Danielle Orr v. Assurant Employee Benefits

In the
United States Court of Appeals
For the Seventh Circuit
No. 14-2370
DANIELLE ORR, as administrator of
the estate of DANIEL ORR, et al.,
Plaintiffs-Appellants,
v.
ASSURANT EMPLOYEE BENEFITS, agent
for UNION SECURITY INSURANCE
COMPANY,
Defendant-Appellee.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:13-cv-05535 — Matthew F. Kennelly, Judge.
ARGUED DECEMBER 4, 2014 — DECIDED MAY 19, 2015
Before BAUER, RIPPLE, and SYKES, Circuit Judges.
BAUER, Circuit Judge. Plaintiffs-appellants, Danielle and
Hailey Orr, are the daughters of Daniel Orr, who died in a
motorcycle accident on August 7, 2012. As Daniel Orr’s
beneficiaries, Danielle and Hailey filed claims seeking benefits
payable under a Group Life Insurance Policy No. G 5459403
2 No. 14-2370
governed by the Employment Retirement Income Security
Act (“ERISA”), which Union Security Insurance Company
(“USIC”)1 issued to Daniel Orr’s former employer, Modern
Group of Companies, LLC. The Policy provided accidental
death and dismemberment benefits to a participant and his
beneficiaries, subject to certain limitations and exclusions. One
such exclusion is for a loss resulting “directly or indirectly from
… intoxication[.]”
On December 10, 2012, USIC notified the Orrs, via letter
from “Life Claims Specialist” Terri Steen, that it had denied
their claim for accidental death benefits on the ground that
Daniel Orr’s death resulted from his intoxication. The letter
explained that autopsy and toxicology reports revealed that
Daniel Orr’s blood alcohol level at the time of the accident
exceeded the legal limit and that USIC’s medical consultant
opined that Daniel Orr “would have been impaired in atten-
tion, coordination, and balance,” as a result. The letter also
advised the Orrs of their right to seek review of the decision
and provided Ms. Steen’s contact information should the Orrs
have any questions or concerns regarding the claim denial
review process.
Enclosed with the letter was a copy of USIC’s Life Claims
Denial Review Procedure. This document immediately informs
the claimant, in boldfaced, all-caps print, that a request for
review must be submitted in writing and within sixty days of
1
Assurant Employee Benefits is USIC’s agent. We, like the district court,
refer to defendant-appellee as USIC because that is how the defendant-
appellee refers to itself.
No. 14-2370 3
receipt of the written notice of denial. It goes on to describe a
two-level process of review:
“First Review: If you request a review of our deci-
sion, your claim will be reviewed by an individual
not previously involved in the decision to deny your
claim. The reviewer will either overturn or uphold
the denial. You will be notified of this decision in
writing … .“
“Second Review: If your claim is denied after your
initial request for review, you may request another
review of our decision. Your request for review
would then be forwarded to a manager in the Life
Claims area or to the Life Claims Appeals Commit-
tee. The decision of that manager or committee is the
final level of administrative review available.”
Immediately thereafter, the document informs the claimant
of his or her right to bring a lawsuit and warns the claimant of
the peril of filing suit prior to completing USIC’s claims denial
review process:
“If your claim is denied by our Life Claims Appeals
Committee or Life Claims Manager as part of the
Second Review described above, you have the right
to bring a civil action under section 502(a) of the
Employee Retirement Security Act of 1974, if your
claim is governed by this Act. If you do not com-
plete both the first and second review before filing
a lawsuit, a court can dismiss your lawsuit.“
4 No. 14-2370
Lastly, the document encourages the claimant to call USIC
if he or she has any questions regarding the claims denial
review process.
On February 5, 2013, the Orrs sent USIC a letter bearing the
title “NOTICE OF INTENTION TO OPPOSE DENIAL OF
POLICY PROCEEDS.” The letter stated, “[t]his letter is
intended to qualify as a First Review of the denial of benefits”
as set out in USIC’s “Life Claims Denial Review Procedure[.]”
The Orrs did not contest the initial claim denial in this letter,
but instead requested documents relevant to the claim and an
extension of time to obtain and submit additional written
materials. USIC responded on February 13, 2013, in a letter
acknowledging the Orrs’ document request and granting them
a thirty-day extension to finalize their appeal. Two days later,
USIC sent the Orrs the requested documents.
The Orrs then sent a letter dated March 11, 2013, to USIC.
This letter was entitled “NOTICE OF FILING APPEAL (2nd
Level) OF DENIAL OF POLICY PROCEEDS,” and, unlike
their February 5 letter, this letter argued at length that USIC
had improperly applied the intoxication exclusion to deny the
Orrs’ claim for accidental death benefits. USIC denied the Orrs’
appeal on May 14, 2013, via a letter from USIC “Appeals
Specialist” Lee S. Watkins. This letter described the basis for
the denial and stated, “[i]f you disagree with the decision
and wish to request a review, please submit a written state-
ment indicating why you believe the decision is incorrect …
within 60 days after your receipt of this letter.” In closing, the
letter provided Mr. Watkins’ contact information, should any
questions arise. Included with the letter was another copy of
the USIC’s Life Claims Denial Review Procedure. Again, the
No. 14-2370 5
procedure advised the Orrs that either a Life Claims Manager
or a Life Claims Appeals Committee would decide their second
appeal and warned that if the Orrs filed a lawsuit before
completing this second level of review, “a court [could] dismiss
[their] lawsuit.”
On July 15, 2013, the Orrs sent USIC a letter presenting
further challenges to the denial of their claim. In this letter,
the Orrs asserted that they had already complied in full
with USIC’s review procedure; the Orrs characterized their
February 5 letter as a “first level of appeal” and their March 11
letter as “the second level of appeal.” Yet, at the same time, the
letter acknowledged that USIC’s May 14 letter held additional
appeal rights available to them. Accordingly, the Orrs went on
to describe the grounds for disputing the claim denial, includ-
ing a challenge to the reasoning set forth in USIC’s May 14
letter. In closing, the Orrs’ attorney stated that he was in the
process of investigating the facts of the case further, and that
he “expect[ed] to have more probative information available”
if the investigation proved successful.
The Orrs never provided USIC any further information.
Rather, four days later, on July 19, 2013, and before USIC had
responded to their July 15 letter, the Orrs filed a lawsuit in the
Circuit Court of LaSalle County, Illinois.
USIC, unaware of the Orrs’ lawsuit at the time, responded
to the Orrs’ July 15 letter with a letter dated July 23, 2013.
USIC’s response stated as follows:
“I have received your second appeal for accidental
benefits … . In your letter, you indicate that you
plan to send additional documentation. Please
6 No. 14-2370
advise by what date you will be submitting your
documentation, so that I may schedule the Life
Claims Appeal Committee’s review accordingly.”
On July 24, 2013, one day later, USIC was served with the
Orrs’ lawsuit. USIC promptly removed the suit to the Northern
District of Illinois, and the parties filed cross-motions for
summary judgment. The district court granted USIC’s motion
and denied the Orrs’ motion on the ground that the Orrs failed
to exhaust their administrative remedies with USIC prior to
filing suit. The district court then entered final judgment
against the Orrs. This appeal followed.
I. DISCUSSION
We review a district court’s grant of summary judgment
de novo. Lindemann v. Mobil Oil Corp., 79 F.3d 647, 649 (7th Cir.
1996) (stating the standard of review in ERISA context).
Summary judgment is appropriate when there is “no genuine
issue as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). Where,
as here, the district court was faced with cross-motions for
summary judgment, our review requires that we construe all
facts and inferences in favor of the party against whom the
motion under consideration is made—in this case, the Orrs. See
Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir.
1998).
The Orrs first argue that the district court erred in granting
summary judgment to USIC on the ground that they failed to
exhaust their administrative remedies. The Orrs claim that
they, not USIC, are entitled to summary judgment on the issue
of exhaustion. After reviewing the record, we agree with the
No. 14-2370 7
district court that the Orrs failed to exhaust their administra-
tive remedies prior to filing suit.
As discussed above, USIC’s Life Claims Denial Review
Procedure requires that a claimant seeking review of a claim
denial complete two levels of internal review prior to filing a
lawsuit. In the district court, the Orrs maintained that a first
level review occurred on December 10, 2012—the same day
that USIC notified the Orrs that it had denied their claim for
accidental death benefits—and that a second level review
occurred on May 14, 2013. We agree with the district court’s
determination that there is no basis in the record to support the
Orrs’ contention that they filed for a first level review on
December 10, 2012. To begin with, USIC’s Life Claims Denial
Review Procedure unmistakably requires a party seeking
review to submit a request for review in writing. The record
does not contain any written request for review from the
Orrs on December 10, 2012, nor is there any indication that
any documentation is missing from the record. Second, as
the district court noted, it is difficult to imagine how the
Orrs possibly could have filed for a first level review on
the very date their claim was initially denied. Lastly, the
Orrs’ February 5, 2013, letter, which is entitled “NOTICE OF
INTENTION TO OPPOSE DENIAL OF POLICY PROCEEDS”
and states, “[t]his letter is intended to qualify as a First Review
of the denial of benefits[,]” entirely belies their argument that
a first level review occurred on December 10, 2012. The Orrs do
not claim that USIC completed a review of the denial of their
claim for accidental death benefits subsequent to May 14, 2013.
Instead their July 15, 2013, letter, which USIC considered to be
an application for a second level of review, remained pending
8 No. 14-2370
on July 19, 2013, when the Orrs filed suit. Accordingly, the
district court did not err in determining that the Orrs came
close to exhausting their administrative remedies, but aban-
doned administrative review before completing it in favor of
a lawsuit.
Perhaps recognizing the futility of their argument before
the district court, the Orrs claim for the first time on appeal
that a first level of review occurred October 1, 2012. Not only
is this argument waived, see Frey Corp. v. City of Peoria, Ill., 735
F.3d 505, 509 (7th Cir. 2013) (“A party ‘waive[s] the ability to
make a specific argument for the first time on appeal when
the party fail[s] to present that specific argument to the district
court, even though the issue may have even before the district
court in more general terms.’“ (quoting United States v. Ritz,
721 F.3d 825, 828 (7th Cir. 2013)), it is also entirely without
merit. The October 1, 2012, document that the Orrs point to as
constituting an application for a first level of review is an email
to USIC from Sandy Panzero, an employee of Daniel Orr’s
former employer who assisted the Orrs in filing their initial
claim for benefits. This email states in full: “Attached you will
find a life insurance claim for Daniel Orr. Please let me know
if you have any questions.” It is difficult to imagine how the
Orrs, or rather how their attorney, could possibly contend that
this email constitutes an application for review of the denial of
their claim for accidental death benefits. Moreover, “a review”
presupposes an underlying decision to review—the record
plainly shows that the Orrs did not receive notice that USIC
had denied their claim for accidental death benefits until
December 10, 2012. All in all, we agree with the district court
No. 14-2370 9
that the Orrs failed to exhaust their administrative remedies
with USIC before filing suit.
The Orrs next claim that, even if they failed to exhaust their
administrative remedies, their failure to exhaust should be
deemed excused. Although ERISA’s text is silent on the issue,
we have long held that the decision to require exhaustion as a
prerequisite to bringing suit is a matter within the sound
discretion of the trial court. Kross v. Western Electric Co., Inc.,
701 F.2d 1238, 1244 (7th Cir. 1983); Powell v. A.T. & T.
Commc’ns, Inc., 938 F.2d 823, 825 (7th Cir. 1991). This determi-
nation—whether to excuse or not excuse the exhaustion
requirement—will only be disturbed on appeal if the lower
court has clearly abused its discretion. Edwards v. Brigg &
Stratton Ret. Plan, 639 F.3d 355, 361 (7th Cir. 2011).
Generally, a failure to exhaust administrative remedies will
be excused in few limited circumstances—when resort to
administrative remedies would be futile, Gallegos v. Mount
Sinai Med. Ctr., 210 F.3d 803, 808 (7th Cir. 2000), when the
remedy provided is inadequate, id., or where there is a lack of
access to meaningful review procedures, Schorsch v. Reliance
Standard Life Ins. Co., 693 F.3d 734, 739 (7th Cir. 2012). The Orrs
do not claim that further pursuit of administrative review
would have been futile, that the administrative remedy sought
is inadequate, or that they were denied access to meaningful
review procedures. Rather, the Orrs raise a number of novel
grounds on which they believe the exhaustion requirement
should be deemed excused. Although none of these arguments
are persuasive, we will briefly address each in turn.
10 No. 14-2370
First, the Orrs appear to contend that their failure to
exhaust should be excused because they filed suit merely to
avail themselves of the court’s subpoena power in order to
obtain further discovery. The Orrs provide no case law
supporting this contention, nor did we find any such authority
in the course of our independent research. In any event, this
argument fails because it is simply at odds with the exhaustion
requirement itself.
Second, the Orrs claim that exhaustion should be deemed
excused because they misinterpreted USIC’s Life Claims Denial
Review Procedure as requiring that they file suit sixty days
after May 14, 2013—the date on which USIC denied what the
Orrs considered to be their second appeal. This argument is
also unpersuasive. USIC’s Life Claims Denial Review Proce-
dure document is clear and straightforward—it refers to the
sixty-day deadline only in reference to appealing the claim
denial; the section entitled “Right to Bring a Lawsuit” does not
impose any temporal limitation on the claimant. See Gallegos,
210 F.3d at 810 (“We interpret an ERISA plan summary with its
plain meaning as understood by an average person.”). We will
not penalize USIC for the Orrs’ attorney’s claimed misinterpre-
tation of these straightforward policies.
Third, the Orrs claim USIC improperly layered additional
appeal levels into the claims review process, or otherwise
frustrated the Orrs’ efforts to comply with this process.
According to the Orrs, USIC’s July 23, 2013, letter stated that
USIC “would not send the [Orrs’] case to the Appeals Commit-
tee until claimants provided additional information that [USIC]
claimed was promised” in the Orrs’ July 15, 2013, letter. USIC’s
July 23, 2013, letter did no such thing. In their July 15, 2013,
No. 14-2370 11
letter, the Orrs described in detail the grounds for disputing
the claim denial and, in closing, stated that they had “retained
a forensic pathologist to support [their] position” and that they
“expect[ed] to have more probative information available if …
successful in the efforts to uncover facts of the case that have
not been disclosed or discussed to date.” USIC’s July 23, 2013,
response letter merely acknowledged receiving the Orrs’
second appeal and stated: “In your letter, you indicate that you
plan to send additional documentation. Please advise by what
date you will be submitting your documentation, so that I may
schedule the Life Claims Appeal Committee’s review accord-
ingly.” This is an entirely reasonable response to the represen-
tations made by the Orrs in their July 15 letter. USIC did not
improperly layer an additional level of appeal into the claim
review process, nor did it in anyway impede or refuse to
consider the Orrs’ second appeal; if anything, USIC was
attempting to aid the Orrs by not deciding their second appeal
until they had submitted all the documentation that they
desired to submit.
Lastly, the Orrs assert that USIC had an affirmative duty to
inform them of any deficiency in the number of levels of appeal
that they submitted, but since this argument was not presented
to the district court, it is waived on appeal. See, e.g., Kunz v.
DeFelice, 538 F.3d 667, 681 (7th Cir. 2008) (“Failure adequately
to present an issue to the district court waives the issue on
appeal.”).
II. CONCLUSION
For all of the aforementioned reasons, the district court’s
grant of summary judgment on behalf of USIC is AFFIRMED.