The Employee Retirement Income Security Act of 1974 (“ERISA”) mandates that claimants under an ERISA plan have access to the federal courts.  But courts have ruled that prior to litigation, a claimant must exhaust all administrative remedies, such as appealing insurers’ denials of claims.  However, the futility doctrine provides an exception to this requirement that, while narrow, can prove valuable for some claimants.

Joni Dioquino (“Dioquino”) was eligible for short-term disability (“STD”) and long-term disability (“LTD”) benefits through United of Omaha Life Insurance Co (“Omaha”), which served as claims administrator and claims fiduciary for the plan.  When she was diagnosed with conditions causing her leg pain, especially when sitting for more than a few minutes, which her job required, she made an STD claim to Omaha.  Omaha denied her claim, supporting its denial with the opinions of an unknown nurse case manager and two “paper review” doctors, each of whom had clearly ignored at least some of her medical records.  She appealed Omaha’s decision twice and Omaha upheld its denial both times, despite clear and extensive medical evidence supporting her claim.  The reasoning provided for its decisions made it clear that Omaha simply ignored substantial medical evidence, including statements contradicting the evidence.

Dioquino sued Omaha to recover both STD and LTD benefits.  Omaha filed a Motion for Summary Judgment arguing in part that Dioquino lacked standing to sue for LTD benefits because she never filed an LTD claim to Omaha.  Dioquino opposed Omaha’s motion, arguing under the futility doctrine that she had legal standing to sue for LTD benefits as well as STD benefits because submitting an LTD claim with Omaha would have been futile.  The Court agreed with Dioquino and denied Omaha’s Motion for Summary Judgment, finding that Dioquino’s allegations could demonstrate that for her to submit an LTD claim to Omaha would be an act of futility.

The futility doctrine provides an exception to the jurisprudential rule that claimants must exhaust all administrative remedies prior to filing legal action.  It applies in cases in which an administrative review is demonstrated to be doomed to fail.  Diaz v. United Agr. Emp. Welfare Ben. Plan & Tr., 50 F.3d 1478 (9th Cir. 1995).  In Burnett v. Raytheon Co. Short Term Disability Basic Benefits Plan, 784 F.Supp.2d 1170 (C.D. Cal. 2011), the Court provided four factors to be considered in determining whether the futility exception applies: 1) whether the definitions for “fully disabled” for purposes of STD and LTD benefits are substantially the same; 2) whether the plans are integrated, such that they rely on and refer to each other; 3) whether the denial or termination of STD benefits essentially dooms any LTD claim; and 4) whether the plans are administered by the same entity.

The presence of the Burnett factors in Dioquino’s case was the basis on which the Court denied Omaha’s Motion for Summary Judgment, thus allowing her case to move forward.  While plan terms can be widely varied and vastly different for any claimant, situations like Dioquino’s can and do occur.  To go through the LTD claim process can set a claimant’s ability to recover benefits back by several months.  Thus, awareness of plan terms can be of vital importance for some claimants.  McKennon Law Group PC has significant experience in handling ERISA and non-ERISA insurance cases in which an insurer denied a claim.  If your insurer or plan administrator has denied your claim, please contact us for a free consultation so that we may assess your matter.