Anatomy of a Late Claim

March 31, 2014 | Appeals | Insurance Coverage

A recent decision by the U.S. Court of Appeals for the Sixth Circuit, affirming a federal district court ruling, highlights the importance for both employers and employees of the language in a health care plan and summary plan description (SPD), including the limitations periods for commencing litigation.

The case involved the health care plan for retired employees of United Parcel Service of America, Inc. (UPS). The SPD contained a section outlining what a beneficiary should do if a claim were denied. It stated:

If your claim for any benefits from the Plan is denied, you may have it reviewed in accordance with the following claims review procedures.

Immediately following that was a section entitled “Appeals Procedures.” This section set forth six steps in the review process, including the opportunity for a “First Level Appeal” and culminating in a “Second Level Appeal” with the UPS Claims Review Committee (the Committee).

In the following section, entitled “Important Information,” beneficiaries were informed:

You cannot file suit in federal court until you have exhausted these appeals procedures.

Immediately following these instructions was a section entitled, “Limitation on Legal Action.” This section provided:

Any legal action to receive Plan benefits must be filed the earlier of:

  • Six Months from the date a determination is made under the Plan or should have been made in accordance with the Plan’s claims review procedures, or
  • Three years from the date the service or treatment was provided or the date the claim arose, whichever is earlier.

Your failure to file suit within this time limit results in the loss/waiver of your right to file suit.

On August 14, 2008, the plaintiff requested coverage for a proposed treatment for his minor son, a beneficiary under the plan. In a letter dated September 12, 2008, the claims administrator for the plan, Aetna Life Insurance Company, concluded that the proposed treatment was not covered by the plan.

A few days later, on September 17, 2008, the boy’s mother filed the family’s First Level Appeal. Aetna denied the appeal in a letter dated October 9, 2008. The Aetna letter informed the family that they could request a Second Level Appeal.

On November 14, 2008, the family filed its Second Level Appeal. On December 3, 2008, the Committee denied the Second Level Appeal in a letter that stated that it embodied the Committee’s “final decision” and that informed the family that they might have “a right to bring a civil action in federal court in accordance with ERISA Section 502(a).”

Following this decision, the family wrote to the Committee asking for reconsideration. In the letter, the family said that this was their final request for benefits “before pursuing with ERISA.” The Committee responded with a letter dated January 13, 2009 that stated:

The Committee made a full and fair review of your appeal in accordance with the claims review procedures established by the Plan, the provisions of the Plan and based on all of the information and documentation submitted. The last paragraph of the letter from the Committee dated December 3, 2008 explains any additional rights you may have with respect to your claim for benefits under the medical plan.

A week later, the Committee sent the family a follow-up letter that included various correspondence and the plan’s SPD.

On March 30, 2009, the family, through counsel, sent a letter in response to the Committee’s January 13, 2009 letter reaffirming the Second Level Appeal denial. The letter asked the Committee to reconsider its earlier decision and warned that if coverage were refused, the family would file suit.

In a letter dated May 20, 2009, the Committee responded and again reaffirmed its denial of coverage. On July 10, 2009, the family wrote a letter to a UPS employee that asked him to review the case. The request was forwarded to the Committee, which replied by letter on August 4, 2009, again denying the family’s request.

The plaintiff sued Aetna, UPS, and the plan on February 3, 2010 under Section 502 of ERISA. That lawsuit was filed within three years of the date the plaintiff’s claim arose, although not within six months of the December 2008 Second Level Appeal denial. The defendants moved to dismiss the action on the basis of the plan’s limitations period.

In his response, the plaintiff argued that his suit was not time-barred because, in effect, the Committee’s responses following the Second Level Appeal decision, including the August 4, 2009 correspondence, constituted a “determination” and therefore his suit was filed within the six-month limitations period. He also argued that the limitations period should be tolled because he had never seen the limitations provision set forth in the plan and, in any event, even if he had seen it, the language was so confusing that he would not have known when to file suit.

Relying on the plan’s provisions, the district court awarded summary judgment to the defendants, holding that the plaintiff’s claims were time-barred and that equitable tolling did not apply. Now, the Sixth Circuit has affirmed, based on the plan language and the reasoning and conclusions of the district court. [Claeys v. Aetna Life Ins. Co., 2013 U.S. App. Lexis 25319 (6th Cir. Dec. 17, 2013).]

Circuit Court Upholds Trial Court’s Decision Disregarding Study Critical of Arbitration of Employment Disputes

In this case, the plaintiff was hired in December 2008 as an at-will employee by Citigroup, Inc. When she joined Citigroup, she signed an arbitration agreement that subjected all potential employment-related disputes to binding arbitration before the American Arbitration Association (AAA).

In 2011, the plaintiff was terminated because of her alleged “absenteeism.” She claimed that she was terminated because she had missed time at work due to hospitalization and complications with her pregnancy. She sued Citigroup in federal district court for wrongful termination, alleging violation of the Family and Medical Leave Act and sex discrimination in violation of Title VII. 

Citigroup moved to dismiss the lawsuit and to compel arbitration. The plaintiff responded that:

(1) the arbitration agreement was unenforceable because of fraud, mistake, or prior breach;

(2) the arbitration policy was unconscionable; and

(3) mandatory employment arbitration before the AAA violated public policy.

In support of her arguments, the plaintiff relied on a study by Cornell University Professor Alexander Colvin that contended that arbitration awards in employment disputes disproportionately favored employers over employees. In addition to the study, the plaintiff relied on an affidavit prepared by Colvin that summarized his findings.

Colvin’s study and the affidavit were not created for purposes of this case.  Both were completed in 2009, three years prior to the filing of the lawsuit.

The district court referred Citigroup’s motion to dismiss and to compel arbitration to a magistrate judge. The magistrate judge issued findings and a recommendation that Citigroup’s motion be granted and that attorney’s fees be awarded to Citigroup because the plaintiff’s arguments were frivolous.

The plaintiff objected, but the district court adopted the magistrate’s findings and recommendation with the exception of the award of attorney’s fees. The district court found that a valid arbitration agreement existed between the parties, that the dispute fell within the scope of the agreement, and that the agreement did not violate public policy. The district court completely disregarded Colvin’s study because, according to the district court, it did not satisfy the standards set forth in Federal Rule of Evidence 702.

The plaintiff appealed, and the U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s ruling.

In its decision, the circuit court noted that the district court had questioned the relevance and reliability of Colvin’s study to the extent that it was presented to demonstrate how arbitration generally was unfair to employees. The circuit court then stated that it agreed with the district court that Colvin’s study did not take into account a number of factors or variables and failed to meet the requirements of Rule 702 and relevant U.S. Supreme Court decisions. 

According to the circuit court, the study provided a “general assessment of differential outcomes between employers and employees who resolved employment-related disputes through arbitration or litigation.” It added that Colvin’s affidavit was prepared in 2009 “for another case involving different parties who were engaged in post-arbitration litigation” and that he did not prepare an affidavit that explained the implications of his study on the facts of the plaintiff’s case against Citigroup.

The circuit court said that an expert’s opinion should not be admitted if it did not apply to the specific facts of the case and explained that the study provided “no case-specific analysis” to help determine whether Citigroup’s arbitration agreement was enforceable. Instead, it found, the study “summarily posit[ed] that employers enjoy[ed] a greater likelihood of success before the AAA than employees.” The circuit court added that the professor had conducted “no observational or statistical analysis to determine whether the arbitration policy at issue in this case was unenforceable.” The circuit court noted that the plaintiff’s lawsuit was filed at least five years after any data was compiled for Colvin’s study and that significant changes in litigation and arbitration outcomes may have occurred during that span of time.

Accordingly, the circuit court held that the district court had not abused its discretion by disregarding the study and the accompanying affidavit.

The circuit court then ruled that, because the plaintiff’s challenges to the enforceability of the arbitration agreement were “completely grounded in Colvin’s findings regarding the alleged unfairness of mandatory arbitration before the AAA,” and because the district court had properly disregarded that study, the district court had not erred when it had concluded that a valid arbitration agreement existed between the plaintiff and Citigroup and that their dispute fell within the confines of the agreement. [Diggs v. Citigroup, Inc., 2014 U.S. App. Lexis 506 (5th Cir. Jan. 8, 2014).]

Circuit Court Reverses ADA Judgment for Employer, Finding Disputed Issues of Material Facts as to Whether It Should Have Accommodated Plaintiff’s Disability

In 2004, the plaintiff in this case began working as a forming inspector/packer for C&M Fine Pack, Inc. She was assigned to the third/night shift.  In 2009, she began to exhibit a pattern of decreased consciousness and alertness, for which she received several disciplinary warnings. The plaintiff received what C&M characterized as a final warning/suspension on February 15, 2010 after she left her work site to use the restroom and did not return for over 20 minutes; apparently, she was found sleeping in the restroom by a co-worker.

Following her suspension, the plaintiff met with the plant manager and three of her supervisors and indicated that her sleep issues were caused by medication that her doctor had prescribed.

Several months later, the plaintiff’s shift supervisor reported her for being completely asleep while packing parts. He expressed concern for her safety and the lack of improvement in her wakefulness.

As a result of the continuing problem, the plaintiff attended a meeting with management personnel, who issued her another final warning/suspension on April 15, 2010 that stated:

[Y]ou were observed … with your head down at you[r] inspection station. To get your attention they had to yell your name at which time you snapped to and responded. This occurred several times during the shift…. A review of your personnel file shows that in the last twelve months you have received three write-ups for performance and the last one a final warning with suspension for sleeping during your shift. Per our progressive discipline practice you have been suspended pending determination of the level of discipline you will receive for this latest incident. You were informed that you could face termination of employment per our progressive disciplinary practice. You were informed that I would be in touch no later than Monday, April 19[,] with [C&M]’s decision. You were also informed that if you had further information that was relevant to our deliberation, you needed to contact me prior to Monday.

On April 16, 2010, the plaintiff informed C&M’s human resources manager that her performance issues might be related to a medical condition. He subsequently met with the plaintiff to provide her with a letter regarding the Americans with Disabilities (ADA) and documentation for the plaintiff’s physician to complete. The paperwork contained a deadline of April 30, 2010 for the return of the documentation.

The plaintiff’s physician filled out the ADA paperwork and marked “yes” by the box asking if the patient had a mental or physical disability covered under the ADA. The physician wrote that the plaintiff exhibited excessive drowsiness that affected her job performance and recommended periods of scheduled rest. Finally, he wrote “add’n medical work up in progress” at the bottom of the form. The plaintiff submitted this paperwork to C&M on April 21, 2010.

After receiving this paperwork, C&M terminated the plaintiff and informed her of its decision on April 28, 2010. About one month later, the plaintiff received a definitive diagnosis for narcolepsy, which in her case was manageable with proper medication.

The plaintiff sued C&M and made three claims under the ADA: disability discrimination, failure of the “interactive process” to determine the appropriate accommodation under the circumstances, and failure to provide reasonable accommodations. The trial court granted summary judgment in favor of C&M, finding that it had terminated her before it had knowledge of her condition and, therefore, could not have violated the ADA. The plaintiff appealed.

The U.S. Court of Appeals for the Seventh Circuit reversed the district court’s ADA rulings.

First, the circuit court found that by April 28, 2010, C&M had known that the plaintiff had suffered from a disability covered under the ADA before it had fired her. In the circuit court’s view, after the plaintiff informed C&M that she might have a medical condition affecting her work and she was given the ADA paperwork to be filled out by her doctor, it seemed as though C&M had begun “to engage in the interactive process” with the plaintiff. The circuit court stated, however, that when C&M learned of her possible medical condition, it chose to take the “aggressive approach” and it terminated her. Thus, it held, the plaintiff was fired after C&M had learned that she had a medical condition covered under the ADA.

Moreover, the circuit court also found that C&M had not properly accommodated the plaintiff after she had notified it of her condition. Indeed, the circuit court found, rather than collaborate with the plaintiff or her doctor “to find a reasonable accommodation, C&M chose to turn a blind eye.” C&M did not seek further clarification from either the plaintiff or her doctor and disregarded the medical evaluation altogether, the circuit court found.

The circuit court then determined that the evidence suggested that a reasonable accommodation was readily available: the plaintiff “simply needed further medical testing and a prescription to control her narcolepsy.”

Accordingly, the circuit court reversed the entry of summary judgment in favor of C&M on the plaintiff’s ADA claim and remanded the case to the district court for further proceedings consistent with its opinion. [Spurling v. C&M Fine Pack, Inc., 2014 U.S. App. Lexis 660 (7th Cir. Jan. 13, 2014).]

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