U.S. Court of Appeals Affirms Decision That Requires Exhausting Administrative Remedies Prior to Filing Suit on ERISA Claim

Daniel Orr died in a motorcycle accident in August 2012. His beneficiaries, who were his daughters, Hailey and Daniell, filed claims seeking benefits payable under a group life insurance policy governed by ERISA. The insurance policy was issued by Union Security Insurance Co. to Orr’s former employer.

The policy provided accidental death and dismemberment benefits to a participant and his or her beneficiaries, subject to certain exclusions, including exclusion on a loss resulting directly or indirectly from intoxication.

In December 2012, Union Security notified the Orr daughters that it had denied their claims on the ground that Orr’s death resulted from his intoxication. The notification explained that autopsy and toxicology reports showed that Orr’s blood alcohol level at the time of the accident was above the legal limit.

The notification stated that the Orrs could appeal the denial and that an appeal had to be filed within 60 days of receipt of the written notice of denial. The Orrs appealed and Union Securities denied the appeal.

The Orrs then filed documents requesting a second appeal from Union Security, but before that appeal was complete, they filed a lawsuit in the LaSalle County Circuit Court. Union Security removed the case to the Northern District of Illinois and then the parties filed cross-motions for summary judgment.

The U.S. District Court ruled in favor of Union Security finding that the Orrs had failed to exhaust their administrative remedies. The Orrs appealed to the U.S. Court of Appeals for the Seventh Circuit in Chicago.

The appeals panel stated that Union Securities’ review procedure requires that a claimant seeking review of a claim denial complete two levels of internal review prior to filing a lawsuit. The Orrs argued that the first level of review occurred on Dec. 10, 2012, the same day that Union Security notified the Orrs that it had denied the claim for benefits and that a second review occurred in May 2013.

The appeals panel disagreed, finding that there was no basis in the record to support the contention that the Orrs filed for a first level of review in December 2012. The panel noted that based on the record, the Orrs had come close to exhausting the remedies, but that because the request for a second level of denial was still pending as of the date of their lawsuit, the district court had not erred in concluding that the remedies were not fully exhausted.

The panel noted that ERISA is silent on the issue. However, the 7th Circuit has long held that the decision to require exhaustion of remedies as a prerequisite to bringing suit is one that is within the sound discretion of the district court.

The only noted excuse generally would occur when a resort to administrative remedies would be futile or when the remedy provided is inadequate or where there is a lack of access to meaningful review procedures. The panel found that none of those circumstances existed in this case. The panel rejected the Orrs’ arguments that excusal was warranted because they filed a lawsuit to avail themselves of the court’s subpoena power in order to obtain discovery. The court also stated that the Orrs provided no case law to support their argument. Accordingly, the U.S. Court of Appeals affirmed the district judge’s decision granting the defendant summary judgment.

Danielle Orr, as Administrator of the Estate of Daniel Orr, et al. v. Assurant Employee Benefits, agent for Union Security Insurance Co., No. 14-2370 (U.S. Court of Appeals, 7th Cir., May 19, 2005).

Kreisman Law Offices has been handling wrongful death cases, motorcycle accident cases, automobile accident cases, truck accident cases and bicycle accident cases for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 38 years in and around Chicago, Cook County and its surrounding areas, including Oak Lawn, Bedford Park, Oak Park, Harwood Heights, Park Ridge, Forest Park, Schaumburg, Schiller Park, Palos Park, Orland Park, Chicago (Lakeview, Andersonville, Albany Park, Jackson Park, Irving Park, Hyde Park, Hegewisch, Pilsen, Prairie District, Printers Row, Roscoe Village, Morgan Park, McKinley Park, Lower West Side, Lincoln Square, Lincoln Park), Bensenville and Evanston, Ill.

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