ERISA-Tenth Circuit Holds That Suit For Disability Benefits Is Barred Due To Failure To Exhaust Administrative Remedies

In Holmes v. Colorado Coalition For The Homeless Long Term Disability Plan, No. 13-1175 (10th Cir. 2014), the plaintiff, Lucrecia Carpio Holmes (“Ms. Holmes”), appeals the district court’s ruling that her claim for disability benefits under ERISA is barred due to her failure to exhaust administrative remedies.

In this case, Ms. Holmes is a former employee of the Colorado Coalition for the Homeless (the “Coalition”) and participated in an employee benefits plan funded, in part, by a disability insurance policy through Union Security Insurance Company (“Union Security). While employed by the Coalition, Ms. Holmes presented with a number of medical conditions, including breast cancer, cataplexy, apnea, blackouts, diabetes, carpal tunnel syndrome, and neuropathy. As a result, she filed a claim for disability benefits with Union Security on March 10, 2005. Union Security sent written notification to Ms. Holmes on May 27, 2005 that it had denied her claim because she failed to prove she was disabled as defined by the Policy. The denial letter included an explanation of Ms. Holmes’s right to internal review of the decision and attached a copy of a Group Claim Denial Review Procedure (the “Denial Review Procedure”), which describes a two-level review process.

On November 21, 2005, in accordance with the Denial Review Procedure, Ms. Holmes filed a request for review of the denial (the first-level review). Union Security issued a decision on the first-level review 137 days later on April 7, 2006, when it informed Ms. Holmes in writing that it had affirmed the denial of benefits. Union Security’s April 7, 2006, letter contained a second copy of the Denial Review Procedure, which informed Ms. Holmes that she may request another review of Union Security’s decision, and that this second-level review is the final level of administrative review available. The Denial Review Procedure further states that if Ms. Holmes’s claim is denied as part of the second-level review, she will have a right to bring a civil action. Rather than filing the second-level appeal, on April 28, 2008, she filed this suit.

In analyzing the case, the Tenth Circuit Court of Appeals (the “Court”) said, first, that the plan document specifically authorized Union Security to advise Ms. Holmes of further appeal rights, which could include a second-level review. Next, the record shows that Union Security advised Ms. Holmes of her further appeal rights by supplying her with a copy of the Denial Review Procedures. The summary plan description (the “SPD”) here did not discuss the second-level appeal, but, under the Supreme Court’s decision in Amara, the SPD is not a part of the plan, and Ms. Holmes was not otherwise prejudiced by the failings of the SPD. Finally, based on the plan and the additional terms authorized by it, and the court-created requirement of exhaustion of internal claim procedures under ERISA, the Court concluded that Ms. Holmes was required to seek a second-level review before bringing this suit. Accordingly, the Court affirmed the district court’s decision.

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