Claimant is Ordered to Pay Attorney Fees to Standard for Failing to Exhaust Her Administrative Remedies
Author: Attorney Gregory Dell
In Spath v. Standard Insurance Company, the plaintiff was injured at work and was initially granted disability benefits. Upon a review of the claimant’s file, Standard changed its mind. On September 17, 2014, Standard sent Spath a letter telling her it had made a mistake and was immediately terminating her benefits. The letter told her she had 180 days to file an appeal and, if she did not, it would close her file.
Spath did not appeal. Instead, after the time for appeal had passed, she filed an ERISA lawsuit alleging Standard had “arbitrarily and capriciously” closed her claim file. The court disagreed and dismissed her lawsuit, finding that, “A participant seeking to recover benefits due under the terms of the plan must exhaust these administrative procedures.” The Missouri federal court also ordered Spath to pay $500 in attorneys’ fees.
Requirement to Exhaust Administrative Remedies
Standard’s September 14, 2014, letter informing Spath it was terminating her disability benefits also told her she had 180 days from the date she received the letter to make a written request for Standard to review its decision. Instead of asking for a review, Spath’s attorney mailed a letter to Standard on November 20, 2014, demanding that Standard reinstate benefits.
Standard replied to the attorney by explaining that the November letter could not be construed as a request for an appeal. Standard also informed Spath’s attorney that certain medical records would be required if Spath wished to pursue an appeal.
Spath filed no request for an appeal, provided no medical records to Standard. Instead, she filed this ERISA lawsuit. It did not take the court long to determine that Spath, who never asked Standard to review its termination of benefits, had failed to exhaust her administrative remedies. The court granted Standard’s motion for summary judgment on the grounds that, “Because she never exhausted her administrative remedies, her ERISA claims are deficient as a matter of law.”
Spath Was Ordered to Pay $500 in Attorneys’ Fees and Costs
Standard requested the plaintiff pay it $1,000 in attorneys’ fees and costs. The court considered a number of factors in determining whether or not to award fees:
- Whether Spath acted in bad faith.
- Spath’s ability to pay.
- Whether an award would have a future deterrent effect under similar circumstances.
- Whether the lawsuit was for the purpose of resolving a significant legal question.
- The merits of each party’s position.
- Spath did not spend much time on its motion or engage in any discovery.
- Standard warned Spath it would seek attorneys’ fees.
Four out of the seven factors weighed in favor of an award of legal fees. Since Spath did not have the ability to pay, the court ordered her to pay $500 instead of the requested $1,000.
This case was not handled by our office, but it may provide guidance to claimants who are tempted to forego administrative review of denial of benefits and to instead, file an ERISA lawsuit. If you need assistance with a similar matter, or any other matter relating to your disability claim, please contact any of our lawyers for a free consultation.