Home > Blog > Blog > Health Insurance > ERISA Watch – Procedural Irregularities in Processing of Medical Benefit Claim Results in Exhaustion of Administrative Remedies and De Novo Review

ERISA Watch – Procedural Irregularities in Processing of Medical Benefit Claim Results in Exhaustion of Administrative Remedies and De Novo Review

This week’s notable decision is Easter v. Cayuga Med. Ctr. at Ithaca Prepaid Health Plan, No. 514CV1403BKSTWD, __F.Supp.3d__, 2016 WL 6820464 (N.D.N.Y. Nov. 15, 2016).  There are a number of goodies in this decision but I’m going to focus on the exhaustion and standard of review issues.  In this case, Plaintiff, Jennifer Easter, on behalf of her son, B.E., brought suit against Defendants Cayuga Medical Center at Ithaca Prepaid Health Plan (“Plan”), Cayuga Medical Center (“CMC”), and Excellus Health Plan, Inc. (“Excellus”) for violating ERISA by denying their claims for medical benefits and failing to provide requested information.  In short, a doctor diagnosed B.E. with conduct disorder; mixed mood and anxiety disorder; a learning disability in language, reading, memory, and sequencing; and antisocial personality disorder.  Easter sought residential treatment for B.E. at Maple Lake Academy in Utah, a facility licensed by the State to provide residential treatment, from January 2014 through October 2014.  After numerous attempts to obtain benefit information from Defendants to no avail, Plaintiffs and an Excellus representative discussed issuance of a denial letter so that Plaintiffs could appeal.  However, Plaintiffs never received a response from Excellus regarding a written denial or an appeal for any of their benefits claims.  Plaintiffs continued to submit claims for payment but only received requests for additional information in response.

Plaintiffs asserted three causes of action:  (1) under ERISA § 502(a)(1)(B) to recover full benefits due; (2) under ERISA § 502(a)(3) to remedy alleged breaches of fiduciary duty and claims procedure; and (3) under ERISA § 502(a)(1)(A) for the Plan Administrator’s alleged failure to supply plan information within 30 days.  On the preliminary issue of whether Plaintiffs have exhausted their administrative remedies, the court found that Excellus did not maintain reasonable procedures governing the filing of benefit claims or follow the regulations’ requirements for adverse benefit determinations.  The court rejected Excellus’s argument that the regulatory timing provisions do not apply because Plaintiffs failed to provide additional information which precluded Excellus from conducting an initial review of the claims and from making an initial determination.  This is because ERISA regulations state that adverse benefit determinations must be made “within a reasonable period of time” regardless of whether the claimant has submitted all necessary information. See 29 C.F.R. § 2560.503–1(f)(2)(iii)(B), (f)(4).

Excellus also argued that because it did not technically deny Plaintiffs’ claims for benefits, ERISA § 503, which refers specifically to denials, and 29 C.F.R. § 2560.503–1, which “flows from” that statutory section, are inapplicable. The court disagreed.  29 C.F.R. § 2560.503–1(f)(2)(iii)(B) specifically regulates plan procedures in cases where an extension of time to determine a claim is needed due to a failure of the claimant to submit the information necessary.  The court found that Defendants violated the procedural requirements of the ERISA regulations as promulgated at 29 C.F.R. § 2560.503–1 and did not meet their burden to show that these procedural failings were “inadvertent and harmless.”  Plaintiffs attempted to pursue administrative remedies but Excellus did not issue a decision, and because it did not provide Plaintiffs with information regarding the appeals process, it delayed final adjudication of Plaintiffs’ claims and prevented further development of the administrative record.  Plaintiffs reasonably believed that their only recourse was to file a lawsuit and were unquestionably harmed.  As such, the court found that Plaintiffs have exhausted administrative remedies and that Defendants are not entitled to summary judgment on that ground.

On the standard of review, the Plan grants CMC discretionary authority, but the court found that the extent to which Excellus exercises discretion is unclear.  Regardless, procedural deficiencies in the claims process mean that, under Halo v. Yale Health Plan, 819 F.3d 42 (2d Cir. 2016) and 29 C.F.R. § 2560.503–1(1), the court must apply a de novo standard of review.

This is a pretty lengthy decision so I’m not going to go into every issue addressed by the opinion, but I encourage you to read it.  Thank you to Plaintiffs’ attorney, Carla McKain, for bringing this decision to my attention.  It somehow did not make it into my Westlaw alerts.  Try as I might, I don’t catch everything.  If you get an awesome decision (and by awesome, I mean awesome for claimants), please send it to me.  If you’d like a PDF of Easter, shoot me an email.  I could not find a link to a free copy.

Do you like ERISA Watch’s humor?  (attempt at humor?)  Then you’ll like this.  I am pleased to spread the news that friend and colleague Joe Creitz, along with comedian Sid Singh, has launched a weekly law, humor, and social commentary podcast called “The Law Is My Ass” (“Law My Ass!” for short).  Episodes typically feature a romp through the week’s legal news, interviews with legal luminaries, and listener questions.  I, myself, have had a listener question answered in Episode 3!  (I wanted to know Joe’s favorite sauerkraut recipe.)  You can find the podcast at iTunes (https://itunes.apple.com/us/podcast/the-law-is-my-ass/id1176316667), and on the web (http://lawmyass.libsyn.com/), and contact the podcast at lawmyass@gmail.com. Subscribe and give it a listen!

Below is Roberts Disability Law, P.C.’s summary of this past week’s notable ERISA decisions.

Disability Benefit Claims

Sixth Circuit

  • The court concluded that there was no Permanent Total Disability (“PTD”) benefit available under the Chrysler LLC’s Voluntary Group Accident Insurance Program, thus there was no wrongful denial of PTD benefits to Plaintiff. Here, the 2002 SPD included a PTD benefit, but a SPD issued in 2007 did not include a PTD benefit.  No SMM was required to be issued because a new SPD was issued in 2007 and the MetLife Certificate of Insurance does not contain a PTD BenefitButler v. FCA US, LLC, No. 14-14752, 2016 WL 6679828 (E.D. Mich. Nov. 14, 2016) (Judge Sean F. Cox).

Seventh Circuit

  • Aetna did not act arbitrarily and capriciously in terminating Plaintiff’s benefits based on her PTSD diagnosis. The fact that Aetna found that Plaintiff was disabled under the terms of the plan for more than five years does not mean that Aetna acted arbitrarily and capriciously. Aetna’s termination was “well-founded” and relied properly on the reports of three reviewing physicians.  The court noted that the record contains to formal measurements of how Plaintiff’s self-reported severe symptoms affected her functional capabilitiesJacowski v. Kraft Heinz Foods Co., No. 15-CV-657-BBC, 2016 WL 6693588 (W.D. Wis. Nov. 14, 2016) (Judge Barbara B. Crabb).

Eleventh Circuit

  • In matter challenging denial of “any occupation” disability benefits to claimant with lumbar degenerative disease and obesity, finding that: (1) Novelis, the former employer not charged with any decisionmaking responsibility, is entitled to judgment on the administrative record as to Plaintiff’s termination of benefits claim against it; (2) Liberty acted reasonably in relying on its medical reviewer’s report since the opinion was similar to that of Plaintiff’s doctors; (3) Liberty cannot be held liable under § 1132(c)(1) as a fiduciary of Novelis for failing to respond to Plaintiff’s document requests; and (4) any claim based on Liberty’s delay in sending Plaintiff the curriculum vitae of all of the experts consulted failsHallman v. Liberty Life Assurance Co. of Boston, No. 3:15-CV-49 (CDL), 2016 WL 6662706 (M.D. Ga. Nov. 10, 2016) (Judge Clay D. Land).

ERISA Preemption

Third Circuit

Fifth Circuit

  • Granting MetLife’s motion for reconsideration and finding that Plaintiff’s remaining state law claims – breach of contract, detrimental reliance, Louisiana Revised Statutes sections 22:655; 22:1269; 22:1892; and 22:1973 – are conflict preempted under ERISA Section 514. McNealy v. Becnel, No. CV 14-2181, 2016 WL 6807395 (E.D. La. Nov. 17, 2016) (Judge Susie Morgan).

Life Insurance & AD&D Benefit Claims

Tenth Circuit

  • In matter where all ten of Plaintiff’s fingers were at least partially amputated after he suffered severe frostbite while mountain climbing in Nepal, the court granted Zurich’s motion for summary judgment because the partial severance of his fingers is not covered by the unambiguous language of the policy. To be a “covered loss” under the policy, the right index finger and thumb both must be amputated “through or above” the MCP joint and Plaintiff’s right index finger and thumb were not amputated through the MCP joints, they were both amputated between the MCP joint and fingertipNyberg v. Zurich Am. Ins. Co., No. 15-1359-EFM-JPO, 2016 WL 6778943 (D. Kan. Nov. 16, 2016) (Judge Eric F. Melgren).

Medical Benefit Claims

Second Circuit

  • Defendants violated the procedural requirements of the ERISA regulations in a manner which left Plaintiffs believing that they could not pursue further administrative appeal and caused Plaintiffs to suffer harm. Based on this, the court found that Plaintiffs have exhausted administrative remedies and that Defendants are not entitled to summary judgment on that ground.  Procedural deficiencies in the claims process means that, under Halo and 29 C.F.R. § 2560.503–1(1), the Court must apply a de novo standard of review.  Because the administrative record does not provide a basis upon which the court could determine whether B.E.’s treatment at Maple Lake was medically necessary, the court remanded the claim to the administrator.  Easter v. Cayuga Med. Ctr. at Ithaca Prepaid Health Plan, No. 514CV1403BKSTWD, __F.Supp.3d__, 2016 WL 6820464 (N.D.N.Y. Nov. 15, 2016) (Judge Brenda K. Sannes)

Sixth Circuit

  • The court concluded that the CBA at issue is ambiguous concerning the parties’ intent to vest lifetime retiree healthcare benefits and extrinsic evidence is necessary to resolve the ambiguities. The court determined that absence of express language promising lifetime retiree healthcare benefits is not dispositive of whether Honeywell must provide lifetime retiree healthcare benefitsFletcher v. Honeywell Int’l, Inc., No. 3:16-CV-302, 2016 WL 6780020 (S.D. Ohio Nov. 15, 2016) (Judge Walter H. Rice).

Pension Benefit Claims

Ninth Circuit

Tax Court

  • Petitioner did not apply the correct method to reduce the maximum benefits under section 415(b)(2)(C) for a retirement age before to age 62, where the plan does not provide for forfeiture of the participant’s benefits at death. Petitioner is liable for excise taxes under section 4972 for nondeductible contributions made to the plan for calendar years 2002 through 2006 because the contributions were in excess of the limitations imposed by section 404. Petitioner is liable for additions to tax pursuant to section 6651(a)(1) and (2) for failure to timely file Forms 5330, Return of Excise Taxes Related to Employee Benefit Plans, and failure to timely pay the excise taxes for calendar years 2002 through 2006.  The statute of limitations does not bar the assessment and collection of excise taxes pursuant to section 4972 for nondeductible contributions to the plan for calendar years 2002 through 2006Pizza Pro Equipment Leasing, Inc., v. Commissioner of Internal Revenue, No. 13149-15., 2016 WL 6804474 (T.C. Nov. 17, 2016) (Judge Laro).

Plan Status

Fifth Circuit

  • Denying motion for new trial seeking to vacate the court’s conclusion that judicial estoppel applied to prevent Plaintiffs from taking the inconsistent position that the Plan is not a “top-hat” plan because Plaintiffs have not presented any new evidence, demonstrated that there was a manifest error of fact or law or shown a change in the law that would justify the extraordinary remedy of reconsidering a final judgment. Owens v. W. & S. Life Ins. Co., No. CV 13-4782, 2016 WL 6679848 (E.D. La. Nov. 10, 2016) (Judge Mary Ann Vial Lemmon).

Pleading Issues & Procedure

Sixth Circuit

  • In this matter where there are two insurance contracts that cover different injuries (i.e., Plaintiff’s personal bodily injuries and her alleged resulting disability) that arise out of the same automobile accident, the court has supplemental jurisdiction over Plaintiff’s state law claims. The court found that Defendant UniCare’s removal of this case without the consent of its co-defendant, Metropolitan Property and Casualty Insurance Company, was improperAskew v. Metro. Prop. & Cas. Ins. Co., No. 16-CV-12130, __F.Supp.3d__, 2016 WL 6776286 (E.D. Mich. Nov. 15, 2016) (Judge Gerald E. Rosen).

Tenth Circuit


Fifth Circuit

Withdrawal Liability & Unpaid Contributions

Second Circuit

  • Following grant of default judgment in unpaid fringe benefit contributions case, granting Plaintiffs’ motion to compel the production of (1) two years of bank statements relating to a Chase checking account previously owned by Gillette; (2) tax returns filed by Gillette for the years 2009, 2010, 2011, and 2012; (3) a form W-2 for the $7,953 in income reflected on Gillette’s 2013 tax return; and (4) twelve months of credit card statements relating to a Credit One account owned by Gillette. Ferrara v. Bd Haulers Inc., No. 11-CV-940 (ADS), 2016 WL 6683474 (E.D.N.Y. Nov. 12, 2016) (Judge Arthur D. Spatt).

Third Circuit

Seventh Circuit

Ninth Circuit

* Please note that these are only case summaries of decisions as they are reported and do not constitute legal advice.  These summaries are not updated to note any subsequent change in status, including whether a decision is reconsidered or vacated.  If you have questions about how the developing law impacts your ERISA benefit claim, contact an experienced ERISA attorney.  Case summaries authored by Michelle L. Roberts, Partner, Roberts Disability Law, P.C., 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel:  510-230-2090. 



facebook twitter shop

*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.

Get The Help You Need Today

Inner form image


Contact Us

We know how to get your insurance claim paid. Call today at:
(510) 230-2090

Close Popup