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Contractual SOL Waived by Failure to Notify – D.S.C.

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  • Contractual SOL Waived by Failure to Notify – D.S.C.

    Here’s a new case out of the District of South Carolina. This is my case, so I will simply present it without argument or discussion. The issue before the court is whether or not a one year contractual statute of limitations included in the plan is enforceable where the defendant did not inform the beneficiary of it in the final denial letter. The court concludes:

    Further, although § 2560.503-1(j)(4) does not specifically require that claimants be informed of a contractual time limitation, reading subsection (j)(4)(i) in conjunction with subsection (g)(1)(iv) requires that plan administrators disclose the voluntary internal appeal procedures and the contractual limitations period in final denial letters. Moreover, this reading is logical because the voluntary internal appeal procedures and the civil action limitations periods are the only remaining options for a claimant seeking to challenge a denial of coverage following the issuance of a final denial letter. See e.g., William v. United Healthcare, No. 1:16-CV-00144-DN, 2017 WL 2414607, at *7 (D. Utah June 2, 2017) (unpublished). Further, in the case at bar, Universal Fidelity did not advise the Plaintiff of her rights under § 502(a), which is plainly required by § 2560.503-1(j)(4). In addition, Universal Fidelity failed to provide notice to Plaintiff regarding her right to obtain records and the option of alternative dispute resolution. § 2560.503-1(j)(3) and (j)(5). Based on the foregoing, Universal Fidelity was required to inform the Plaintiff of her rights under § 502(a) and specifically, inform her of the contractual one-year time limitation.
    Further,

    However, even if the court agreed with the analysis in these cases, Universal Fidelity failed to inform the Plaintiff of her rights to bring a civil action under § 502(a) as is plainly required by § 2560.503-1(j)(4). “[B]oth initial and final denial letters are required to have a statement informing the claimant of his or her right to bring a civil action under the ERISA statute.” Michael C.D., 2016 WL 2888984, at *5. Thus, even assuming solely for the sake of argument that Universal Fidelity was not required to specifically inform the Plaintiff of the contractual time limitation as held in Wilson, it was certainly required to advise her of her rights to file a civil action, which it plainly failed to do. The denial letter is devoid of any mention of the Plaintiff’s rights to obtain documents, the availability of alternative dispute resolution, and most importantly, her right to file a civil action including informing her of the one-year contractual time limitation. (Ans. Ex. B (Final Denial Letter), ECF No. 10-2.)
    The court finds that substantial compliance with the regulation fails.

    Further, any argument of substantial compliance with the regulations fails. See Gagliano v. Reliance Standard Life Ins. Co., 547 F.3d 230, 237 (4th Cir. 2008) (considering substantial compliance). Universal Fidelity’s conduct in this case is “not remotely close to any concept of substantial compliance under the regulations.” Id. Moreover, the court agrees with the First Circuit in Santana-Diaz, which held that

    where a plan administrator fails . . . to include the time limit for filing suit in its denial of benefits letter, and it has not otherwise cured the defect by, for example, nforming the claimant of the limitations period in a subsequent letter that still eaves the claimant sufficient time to file suit, the plan administrator can never be in substantial compliance with the ERISA regulations, and the violation is per se prejudicial to the claimant.
    816 F.3d at 183. The court further finds that for the same reasons, the failure to inform a claimant of their right to file suit under § 502(a) is per se prejudicial to the claimant.
    Finally, the court finds that actual or constructive knowledge is not sufficient.

    Universal Fidelity alleges that because the Plaintiff is married to the owner of the Plan Sponsor, Plan Administrator and Named Fiduciary of the Plan, there is actual or constructive knowledge of the Plan’s contractual limitations period, and cites the stop loss insurance coverage application, Plan application, executed Administrative Services agreement, and application for coverage for the Plaintiff and the owner in support of this argument. (Reply 5-6, Exs. 2-4, ECF No. 24.) However, Universal Fidelity’s argument is without merit. Universal Fidelity cites cases discussing the application of equitable tolling or which are clearly distinguishable from the issues in this case. Universal Fidelity summarily cites Scharff for the proposition that the Plaintiff had constructive knowledge of contents of the Plan, which included the contractual time limit. 581 F.3d at 908. As discussed above, Scharff did not involve an analysis of the regulations at issue in the case at bar. Section 2560.503-1(g)(1)(iv) and (j) requires that plan administrators notify claimants of certain information in denial letters. Further, there is no allegation that a summary plan description was provided to the Plaintiff with the final denial letter and providing the 89-page summary plan description with the denial letter in this case would be insufficient to substantially comply with § 2560.503-1(g)(1) and (j). See e.g., Turner v. Volkswagen Grp. of Am., Inc., No. 2:16-CV-06570, 2017 WL 3037803, at *5(S.D. W. Va. July 18, 2017) (unpublished) (“Simply put, appending an arcane thirty-six page insurance plan description to a denial letter without once referencing the plan’s review procedures in the body of the denial letter fails to sufficiently apprise the claimant of the plan’s review procedures.”); (Ans. Ex. 1 (Summary Plan Description), ECF No. 10-1.).
    The opinion is attached below.
    Attached Files
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