In Emily Smith v. The Hartford, No. 4:20-CV-00041-CLM, 2020 WL 4815143 (N.D. Ala. Aug. 19, 2020), the Court refused to consider mental incapacity, among other arguments, as grounds to overcome the Eleventh Circuit’s strict exhaustion requirement for ERISA. This decision reinforces the very narrow exceptions available to a plaintiff in circumventing the exhaustion requirement.
Due to her depression, Plaintiff Emily Smith’s (“Smith”) received short-term disability benefits through Defendant Hartford Life and Accident Insurance Company’s (“Hartford”). She later began receiving long-term disability (“LTD”) benefits, but those LTD benefits were terminated by Hartford in early 2017. Before Smith’s LTD benefits were terminated, however, Hartford mailed a benefit determination letter informing Smith that her LTD benefits were soon to expire because benefits for depression were limited to 24 months. Hartford also notified Smith that she had the option to appeal the decision by writing to Hartford within 180 days if she did not agree with the denial. If her appeal was denied, then the letter indicated she had a right to bring a civil action under ERISA. Her policy also contained similar language.
More than 18 months after Hartford terminated Smith’s benefits, Smith for the first time, through her attorney, indicated that she wished to appeal the determination of benefits. Smith’s complaint contains just one count for benefits under ERISA. Once in federal court, Hartford moved to dismiss arguing that Smith failed to exhaust her administrative remedies when she did not appeal Hartford’s decision to terminate her disability benefits within the applicable time provided by her plan.
On August 19, 2020, the United States District Court for the Northern District of Alabama granted Hartford’s motion to dismiss, stating that Smith’s arguments for excusing her from exhausting the administrative remedies under her plan cannot overcome the Eleventh Circuit’s strict exhaustion requirement under ERISA.
Smith provides three grounds for why her claim should be equitable tolled: (1) Smith was not competent to understand the 180-day appeal deadline; (2) Hartford did not prominently state the appeal deadline in Smith’s benefit determination letter; and, (3) Hartford waived the appeal deadline by providing her with a copy of her claims file.
In siding with Hartford, the Court notes that there is no Eleventh Circuit case law in which the ERISA exhaustion requirements were excused based on a theory of mental incapacity or for either of the other arguments provided by Smith. Rather, the Court states that Eleventh Circuit jurisprudence makes clear that the exhaustion requirement may be excused only when resorting to the administrative route is “futile or the remedy inadequate.”
IMPACT OF THE RULING
Overall, this decision is in line with the general approach that most courts, particularly the Eleventh Circuit’s, promotion of strict adherence to the exhaustion requirement under ERISA. Though a court-made doctrine, courts have uniformly concluded that the exhaustion requirement is consistent with the Congressional purpose of ERISA, including protecting claimants via internal review requirements and promoting the efficient use of judicial resources. As such, a plaintiff’s failure to exhaust his or her administrative remedies is one of the most valuable tools for plans and plan fiduciaries in ERISA litigation. While this does not appear to be changing anytime soon in the Eleventh Circuit, plans and plan fiduciaries should take care to carefully and thoughtfully articulate their claims and appeals procedures when possible to strengthen their defense against plaintiffs seeking to circumvent the requirement.