In Zerangue v. Lincoln National, Lena Zerangue (“Zerangue”) filed an ERISA suit against The Lincoln National Life Insurance Company (“Lincoln”) in an attempt to recover long-term disability benefits that she believed she should receive. Lincoln then filed a Rule 12(b)(6) motion to dismiss the plaintiff’s claim because it alleged that Zerangue had not yet exhausted all administrative remedies possible. Because of her employment with Alliance Benefit Partners, Zerangue held policy coverage under both short-term and long-term disability plans.
Zerangue pleaded that Lincoln denied her short-term disability benefits claim and that Lincoln National did not give her the benefit of a full and fair review of that decision.
She further argues that because Lincoln denied her short-term disability benefits that it should presumed to have denied her long-term disability benefits. Subsequently, Lincoln filed a 12(b)(6) motion to dismiss the claim, arguing that Zerangue has not stated a claim under which she can be granted relief because Zerangue never even applied for LTD benefits in addition to failing to go through the mandatory administrative appeal process.
Under Rule 12(b)(6), the Court “accept[s] all well-pleaded facts as true and view[s] all facts in the light most favorable to the plaintiff.” However, the court does not have to take legal conclusions into consideration as if they are facts themselves. To overcome the possibility of being dismissed, a filed complaint must have enough facts that are acceptable as true to be a claim that appears reasonable at face value. Facts must not merely be speculative, but must be assumed to be true. A claim is considered to be plausible if the facts pleaded by the plaintiff cause the court to reasonably infer that the defendant is responsible for the misconduct proposed by the plaintiff.
However, the court noted that “[w]here a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Further, the court cited case law that “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’”, therefore, “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” The capability of the court, however, is limited to the ability to review only those documents that are considered to be filed as “part of the pleadings.” This essentially means that the court may review any documents attached to the claim filed by the plaintiff.
ERISA regulations allows a party to bring suit “to recover benefits due to him under the terms of his plan [or] to enforce his rights under the terms of the plan.” Yet, the Fifth Circuit cites jurisprudence that “claimants seeking benefits from an ERISA plan [must] first exhaust available administrative remedies under the plan before bringing suit to recover benefits.” According to the Cromwell case:
“The policies underlying ‘the exhaustion requirements are to: (1) uphold Congress’ desire that ERISA trustees be responsible for their actions, not the federal courts; (2) provide a sufficiently clear record of administrative action if litigation should ensue; and (3) assure that any judicial review of fiduciary action (or inaction) is made under the arbitrary and capricious standard, not de novo.”
There are certain exceptions to the exhaustion requirements, but they are in themselves, limited exceptions. For example, a claimant can be exempt from the exhaustion requirements if she can prove that seeking an administrative remedy would be pointless, or that she has not been allowed meaningful access to administrative remedies. “To show futility, Plaintiffs must show that the review was conducted with ‘hostility or bias’ against the claimants.”
Zerangue argued that she had two reasons to be excused from the administrative application and administrative appeal exhaustion requirements. First, she argued that she exhausted her administrative remedies related to the short-term disability claim because she was not given a full and fair review of the decision. Second, she argued that a claim for long-term disability benefits would have been futile because her same disabling illness would have been reviewed by the same administrator, and was therefore substantially likely to result in the same decision (a denial of LTD benefits). Zerangue alternatively requested that the court issue a stay of the matter in order to allow her to file her long-term disability claim, which would then essentially “exhaust” her administrative remedies.
The court found that Zerangue did exhaust her administrative remedies for her short-term disability claim. Particularly, the definition of disability for both short-term and long-term disability claims are the same during the elimination period, and then less restrictive during the remaining coverage period. Further, the same administrator reviews both claims. “Under these circumstances, it is certain from the denial of [Zerangue’s] claim for STD benefits that her claim for LTD benefits would also be denied.” The court, therefore, held that it would be futile for her to exhaust her remedies for a long-term disability benefit claim.
In the instant case, however, Zerangue had not yet even filed a claim for long-term disability benefits so “there is no administrative record that would support an award to [her] of LTD disability benefits by this court.” As such, the court believed that it should not review whether she is yet entitled to long-term disability benefits. Because of this, the court elected to dismiss Zerangue’s claim for long-term disability benefits and stay the proceedings regarding same, in order for her to attempt to exhaust her administrative remedies.
The court further explained that if Lincoln were to find that Zerangue’s benefits should not be payable, it would then have an entire administrative record to review regarding whether or not the decision was properly made. In the alternative, if Lincoln decides that the long-term disability benefits should be granted, then most of the issues in the instant claim would be considered moot.
Overall, this led to the court granting Lincoln’s motion to dismiss the claim, when then subsequently dismissed Zerangue’s claim of long-term disability benefits. In the meantime, the suit is considered to be administratively closed pending the outcome of Zerangue’s exhaustion of administrative remedies as to her long-term disability benefits.[Note: this claim was not handled by the Ortiz Law Firm. It is merely summarized here for a better understanding of how Federal Courts are handling long term disability insurance claims.]
Here is a copy of the decision in PDF: