Dismissal of ERISA Disability Suit Upheld for Failure to Exhaust Administrative Remedies
On February 3, 2016, the Court of Appeals for the Fifth Circuit in Moss v. Unum Group, et al., 2016 WL424638 (5th Cir. February 3, 2016) upheld the District Court’s dismissal of a suit alleging the wrongful denial of disability insurance benefits for failure to exhaust administrative remedies.
Moss concerns Urologist, Dr. James L. Moss’s claim for benefits under two disability policies issued by UNUM. Dr. Moss suffers from osteoarthritis and alleged that his condition prevented him from performing urologic surgery. On June 5, 2009, UNUM denied Dr. Moss’s claim for benefits. UNUM’s denial letter notified Dr. Moss that, if he wanted to appeal UNUM’s denial of his claim, he was required to submit a written appeal within 180 days. On June 30, 2009, Dr. Moss’s attorney called a UNUM representative and verbally advised that he disagreed with UNUM’s decision. Dr. Moss’s attorney mailed paychecks to UNUM, but did not file a formal written appeal.
On December 10, 2009, UNUM sent Dr. Moss another letter reiterating its denial of his claim for benefits. The December 10, 2009 denial letter again informed Dr. Moss that he had 180 days to file a written administrative appeal. That denial letter also stated that, “Unless there are special circumstances, the administrative appeal process must be completed before you begin any legal action regarding your claim.” Dr. Moss never filed an administrative appeal. Instead, Dr. Moss filed a lawsuit against UNUM, in which he argued that attempting to exhaust his administrative remedies would be futile. The district court rejected Dr. Moss’s futility argument and dismissed the case without prejudice.
On April 16, 2013, after the district court dismissed his first suit, Dr. Moss asked UNUM to allow him to file an administrative appeal. UNUM responded that it was unable to review the claim because Dr. Moss submitted his appeal request far beyond the 180–day deadline. Dr. Moss filed a second suit against UNUM on October 21, 2013. The district court ruled that Dr. Moss had failed to exhaust his administrative remedies by failing to file a timely administrative appeal. Because Dr. Moss failed to demonstrate that he would be able to timely exhaust his administrative remedies in the future, the district court dismissed the case with prejudice.
On appeal, Dr. Moss argued that UNUM’s alleged bad faith in denying his claim for disability benefits constitutes a “special circumstance” that excuses him from his obligation to file an administrative appeal. Dr. Moss also argued that even though he did not file a formal written appeal, he “effectively exhausted” his administrative remedies by taking informal actions that fulfilled “the underlying purpose of the exhaustion requirement.” According to Dr. Moss, it is sufficient that he telephonically informed UNUM that he disagreed with its decision and mailed UNUM copies of his paychecks. Thus, claims Dr. Moss, “in substance, Dr. Moss did appeal [UNUM]’s denial of benefits.”
The Fifth Circuit found both of Dr. Moss’s arguments to be without merit. The Court reasoned that if a claimant could avoid the exhaustion requirement simply by alleging in his complaint that the plan administrator denied his claim in bad faith, then no claimant would ever be required to exhaust administrative remedies before filing suit. The Court went further and found that “interpreting ‘special circumstances’ as Moss proposes would render the administrative appeal requirement completely toothless. An exception to the appeal requirement that is potentially available to every claimant is hardly a “special” circumstance.” As to Dr. Moss’s second argument, the Fifth Circuit found that “[A]llowing informal attempts to substitute for the formal claims procedure would frustrate the primary purposes of the exhaustion requirement.”
Although the Moss case is not precedential pursuant to Fifth Circuit Local Rules, this case illustrates the need to strictly adhere to the exhaustion requirements established by a long line of case law interpreting the legislative history of ERISA, which clearly suggested that “Congress intended to grant authority to the courts to apply the exhaustion doctrine in suits arising under the Act.”
