Summary
In Duncan, the claim administrator was found to have abused his discretion in treating a preliminary letter from a claim as an appeal—precisely what Plaintiff is asking of the Court in this case.
Summary of this case from Simmons v. Liberty Life Assurance Co. of Bos.Opinion
Civil Action No. 3:03-CV-1931-N.
February 10, 2005
ORDER
Before the Court is Duncan's Motion for Summary Judgment filed August 26, 2004. Because Duncan has proven procedural violations, but has not shown herself to be entitled to health benefits as a matter of law, the Court grants in part and denies in part Duncan's motion.
I. BACKGROUND
Duncan was an employee of Assisted Living Concepts when she was injured on the job. As a nonsubscriber to the Texas Workers Compensation Act, Assisted Living Concepts (ALC) instituted the Occupational Injury Benefit Plan (the Plan), an ERISA governed benefit plan. ALC hired a third party administrator, Providence Risk (Plan Administrator) to manage work injury claims like Duncan's. Duncan was treated at the Emergency Room and by two of the Plan's doctors. The Plan doctors reported that Duncan exhibited several signs of symptom magnification and malingering, suggesting that she was exaggerating her injury. The doctors also reported that Duncan was verbally abusive and was generally noncompliant with their suggested courses of treatment. On May 9, 2003, the Plan Administrator sent Duncan a letter terminating her benefits under the Plan. On May 21, 2003, Duncan's counsel sent the Plan Administrator a letter questioning whether the May 9 letter properly complied with ERISA, requesting information for lodging an appeal and indicating an appeal would be forthcoming. The Plan Administrator treated the May 21 letter as the filing of an appeal and began review of the termination of Duncan's medical benefits. On June 19, 2003, the Plan Administrator upheld its original decision denying Duncan's benefits. Duncan then brought the instant suit, claiming that the Plan Administrator abused its discretion in denying Duncan benefits and violated both its internal and ERISA regulated procedures for considering appeals of benefit denials.
II. STANDARD AND SCOPE OF REVIEW
ALC claims that Duncan seeks de novo review of the Plan Administrator's actions and claims this is the wrong standard of review for a District Court to use under these circumstances. To begin with, it is not apparent that Duncan makes such a claim. In her brief supporting the motion for summary judgment, Duncan cites Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) for the proposition that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Duncan then goes on to argue repeatedly that the Plan Administrator's actions were an abuse of discretion. To the extent there is any doubt, ALC clearly points to language in the Summary Plan Description (SPD) granting the administrator discretion in all aspects of administering the Plan. Accordingly, the proper standard of review before this Court is abuse of discretion.
Duncan also objects to ALC's evidence offered in support of its opposition to Duncan's motion for summary judgment to the extent it is outside the scope of the administrative record. Because the Court resolves Duncan's motion without relying on evidence outside the administrative record, Duncan's objection to ALC's summary judgment evidence is moot.
III. SUBSTANTIVE ENTITLEMENT TO BENEFITS
Duncan claims the Plan Administrator abused its discretion in terminating her benefits because Duncan's behavior is insufficient grounds to terminate benefits and ALC failed to give her any warning that her behavior could result in termination of benefits. ALC responds that ALC did warn her via a letter dated April 3, 2003, reminding Duncan to cooperate fully with the Plan Administrator. ALC also contends that it had no duty to warn Duncan that she must be truthful throughout the claims process. The Court holds that ALC has at least raised a fact issue as to whether Duncan was adequately warned and that Duncan has not shown herself entitled to the warning as a matter of law. Furthermore, ALC claims that Plan beneficiaries like Duncan have a duty to participate in the claims process in good faith. Jackson v. Fortis Benefits Ins. Co., 105 F. Supp. 2d 1055, 1060 (D. Minn. 2000). ALC points to evidence that Duncan threatened her treating physicians, failed to cooperate with treatment and was untruthful throughout the claims process by magnifying her symptoms as proof of Duncan's bad faith. The Court holds that ALC has raised a fact issue as to whether the Plan Administrator abused its discretion in terminating Duncan's benefits. Accordingly, Duncan's motion for summary judgment on the ground that her behavior was an insufficient basis for termination of benefits is denied.
III. PROCEDURAL DEFECTS
Duncan claims that the Plan Administrator abused its discretion in conducting the appeals process by failing to give Duncan 180 days to appeal, by improperly considering the May 21, 2003, letter an appeal, by failing to provide requested information relevant to her appeal before the denial of the appeal, and by failing to provide in the May 9, 2003, termination letter what additional information would be needed to perfect her claim for benefits. Duncan claims that ERISA mandates that a beneficiary like Duncan receive 180 days after the termination letter to investigate her claim, gather documents and appeal her decision. It is undisputed that ERISA and the Plan's SPD allow Duncan at least 180 days to lodge an appeal. 29 C.F.R. § 2560.503-1(h)(3)(i). However, it is not clear that once a claimant initiates an appeal, the claimant has the balance of the 180 days to investigate the claim. In addition, the Plan required the Plan Committee to rule on the appeal within 30 days from the time the beneficiary appealed the initial termination. Both parties seem to recognize that if Duncan's counsel had waited to file an appeal within the 180 days but much later than the May 21 letter, then the Plan Committee would have been bound to consider the appeal. The Court cannot say that the Plan Administrator abused its discretion in interpreting the Plan to require a decision on the appeal within 30 days of the filing of the appeal. As a result, the issue of whether the Plan Administrator improperly truncated the appeals process turns on whether Duncan had initiated the appeal process.
Duncan claims that the Plan Administrator abused its discretion by considering the May 21, 2003, letter an appeal. In the May 21 letter, Duncan first questioned whether the appeal process had even started because Duncan claimed the May 9 letter terminating benefits failed to comply with ERISA requirements. Duncan also indicates in the letter that if the appeal process had not begun, Duncan would like to submit further material for the Plan Administrator's consideration. Duncan then states in the letter that if the initial claims process is closed, she will initiate an appeal. ALC claims that it considered the May 9 letter as complying with ERISA, thereby closing the claims process. Therefore, according to ALC, Duncan's letter automatically constituted an appeal. To constitute initiation of an appeal, "[t]he content of the letter must be reasonably calculated to alert the employer to the nature of the claim and request administrative review." 29 C.F.R. § 2560.503-1(d); Powell v. ATT Communs., 938 F.2d 823, 827 (7th Cir. 1991). Here, the May 21 letter provided much of the factual and legal bases of Duncan's claim on appeal. However, the letter clearly indicates a future intention to file an appeal and requests information to which Duncan was entitled in order to pursue her appeal. This is insufficient to start the appeal process. See Powell, 938 F.2d at 827 (holding that a letter threatening litigation and requesting general information was not a clear enough request for administrative review). The Court holds that the Plan Administrator abused its discretion by considering the May 21, 2003, letter the beginning of the appeal process. Accordingly, the Plan Administrator improperly truncated the appeal process.
Duncan also claims that the Plan Administrator abused its discretion by failing to provide several relevant documents her counsel had requested before considering and closing her appeal. Duncan points to ERISA regulations and the Plan's SPD as entitling her to access to relevant information in the claim file to prosecute her appeal. 29 C.F.R. § 2560.503-1(h)(2)(iii). Duncan argues that failure to provide that information before closing the appeal process is a failure to provide a full and fair review of her claim as ERISA requires. 29 C.F.R. § 2560.503-1(h)(2); Schadler v. Anthem Life Ins. Co., 147 F.3d 388, 393 (5th Cir. 1998). ALC does not contest that it failed to provide the requested information before the June 19, 2003, letter upholding the denial of benefits and ending the appeal process. Duncan was entitled to this information. In light of the fact that the Plan Administrator improperly considered the May 21 letter the initiation of the appeal process, the Court holds the Plan Administrator abused its discretion by not providing the requested information before the appeal terminated. Accordingly, the Plan Administrator failed to provide Duncan a full and fair review of her claim on appeal.
Duncan claims that the Plan Administrator abused its discretion because the May 9 letter terminating her benefits failed to provide what additional information Duncan needed to provide to perfect her claim. ERISA regulations and the Plan's SPD require that the termination letter provide a "description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary." 29 C.F.R. § 2560.503-1(g)(1)(iii). On June 16, 2003, ALC sent Duncan a letter explaining that no further information was necessary to decide her claim. As a result, ALC had not asked for any additional material or information. Considering that the Plan Administrator claims it terminated Duncan's benefits on May 9 for deceit and uncooperativeness, it is hard to imagine what further material or information would have been necessary for Duncan to perfect her claim. Accordingly, Duncan's motion for summary judgment is denied on this ground.
IV. THE REMEDY
Duncan claims that the Plan Administrator's procedural violations entitle her to Plan benefits. Neither party addresses the propriety of this remedy for the procedural irregularities the Court has found. Because the Court holds that the Plan Administrator abused its discretion in administering the appeal process and because Duncan has not shown herself entitled to benefits as a matter of law, the Court must consider whether an award of benefits is the appropriate remedy. Procedural violations of ERISA do not entitle the plan beneficiary to a substantive remedy unless the beneficiary can prove continuous violations resulting in some prejudice to the beneficiary. Hines v. Massachusetts Mut. Life Ins. Co., 43 F.3d 207, 211 (5th Cir. 1995); accord Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th Cir. 1984); Wolfe v. J.C. Penney Co. Inc., 710 F.2d 388, 393 (7th Cir. 1983), disapproved on other grounds by Pierre v. Connecticut Gen. Life Ins. Co., 932 F.2d 1552, 1555 (5th Cir. 1991). Here, the closest Duncan can come to establishing prejudice from the Plan Administrator's conduct is the failure to provide the requested relevant information to which Duncan was entitled. As a result, Duncan has not shown herself entitled to Plan benefits. However, the Plan Administrator failed properly to consider Duncan's appeal and failed timely to provide Duncan with information and documentation to which Duncan was entitled. Accordingly, the Court remands to the Plan Administrator for consideration of Duncan's appeal from the initial May 9, 2003, termination of benefits. The Court declines to award attorneys' fees and costs because neither party has prevailed at this point. The time for Duncan to appeal is tolled from June 19, 2003, the date the Plan Administrator denied the appeal until the end of judicial review. While this remand may impose additional burdens on the parties without changing the appellate outcome, the Court is reluctant to review the Plan Administrator's actions with deference without the Plan Administrator's properly considered appellate decision.
In fact, ERISA contemplates that procedural irregularities in the appeals process result in a defense to a claim that a plaintiff failed to exhaust administrative review. In such a case, the District Court may properly hear the appeal from the denial of benefits. 29 C.F.R. § 2560.503-1(1).