance Company ("Hartford"), in Hartford's capacity as administrator of Davidson's long term disability benefits. (Dkt. #1) The instant action arises out of Hartford's decision to reclassify Davidson's disability from a mental disability to a physical disability.
The facts of this case are largely undisputed. Davidson was an insured participant under Hartford's long term disability policy (The "Policy") through her former employer, Phar-Mor, Inc. In 1989, Davidson began experiencing symptoms that were suggestive of a neurological condition. (Dkt. #19, Exhibit A). Hartford approved Davidson's claim for disability benefits, and notified Davidson that she was entitled to receive long term disability under the Policy until September 5, 2023 because her disability resulted from a physical condition. (Dkt. #19, Exhibit A).
On September 24, 2002, Hartford sent Davidson a letter stating that a review of her claim for benefits indicated that she no longer met the definition of physical disability. (Dkt.# 19, Exhibit B). Although Davidson complained of gait instability, blurred vision, headaches, and numbness, numerous neurological examinations and medical evaluations indicated that there was no physical evidence of a neurological disorder. (Dkt. #19, Exhibit B). As a result, Hartford reclassified Davidson's disability as a mental disability. Unlike benefits for a physical disability, benefits for a disability resulting from a mental condition were only payable for 24 months under Hartford's Policy. Davidson was advised, therefore, that her benefits would terminate on September 23, 2004. Hartford further advised Davidson of her rights under ERISA to appeal the decision within 180 days for a full and fair review.
Under Hartford's Policy, "if an insured person is disabled because of: 1) psychosis or neurosis; or 2) any condition caused, contributed, or made disabling by a psychosis or neurosis," benefits are only payable for 24 months. (Dkt. # 14).
On October 8, 2002, Davidson appealed the September 24, 2002 decision of Hartford to reclassify her long term disability benefits as a disability resulting from a mental disability. (Dkt. #14). As part of the appeals process, Hartford requested a review to be conducted by Dr. Irwin Greenburg ("Dr. Greenburg"). Dr. Greenburg concluded that Davidson's symptoms were not the result of a physical condition because numerous neurological tests and examinations failed to identify any physical causes. (Dkt. #19, Exhibit C). Dr. Greenburg determined that Davidson was suffering from Somatoform Disorder and Chronic Dysthymic Disorder, two conditions that cannot be traced to a specific physical cause. As a result, on February 18, 2003, Hartford sent Davidson a letter stating that their decision to reclassify her disability benefits as resulting from a mental condition was final. Hartford also advised Davidson that her administrative remedies were exhausted under the Policy and she could pursue her claim in federal court. (Dkt. #19, Exhibit C).
According to the Policy, "Legal action cannot be taken against The Hartford . . . after the shortest period allowed by the laws of the state where the policy is delivered. Excepted as noted below, this is 3 years after the time written proof of loss is required to be furnished according to the terms of the policy." (Dkt. #14).
Over the next two years, Davidson continued to communicate with Hartford and provide medical information in an attempt to demonstrate that her disability was physical. Despite the evidence submitted by Davidson, Hartford maintained its position that Davidson's disability was the result of a mental condition. On April 27, 2004, Hartford sent a letter to Davidson, stating:
Please refer to the attached copy of our 2/18/03 letter which communicated our final decision on your appeal of our 9/24/02 decision to apply the policy's mental illness provision. We will consider no further appeals related to our 9/24/02 decision. We understand you believe your disability is physical or non-psychiatric. You may continue to send medical or other information to prove your position. We will review all information you send and notify you if our position on the nature of your disability changes.
(Dkt. #19, Exhibit H).
The April 27, 2004 letter also informed Davidson that her long term disability benefits will terminate on September 23, 2004, and "at that time, you will be afforded the opportunity to appeal the termination of your claim." (Dkt. #19, Exhibit H). Davidson continued to submit medical information to Hartford after the termination of her benefits on September 23, 2004.
In response to the additional medical information, Hartford sent Davidson a letter on October 13, 2004, stating that its decision to terminate her benefits had not changed and that she had the right to appeal the decision within 180 days of the date of the letter. Davidson subsequently retained Angela Mikulka ("Mikulka") as counsel to represent her in the appeal process. On March 2, 2005, Hartford sent Mikulka a letter regarding Davidson's claim for benefits. The letter advised Mikulka to send any documentation that she had to support Davidson's claim. Hartford also granted Mikulka a 30 day extension to comply with their request, giving her until May 11, 2005, to submit the necessary documentation. Mikulka submitted an appeal letter to Hartford on May 20, 2005, arguing that Davidson suffered from a physical disability and her disability benefits were wrongly terminated. (Dkt. #14).
Hartford denied Davidson's appeal by a letter dated November 3, 2005, on the grounds that no evidence supported a conclusion that Davidson was physically disabled. (Dkt. #19, Exhibit G). The letter also stated that Davidson may, "bring a civil action under Section 205(c) of ERISA." (Dkt. #19, Exhibit G). Davidson then filed her Complaint in the Court of Common Pleas on March 21, 2006, seeking the reinstatement of her disability benefits. (Dkt. #1). The case was subsequently removed to the United States District Court for the Northern District of Ohio, Eastern Division, on April 17, 2006. (Dkt. #1). Specifically, Davidson's Complaint alleges that: (1) Hartford wrongly terminated Plaintiff's disability benefits on September 23, 2004; and (2) Hartford's decision to discontinue Davidson's disability benefits was the result of a conflict of interest because it was motivated by pecuniary gain.
Plaintiff does not specifically cite ERISA in her Complaint. However, the causes of actions alleged clearly fall under ERISA, and were properly removed to this Court pursuant to 28 U.S.C. § 1441, et seq.
Defendant filed a Motion for Judgment on the Statute of Limitations Defense, alleging that Davidson's claim is barred by the statute of limitations. (Dkt. #14).
Although Defendant titled the instant Motion a "Motion for Judgment on the Statute of Limitations Defense," it is supported by affidavits and the administrative record. (Dkt. #15). Plaintiff's Motion in Opposition is titled "Opposition to Defendant's Motion for Summary Judgment," and is also supported by affidavits and the administrative record. (Dkt. #16). Therefore, the instant Motion will be treated as a motion for summary judgment pursuant to Fed.R. Civ P. 56(c) because matters outside the pleadings are presented to the court and Plaintiff failed to object to the evidentiary material submitted in support of Defendant's Motion. See Johnson v. United States Postal Service, 64 F. 3d 233, 237 (6th Cir. 1996) (holding that a "failure to object evidentiary material submitted in support of a summary judgement motion constitutes waiver of those objections.").
II. LAW AND ANALYSIS
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R. Civ P. 56(c). The court must "view the evidence and draw all reasonable inferences therefrom in the light most favorable to the non-moving party."Little v. BP Exploration Oil Co., 265 F.3d 357, 361 (6th Cir. 2001). "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge. . . . The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [her] favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); accord Graham-Humphreys v. Memphis Brooks Museum of Art, Inc., 209 F.3d 552, 556-57 n. 7 (6th Cir. 2000). The central issue is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law."Anderson, 477 U.S. at 251-52. "A party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting FED. R. CIV. P. 56(c)). For a dispute to be genuine, the evidence must be such that "a reasonable jury could return a verdict for the nonmoving party."Anderson, 477 U.S. at 248.
A. Introduction
Plaintiff seeks legal and equitable relief under ERISA. Hartford asserts that Davidson's cause of action accrued on September 24, 2002, when Hartford sent Davidson the initial letter stating that her disability benefits were being reclassified as resulting from a mental disability. Davidson, however, contends that her cause of action did not accrue until November 3, 2005, when Hartford sent Davidson a letter rejecting her appeal and advising Davidson of her right to sue in federal court. Thus, Defendant's Motion for Summary Judgment hangs on one critical issue: whether Plaintiff's cause of action began to accrue on November 3, 2005, as alleged by Plaintiff, or on September 24, 2002, as alleged by Defendant.
B. Exhaustion of Remedies
Before analyzing the statute of limitations issues, it is necessary to survey the administrative steps a plaintiff must take before bringing an ERISA benefits action. Although ERISA does not specifically require exhaustion, the Sixth Circuit has found that the administrative scheme of ERISA requires a participant to exhaust her administrative remedies before seeking legal recourse in federal court. Weiner v. Klais and Co., Inc., 108 F.3d 86, 90-91 (6th Cir. 1997); Baxter v. C.A. Muer Corp., 941 F.2d 451, 453 (6th Cir. 1991); Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 986 (6th Cir. 1991). The exhaustion of internal plan remedies minimizes the number of frivolous ERISA lawsuits; promotes the consistent treatment of benefit claims; provides a nonadversarial dispute resolution process; and decreases the cost and time of claims settlement.Baxter v. C.A. Muer Corp., 941 F.2d 451, 453 (6th Cir. 1991).
Two exceptions exist, however, to this general rule. A claimant does not have to exhaust her administrative remedies when: (1) an appeal would be futile; or (2) any possible administrative remedy would be inadequate. Costantino v. TRW, Inc., 13 F.3d 969, 974-75 (6th Cir. 1992). However, Plaintiff does not raise these exceptions in her Opposition to Defendant's Motion for Summary Judgment. (Dkt. #16).
Under Hartford's Policy, a plan participant has one hundred eighty (180) days to appeal a decision to terminate benefits. (Dkt. #19, Exhibit F). The appeal is free of charge and the plan participant is entitled to receive access to, and copies of, all documents, records, and other information relevant to the claim. Once the appeal is received by Hartford, the entire claim is reviewed, including any information previously submitted and any additional information received with the appeal. If the appeal is denied, the plan participant has a right to bring a claim in federal court under ERISA. (Dkt. #19, Exhibit F). Under the Hartford Policy's section on legal actions, participants are advised that,
Legal action cannot be taken against the Hartford: (1) sooner than 60 days after proof of loss has been furnished; or 2) after the shortest period allowed bylaws of the state where the policy is delivered. Except as noted below, this is 3 years after the time written proof of loss is required to be furnished pursuant to the terms of the policy.
Under the Policy, the only exceptions to the three-year statute of limitations apply in Kansas and South Carolina. (Dkt. #14). Because Davidson's claim arises in Ohio, the three-year statute of limitations applies to the case at bar.
(Dkt. #14).
C. Applicable Statute of Limitations
In the instant case, both parties recognize that the Hartford Policy specifies a three-year statute of limitations for filing benefit claims. Therefore, the three-year statute of limitations controls the Plaintiff's cause of action.
While claims brought pursuant to ERISA have no prescribed statute of limitations period, the Sixth Circuit has allowed companies to prescribe different limitations periods under the express provisions of the employee benefit plan document as long as the limitation is reasonable. Santino v. Provident Life Acc. Ins. Co., 276 F. 3d 772, 776 (6th Cir. 1992); Clark v. NBD Bank N.A., 3 Fed. Appx. 500, at **8 (6th Cir. 2001) (holding that a three year limitation period is reasonable).
D. Accrual of Statute of Limitations
The parties are in dispute over when an ERISA cause of action accrues, triggering the three-year statute of limitations period under the Policy. An ERISA cause of action for benefits accrues, and the statute of limitations or contractual limitations period begins to run, when a benefit claim has been made and formally denied. Stevens v. Employer-Teamsters Joint Council No. 84 Pension Fund, 979 F. 2d 444, 451 (6th Cir, 1992). Here, confusion arises because Hartford conducted two separate appeal reviews regarding Davidson's claim for benefits and issued two separate right to sue letters. First, Hartford conducted a review of their September 24, 2002 decision to convert Davidson's benefits to a mental disability. Hartford issued a letter of February 18, 2003, affirming their decision to deny benefits and notifying Davidson of her right to sue in federal court. Hartford conducted a second review after Davidson's benefits were actually terminated on September 23, 2004. Hartford affirmed their decision to terminate her benefits, and issued a second right to sue letter on November 3, 2005, notifying Davidson of her right to sue in federal court.
Hartford asserts that the initial decision to reclassify Davidson's benefits as a mental disability on September 22, 2002 is the date when Davidson's cause of action accrued, making Davidson's Complaint barred by the three-year statute of limitations. Defendant cites Allen v. Unionmutual Stock Life Insurance Co. of America, 989 F. Supp 961 (S.D. Ohio 1997), in support of their proposition that causes of action under ERISA accrue at the time the initial determination is communicated to the plaintiff rather than the date the appeal is denied. Allen is readily distinguishable from the instant case. Unlike Davidson, the plaintiff in Allen conceded that he failed to follow the appeal procedure set forth in the plan. Allen, 989 F. Supp 961, 964. Allen does not discuss whether a cause of action accrues after the initial denial of a claim for benefits or after a denial of the appeal, because the plaintiff never initiated the appeal process.
Defendant reliance on case law on the "discovery rule" in support of their position that Davidson's cause of action accrued on the date her claim for benefits was initially denied is also misplaced. The discovery rule mandates that a cause of action accrues, and the statute of limitations begins to run, when the individual knows, or reasonably should have known of, a wrongful act. See e.g. Michigan United Food Commerical Workers Unions and Drug and Mercantile Joint Health Welfard Fund v. Muir Co., 928 F. 2d 594 (6th Cir. 1993). The discovery rule, however, is inapplicable to the instant case because the timing of when Plaintiff discovered her injury is not at issue.
Some courts have held that, in light of ERISA's exhaustion requirement, a claim for benefits does not accrue until the participant has exhausted his administrative remedies. Lambarts v. Priority Health, 2006 U.S. Dist. LEXIS 19665 (2206). InLambarts, the court analyzed an ERISA benefits action by assuming that the statute of limitations commenced upon the denial of an appeal for benefits rather than when the claim was initially denied. Lambarts 2006 U.S. Dist. LEXIS 19665, at *8. The court did not ultimately decide when the claim actually accrued because the plaintiff's claim was untimely even under the latest possible date. Id. However, the court pointed out that many courts held that a claim for ERISA benefits does not accrue until the participant has exhausted administrative remedies. See Lippard v. Unumprovident Corp., 261 F. Supp. 2d 368, 377 (M.D.N.C. 2003) ("Because Plaintiff exhausted her administrative remedies when her appeal was denied by Defendant on September 16, 1998, Plaintiff then had three years in which to bring her claim for benefits."); Laurenzano v. Blue Cross Blue Shield of Mass., 134 F. Supp. 2d 189, 211 (D. Mass. 2001) (stating that "for those class members who sought internal remedies, their causes of action did not accrue until they exhausted their internal remedies"); Crane v. Asbestos Workers Phila. Pension Plan, 1998 U.S. Dist. LEXIS 4293, No. Civ. A. 95-4173, 1998 WL 151801, at *1 n. 4 (E.D. Pa. Apr. 1, 1998) ("Plaintiff's claim for benefits did not accrue until his application was formally denied and he had exhausted his administrative remedies under the Plan.").
The Court finds that Davidson's claim is not barred by the statute of limitations. Hartford argues that the September 24, 2002 letter, reclassifying Davidson's disability benefits, constitutes a formal denial of benefits because the letter gave Davidson a right to sue in federal court. Even assuming arguendo that this letter constitutes a formal denial, Hartford arguably kept the administrative process alive by allowing Davidson to submit additional medical information and instituting a second appeal process after her benefits were terminated. Hartford could have ignored Davidson's submissions and refused to consider further appeals by Davidson. Instead Davidson was notified, in the letter dated November 3, 2005, that her claim was denied and that she had the right to sue in federal court. Viewing the evidence in the light most favorable to plaintiff, she had three years from November 3, 2005 to commence her lawsuit. Because Davidson exhausted the appropriate internal remedies established by Hartford and filed her complaint within five months of the November 5, 2005 letter, her claim is not barred by the statute of limitations.
Accordingly, Defendant's Motion for Judgment on the Statute of Limitations Defense is DENIED.
The Court orders that a status hearing shall be held on December 14, 2006 at 1:30 p.m. Counsel shall appear in person.