Court Confirms Participant Must Exhaust Administrative Remedies Before Filing a Suit

The U.S. District Court for the Southern District of New York, in Benson vs. Tiffany and Company SPD, has ruled that a participant in an ERISA-governed group health plan may not proceed with her claim for denial of benefits because she failed to exhaust the administrative remedies available to her under the plan in a timely manner.

Law. ERISA requires that claimants first exhaust their administrative remedies available under their group health plan (i.e., the internal appeals process) before bringing a lawsuit in federal district court. In fact, claimants are not legally entitled to bring a lawsuit under ERISA until they have exhausted their administrative remedies.  Some ERISA-governed plans require claimants to go through several rounds of administrative appeals before they have fully “exhausted” their remedies. 

Courts have excused a claimant’s delay in pursuing administrative remedies where the claimant demonstrates either that: (i) any effort to exhaust the plan’s administrative remedies would be futile; or (ii) equitable tolling is warranted.

Background. In Benson, a participant in a group health plan sought reimbursement for dental expenses she incurred from a biking accident. The participant first filed a reimbursement claim with Medicare because the plan’s terms provided that she would be reimbursed only for those costs in excess of what Medicare would have paid. Medicare denied the plaintiff’s claims in whole and she then submitted her claims to the plan administrator. 

The plan administrator denied the participant’s claims and sent her a denial letter which explained that she had 60 days from the date on which she received the letter to appeal the decision.  The denial letter further advised the participant that she had the right to file a lawsuit under ERISA after she had exhausted all of her appeal rights.  

Notwithstanding this information, the participant waited to file an appeal until 66 days after the plan administrator sent the denial letter.  The plan administrator responded by denying the participant’s appeal on the basis that it had not been received within the designated time limit set forth in the denial letter. In turn, the participant filed a lawsuit to contest the denial of benefits.   

District Court. The court began by reviewing the plan’s 60-day deadline for the participant to appeal, and found that it was both reasonable and enforceable, and that the denial letter provided adequate notice of the deadline. The court concluded that the participant had adequate notice of the appeal timeline, noting that letters providing an explanation that appeals must be submitted in 60 days are sufficient to satisfy ERISA’s notice requirements.

The court next determined that the participant had failed to establish the applicability of any exception to ERISA’s exhaustion requirement. The court stated that “[W]here a plaintiff failed to timely pursue ‘available and open’ administrative remedies, courts have found that ‘the plaintiff cannot later claim futility based on her inability to pursue those claims any longer.’” The court further rejected the application of equitable tolling to extend to the participant’s appeal, noting that this type of relief is only appropriate in “rare and exceptional circumstances” such as “where a plaintiff was unaware of his or her cause of action due to misleading conduct of the defendant, or where a plaintiff’s medical condition or mental impairment prevented her from proceeding in a timely fashion.” Here, the court observed that the participant’s assertion of administrative inconvenience, without more, was insufficient to demonstrate that some “extraordinary circumstances” stood in the participant’s way and prevented timely filing. 

Therefore, the court dismissed the participant’s claim, finding that her failure to exhaust ERISA’s administrative remedies under the plan was an affirmative defense.