Smith v. Westvaco Corporation Voluntary Employees Beneficiary Association Long Term Disability Plan, 399 F.Supp.2d 692 (D.S.C. 2005) – decided November 17, 2005 – United States District Court for the District of South Carolina – Robert E. Hoskins

In this case, I represented Robert Smith.  I view this case as a companion case to Gayle v. United Parcel Service.  (Click here to see the discussion of Gayle from this site.)  In fact, as noted in the Smith opinion, the case was actually stayed pending the Fourth Circuit’s decision in Gayle.  The facts in Smith were nearly identical to Gayle.  The Gayle decision resolved, one of the primary issues in Smith.  The only real remaining issue after Gayle was whether my client’s failure to timely appeal a claim denial should be excused because of the language of the policy at issue.  I tried to distinguish the case from Gayle to try and get Mr. Smith some relief where I could not get any for Ms. Gayle.  Unfortunately, I did not fair any better in Smith.  I argued that the policy was couched in permissive terms rather than mandatory.  The court held that my client’s failure to appeal in a timely manner was fatal to his claim because of the specific language it used in the plan at issue.  The court stated:

“In the instant case, the Plaintiff correctly notes that the Plan summary itself does not make it clear that exhaustion of administrative remedies is a prerequisite to bringing suit under ERISA;5 however, the Plan explicitly directs the claimant to review the initial letter denying benefits for “an explanation of the claims review procedure.”  (Pl. Amended Motion, Exhibit B.)  Nothing in the Regulations requires that the entire appeals process be explicitly laid out in the Plan summary; referral to the denial letter is an appropriate means by which “to apprise the plan’s participants and beneficiaries of their rights and obligations under the plan.”  29 CFR § 2520.102-2. 

FOOTNOTES

5 In pertinent part, the Plan summary reads, “In the event your claim to receive pension benefits under the Plan is denied in whole or in part, you will receive a written notice of the denial . . . .  The notice will contain the reasons your claim was denied . . . .  There will also be an explanation of the claims review procedure.”  Further, the Plan explains, “If you believe that a fiduciary . . . has improperly denied you a Plan benefit . . . you have a right to file suit.  The court will decide who should pay court costs and legal fees and could require either party to pay all legal cost.”

The Regulations specify that the notification of benefit determination “shall set forth, in a manner calculated to be understood by the claimant . . . [a] description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of the Act following an adverse benefit determination on review.”  29 CFR § 2560.503-1(g)(1)(iv).  In this case, the letter notifying Smith of the denial of his claim, which he received on or about June 25, 2002, clearly states: 

If you do not agree with this denial, in whole or in part, and you wish to appeal the decision, you or your authorized representative must write to Westvaco Corporation within one hundred eighty (180) days from your receipt of this letter. . . .  After completion of this review, Westvaco Corporation will advise you of the determination.  After your appeal, and if your claim is again denied, you then have a right to bring a civil action under Section 502(a) of ERISA.

This passage satisfies all of the requirements of the Regulations.  It describes the Plan procedures, lays out the applicable deadlines, and informs the claimant of his right to bring civil suit under ERISA.  While the consequences of failing to timely appeal could be stated more emphatically, 6 the denial letter clearly apprises the claimant of his rights.  As such, the language of the denial letter at issue is distinguishable from the language found objectionable in Rose and Doctors Hospital.  In Rose, no reference was made at all to the claimant’s right to civil action in federal court.  Similarly, in Doctors Hospital, neither the Plan nor the denial letter makes clear that the appeal to the Administrator is a prerequisite to suit in federal court. 

FOOTNOTES

6 The Plan in Gayle clearly states, “If you do not appeal . . . within 180 days . . . you will forfeit your right to appeal to the Plan Administrator.  You will also lose your right to file an action in federal or state court because you will not have exhausted your administrative remedies.”  This language is preferable to that in the Westvaco plan, and, to prevent other suits such as this one, the court urges Defendant to consider adopting such language in its Plan; however, this court cannot say that such explicitness is required by the Regulations. 

Plaintiff and Defendant both emphasize the Plan’s use of the words “must” and “may”.  (Pl. Motion to Amend at 9-13; Def. Memo. in Opposition at 5-7.)  Upon thorough review of the Plan and the denial letter, the court finds that the term “may” refers to the voluntary nature of the appeals process, and the term “must” refers to the mandatory timeframe within which the appeal to the Plan Administrator can be made.  Such language is clear so as to be understood by the average Plan participant.  If it is not language likely to mislead potential claimants into believing that an appeal to the Plan Administrator within 180 days is not a necessary step in the appeals process.  When read together, the Plan and the denial letter comply with the requirements of the Regulations and do not mislead claimants as to their obligations.” (Click here to view the entire Smith decision)