Hughes v. Life Insurance Company of North America

Filing 40

ORDER AND REASONS that Defendant LINA's 20 Motion for Summary Judgment is DENIED. FURTHER ORDERED that Plaintiff Hughes' 24 Motion for Judgment on the Administrative Record is GRANTED. FURTHER ORDERED that Defendat LINA's 37 Motion to Strike Declaration and 38 Motion for Leave to File Sur-Reply are DISMISSED AS MOOT. Signed by Judge Eldon E. Fallon on 9/22/2016. (cms)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

JAMES HUGHES

CIVIL ACTION

VERSUS

NO. 15-2941

LIFE INSURANCE COMPANY OF NORTH AMERICA

SECTION "L" (3)

ORDER & REASONS

Before the Court is Defendant Life Insurance Company of North America’s (“LINA”)
Motion for Summary Judgment, R. Doc. 20. Plaintiff, James Hughes, opposes the Motion, R. Doc.
29, and has filed a cross Motion for Judgment as Matter of Law, R. Doc. 24. Defendant filed an
opposition to Plaintiff’s Motion. R. Doc. 30. Having reviewed the parties’ briefs, the applicable
law, and the statements made at oral argument, the Court now issues this Order & Reasons.
I.

BACKGROUND
This case involves a claim for disability benefits and the continuance of a life insurance

policy. Plaintiff Hughes was employed by Power and Control Systems, Inc. as an electrician. He
is a participant and beneficiary of an ERISA plan created by his employer, and an insured
participant of a group policy issued by Life Insurance Company of North America (“LINA”). R.
Doc. 1 at 1. Hughes stopped working on April 16, 1999, due to T10 paraplegia. Hughes is
permanently paralyzed and bound to a wheelchair. LINA initially approved Hughes’s disability
benefits, but later terminated his benefits on February 8, 2011. LINA claims termination occurred
because Hughes failed to provide requested documentation to demonstrate his continued
entitlement to benefits. R. Doc. 1 at 2. Hughes filed an appeal, which LINA denied because Hughes
1

failed to appeal within 180 days. Hughes argues the 180-day deadline cited by LINA is
inapplicable, because such a deadline is not contained within the policy. R. Doc. 1 at 2. Hughes
filed suit and seeks all benefits due in the past and future under the Plan (including pre- and postjudgment interest), attorney’s fees, and costs. R. Doc. 1 at 3–4.
Defendant Life Insurance Company of North America (“LINA”) timely answered on
October 26, 2015. R. Doc. 8. LINA asserts a number of affirmative defenses based on ERISA,
including ERISA preemption; the limited scope of ERISA review; and ERISA exhaustion
requirements. LINA also asserts affirmative defenses based on the terms of the policy at issue.
Specifically, LINA asserts that Hughes failed to comply with the “proof of loss” provision of the
policy. R. Doc. 8 at 8. The proof of loss provision requires a claimant to timely provide proof of
continued disability and of regular physician care upon request. R. Doc. 8 at 8.
II.

PRESENT MOTIONS
A. Defendant LINA’s Motion for Summary Judgment

Defendant argues it is entitled to Summary Judgment dismissing Plaintiff’s lawsuit
because Plaintiff failed to timely exhaust his administrative remedies and file a timely suit. LINA
agrees Hughes was a covered participant in a LINA benefit plan and became disabled as a result
of an accident in 1999. R. Doc. 20-1 at 1-2. Since that date, his benefits have been terminated four
times. R. Doc. 20-1 at 5. In each of the prior terminations, Hughes followed the procedures for
appealing the decision and his benefits were reinstated. Id. However, in the latest termination,
LINA contends he did not follow plan procedures for appeal, and therefore failed to timely exhaust

2

his administrative remedies. Id. In addition, LINA asserts that this suit was filed outside the threeyear contractual limit for seeking judicial review of a decision to terminate benefits.
First, LINA outlines the requirements of the plan. LINA avers the policy at issue requires
all participants to provide updated medical and income information to the insurer if such
information is requested. R. Doc. 20-1 at 3. If a participant’s benefits are terminated, the individual
has 180 days to initiate an appeal, and any suit contesting a benefits decision must be filed within
three years of the date proof of loss was required. R. Doc. 20-1 at 4.
Next, LINA explains how Hughes’s benefits were terminated, and how he filed his
eventual appeal and this lawsuit. According to LINA, the insurer requested information regarding
his present disability status from Hughes in November, and again in December, of 2010. R. Doc.
20-1 at 5. When LINA did not receive a response, they sent Hughes a termination letter in
February, 2011. Id. This letter explained why benefits were being terminated, and described the
steps Hughes needed to follow to appeal the decision. R. Doc. 20-1 at 6. Nine months later,
Hughes’s mother (“Mrs. Hughes”) called LINA and explained she had power of attorney over her
son, and wished to reinstate his disability benefits. R. Doc. 20-1 at 7. She was advised the time for
appeal had passed; consequently, if she wished to file an appeal she needed to explain why just
cause existed for the delay. Id. Mrs. Hughes explained that her son was currently incarcerated, so
she would not be able to obtain the required information, and requested that LINA close the appeal.
R. Doc. 20-1 at 9. LINA sent Hughes a letter terminating the appeal on September 12, 2012.
Two years later, Mrs. Hughes again contacted LINA and attempted to reinstate her son’s
benefits. Id. This time, Mrs. Hughes explained no one replied to the February, 2011 termination
letter because her son was incarcerated from May to September 2012. R. Doc. 20-1 at 9.
Additionally, she explained his pain medication had an adverse impact on his mental capacity, and
3

he was unable to handle his own affairs. R. Doc. 20-1 at 10. In October 2014, LINA reviewed the
appeal and found there was no just cause for the delay and notified Mrs. Hughes no additional
appeals would be considered. R. Doc. 20-1 at 10.
That same month, Plaintiff’s counsel contacted LINA and requested information from
Hughes’ file. R. Doc. 20-1 at 12. LINA avers that they provided an initial response at that time,
and submitted additional information in February 2015. R. Doc. 20-1 at 12. Hughes filed this
lawsuit in July, 2015.
LINA contends that Fifth Circuit precedent limits the Court’s review of an insurer’s
decision to deny benefits to the administrative record. (citing Vega v. National Life Insurance
Services, Inc, et al, 188 F.3d 287 (5th Cir. 1999)). Additionally, LINA explains that under ERISA,
employee benefit plans are required to provide “adequate notice in writing” when denying benefits
to a plan participant, and provide a “reasonable opportunity . . . for full and fair review” of such
denials. (citing 29 U.S.C. § 1133). According to LINA, it sent multiple request to Hughes for
additional information regarding his disability status prior to termination. Once LINA decided to
terminate benefits, it sent written notice explaining that the termination occurred because it had
not received a response, despite multiple attempts to obtain updated information. R. Doc. 20-1 at
16. This communication included information regarding the time limitations for appeal and next
steps Hughes needed to take if he wished to appeal the decision. R. Doc. 20-1 at 16.
Defendant contends that per ERISA, Hughes is required to exhaust administrative
remedies prior to filing a lawsuit seeking judicial review of the plan administrator’s decision. R.
Doc. 20-1 at 16-17. Thus, Hughes must have appealed the initial termination within 180 days of
the date his benefits were terminated to have exhausted his administrative remedies. R. Doc. 20-1

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at 17. LINA admits that in some circumstances, failure to exhaust may be excused on equitable
grounds, but contends that no such grounds exist in this case. Id.
In particular, LINA rejects Hughes’s claim that he was unaware of the time limit for appeal
because it was not included in his policy. R. Doc. 20-1 at 18. LINA argues that the February, 2011
letter terminating benefits, LINA outlined the appeals process and applicable timelines.
Additionally, Hughes had complied with the appeal time limit on three prior occasions. Further,
LINA disagrees with Mrs. Hughes’ contention that Hughes did not respond to the initial letter
because he was incarcerated. LINA claims that if Mrs. Hughes did have power of attorney, there
is no reason she could not have obtained the necessary medical and financial records while her son
was in prison. R. Doc. 20-1 at 18. Additionally, LINA emphasizes that Hughes was incarcerated
from May to September 2012—approximately 15 months after his benefits were terminated. Id.
Finally, LINA argues that this action is untimely, as it was filed more than three years
after the proof of loss was required by the policy. The policy states that participants have a three
year window in which to file a claim. According to LINA, “[c]ontractual limitations periods on
ERISA actions are enforceable, regardless of state law, provided they are reasonable.” (citing this
Court’s decision in Ponstein v. HMO La., Inc., 2009 WL 1309737 (E.D. La. May 11, 2009)). Here,
Hughes’s benefits were terminated in February 2011. He had 180 days to file an appeal, or until
August, 2011. According to LINA, the statute of limitation began to run at that point, and any suit
would have needed to be filed by August, 2014. However, the suit was not filed until July 2015,
which LINA contends was untimely. R. Doc. 20-1 at 24.
B. Plaintiff Hughes’s Opposition to Motion for Summary Judgment
In his opposition, Plaintiff argues that LINA abused its discretion by imposing a
“fictitious” 180-day deadline for appeal, that Plaintiff had good cause for the delay in filing an
5

appeal, and LINA should be estopped from asserting the three-year statute of limitations to bar
Plaintiff’s suit. Plaintiff admits that the they’plan administrator’s decisions are to be reviewed for
abuse of discretion, but avers that “[a]n administrator must have ‘substantial evidence’ to support
its decision to deny or terminate benefits” and “an administrator must discharge its duties solely
in the interests of the participants and beneficiaries of the plan.” (citing Ellis v. Liberty Life
Assurance Co. of Boston, 394 F.3d 262, 274 (5th Cir. 2004); 29 U.S.C. § 1104(a)(1)). R. Doc. 201 at 7-8.
First, Hughes contends that the 180-day deadline is unenforceable because it was not
contained in the initial policy, but only in the termination letter. According to Hughes, insurers
cannot add contractual terms to insurance policies by including the term in a denial letter. R. Doc.
20-1 at 8. Hughes cites a number of cases in support of this proposition; however, none within the
Fifth Circuit. 1 Id.
Second, Hughes argues that even if there was a 180-day deadline to file an appeal, there
was more than enough reason to find just cause for the delay. Specifically, Hughes contends that
he was unable to manage his affairs because of his declining physical and mental health, in addition
to his incarceration. R. Doc. 20-1 at 11. During the relevant time period, Hughes’s father was also
seriously ill, and suffered multiple heart attacks before he died. Finally, his mother, who is
responsible for raising her grandchildren, was diagnosed with Parkinson’s. R. Doc. 20-1 at 11.

1

Plaintiff cites the following: Merigan v. Liberty Life Assurance Co. of Boston, 826 F.Supp.2d 388, 396–97,
(D.Mass. 2011) (concluding that an appeal deadline contained in the SPD but not in the written instrument constituting
the plan is unenforceable under Amara ); Shoop v. Life Ins. Co. of N. Am., 2011 WL 3665030, at *5 (E.D.Va. 2011)
(“[E]ven though the SPD states that [defendant] has sole discretion to interpret the terms of the Policy, the fact that
this language is not included in the Policy itself, means [that the defendant's] administrative interpretation of the Policy
terms is due no deference.”); Spain v. Prudential Ins. Co. of Am., 2010 WL 669866, at *6 (S.D.Ill. Feb. 22, 2010)
(“[T]he SPD cannot add a mandatory administrative appeal process to the Plan where the Plan is silent and then argue
that [plaintiff] failed to exhaust those administrative remedies.”); see also Schwartz v. Prudential Ins. Co. of Am., 450
F.3d 697, 698–99 (7th Cir. 2006) (defendant could not rely upon language in the SPD granting it discretionary
decision-making authority “which the plan itself does not confer”).

6

Hughes contends that taken together, these challenges provide a more than sufficient basis to
justify his delay in appealing the benefits termination.
Finally, Hughes contends that the doctrines of waiver, estoppel, and contra non valentum 2
should preclude LINA from arguing this suit is barred. In particular, Hughes states that he did not
receive LINA’s letter explaining that his appeal was denied and no other appeals would be
considered until October 2014, after the August 2014 deadline for filing suit had passed. R. Doc.
20-1 at 12. While Hughes agrees that the Supreme Court has found such limitation periods
enforceable, he argues that “if the administrator’s conduct causes a participant to miss the deadline
for judicial review, waiver or estoppel may prevent the administrator from invoking the limitations
period as a defense.” (quoting Heimeshoff v. Hartford Life & Acc. Ins. Co., 134 S. Ct. 604, 615
(2013)). R. Doc. 20-1 at 13. According to Hughes, the reason he did not file this lawsuit until July,
2015 is because he did not receive LINA’s letter denying his appeal until October 2014.
C. Plaintiff Hughes’s Motion for Judgment based on Administrative Record
The first fifteen pages of Plaintiff’s motion are virtually identical to his opposition
discussed above. Again, Hughes argues that LINA abused its discretion in not allowing the appeal
outside the 180-day window, and this suit should not be dismissed pursuant to the three-year
contractual limitations period. In the final portion of his motion, Plaintiff explains the specific
relief he is requesting, in particular, attorney’s fees and prejudgment interest. R. Doc. 24-1 at 15.
Plaintiff argues that five factors support an award of attorney fees in this case. First, Hughes
contends that LINA acted in bad faith, and Hughes can show at least “some success on the merits.”
2

Plaintiff does not define this concept, or explain why it should apply in this case. Contra non valentum is
based on the premise that equity and justice may require suspending prescription in some cases because the plaintiff
was effectually prevented from enforcing his rights for reasons external to his own will. Dominion Exploration &
Production, Inc. v. Waters, 972 So. 2d 350 (La. Ct. App. 4th Cir. 2007). However, this is a rare doctrine, and does not
seem to apply in this case.

7

R. Doc. 24-1 at 15-16. Additionally, Hughes asserts that attorney fees are proper because LINA
has the ability to pay the fee, such an award will have a deterrent effect, this case presents a
significant legal question that impacts all plan participants, and finally Hughes will succeed on the
merits. Plaintiff also argues that for many of the same reasons, prejudgment interest is appropriate
in this matter.
D. Defendant LINA’s Opposition to Plaintiff’s Motion
In LINA’s opposition it argues that Hughes was not excused from exhausting his
administrative remedies, and this suit was not timely filed. First, it states that while Hughes
contends the 180-day deadline was not included in his policy, he does not deny receiving the
Summary Plan Description (“SPD”), or that the 180-day deadline was not included in that
document R. Doc. 29 at 3. 3 LINA refutes Hughes’s argument that conditions in the SPD are not
part of the policy, and distinguishes the cases he cites in support of that proposition. R. Doc. 29 at
4. According to LINA, each of the cases Plaintiff cites addressed whether the SPD “expressly
provided it was not part of the plan documents,” and are therefore not applicable here. Id. Notably,
LINA admits the SPD is not part of the administrative record in this case. R. Doc. 29 at 6.
Apparently, no one can find it if it even existed.
However, LINA argues that even if Hughes did not obtain a copy of the SPD, he is bound
by its terms, because Fifth Circuit law mandates that a plan participant is “bound by the plan’s
administrative procedures and must use them before filing suit even if they have no notice of what
those procedures are.” (citing Bourgeois v. The Pension Plan for the Employees of Santa Fe Int’l
Corps, 215 F. 3d 475, 480 (5th Cir. 2000)). Additionally, LINA contends that Hughes did in fact

3

During oral argument, Plaintiff explained that he has been unable to obtain a copy of the summary plan
description, and has no evidence that the 180-day limitation was included in that document.

8

have notice of the plan’s administrative procedures, as it is undisputed this information was
included in the letter terminating benefits. R. Doc. 29 at 10.
Next, LINA argues that a substantive award of benefits is not the appropriate remedy for
a violation of ERISA’s notice and disclosure requirements. Instead, LINA avers that the only
appropriate remedy is a determination that Hughes did in fact exhaust his administrative
requirements, and therefore would not have needed to wait 180 days before filing suit. R. Doc. 29
at 13-14. Addressing Hughes’s argument that LINA abused its discretion in failing to find “just
cause” that would excuse his delay, LINA contends that once the initial 180-day period passed, it
had no obligation to consider such a voluntary appeal. (citing Harvey v. Standard Ins. Co., 850 F.
Supp. 2d 1269 (N.D. Ala. 2012); DaCosta v. Prudential Ins. Co. of America, 2010 WL 4722393
(E.D.N.Y. 11-12-2010) (“ERISA does not require insurers to provide or conduct voluntary
appeals” and held that voluntary appeals are not subject to the same requirements as mandatory
appeals.). Therefore, LINA avers that any determination regarding the voluntary appeal could not
be an abuse of discretion. R. Doc. 29 at 15.
Turning to Hughes’s argument that equitable tolling should bar LINA from applying the
three-year contractual limitation deadline, LINA cites this Court’s decision in Jacobs v. Prudential
Insurance Co. of America, 4:
“Equitable tolling ‘applies principally where the plaintiff is actively misled by the
defendant about the cause of action or is prevented in some other extraordinary way
from asserting his rights.’” (internal citations omitted) Federal courts “sparingly”
extend such relief. (internal citation omitted). Further, “a plaintiff who ‘fails to act
diligently cannot invoke equitable principles to excuse that lack of diligence.’”
(internal citations omitted) “[A] garden variety claim of ‘excusable neglect’ does not
support equitable tolling.” (internal citations omitted) “Where [the plaintiff] could have
filed his claim properly with even a modicum of due diligence, we find no compelling
equities to justify tolling.” See generally Irwin, 498 U.S. at 96 (noting that equitable
tolling may apply where the claimant “has actively pursued his judicial remedies by
4

120 F. Supp. 3d 588, 596 (E.D. La. July 31, 2015).

9

filing a defective pleading during the statutory period” or “has been induced or tricked
by his adversary’s misconduct into allowing the filing deadline to pass.”)

Here, LINA contends there was no evidence of misrepresentation or any other circumstance to
justify such extraordinary relief. R. Doc. 29 at 19.
Finally, LINA addresses Hughes’s arguments in support of attorney fees in this case. First,
LINA contends that there is no evidence LINA acted in bad faith, and rejects Hughes’s contention
that a 10-year-old report condemning LINA’s practices in California supports a finding of bad
faith. R. Doc. 29 at 20. While LINA admits it has the financial resources to satisfy an award, it
disputes that such an award would have any deterrent effect in this case, as LINA acted in
accordance with ERISA guidelines. R. Doc. 29 at 21-22. Additionally, LINA contends that this
case does not involve a significant legal question, as any decision in this case will only impact
Hughes, and attorney’s fees would be inappropriate because Hughes will not succeed on the merits
of his claim.
E. Plaintiff’s Reply
In Plaintiff’s reply, he re-asserts that the 180-day deadline cannot apply here because the
deadline is not included within the policy. R. Doc. 36 at 1. In support of this position, Hughes
explains that the insurance policy is the plan document, thus, any provision not included in the
policy is unenforceable. R. Doc. 36 at 2. Additionally, Hughes argues that even if the SPD included
such a deadline, it is LINA’s burden to locate the SPD to prove such a provision existed. R. Doc.
36 at 4. Further, Hughes argues that such a letter would be inadmissible, as the Court is limited to
reviewing the administrative record in ERISA appeal cases, and the SPD is not included in the
record. R. Doc. 36 at 6.
Next, Hughes argues that he provided just cause to explain his delay in filing an appeal,
as he explained the significant hardships his family was facing at the time. R. Doc. 36 at 11.
10

Further, Hughes contends that LINA has failed to demonstrate it was prejudiced by Hughes’s late
appeal R. Doc. 36 at 12-13. In particular, Hughes argues that because he is a paraplegic, LINA
cannot possibly argue it was prejudiced when it did not receive updated medical records. R. Doc.
36 at 16-18. Finally, Hughes avers that the contractual limitation stated in the policy should not
bar this suit because LINA indicated it was still considering allowing the appeal until October,
2014; thus the three year period did not begin until that time. R. Doc. 36 at 18.
III.

LAW AND ANALYSIS
A. Summary Judgment Standard

Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56(c)). “Rule 56(c) mandates the
entry of summary judgment, after adequate time for discovery and upon motion, against a party
who fails to make a showing sufficient to establish the existence of an element essential to that
party’s case, and on which the party will bear the burden of proof at trial.” Id. A party moving for
summary judgment bears the initial burden of demonstrating the basis for summary judgment and
identifying those portions of the record, discovery, and any affidavits supporting the conclusion
that there is no genuine issue of material fact. Id. at 323. If the moving party meets that burden,
then the nonmoving party must use evidence cognizable under Rule 56 to demonstrate the
existence of a genuine issue of material fact. Id. at 324.
A genuine issue of material fact exists if a reasonable jury could return a verdict for the
nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1996).
“[U]nsubstantiated assertions,” “conclusory allegations,” and merely colorable factual bases are
11

insufficient to defeat a motion for summary judgment. See Hopper v. Frank, 16 F.3d 92, 97 (5th
Cir. 1994); see also Anderson, 477 U.S. at 249-50. In ruling on a summary judgment motion,
however, a court may not resolve credibility issues or weigh evidence. See Int'l Shortstop, Inc. v.
Rally's Inc., 939 F.2d 1257, 1263 (5th Cir. 1991). Furthermore, a court must assess the evidence,
review the facts and draw any appropriate inferences based on the evidence in the light most
favorable to the party opposing summary judgment. See Daniels v. City of Arlington, Tex., 246
F.3d 500, 502 (5th Cir. 2001); Reid v. State Farm Mut. Auto. Ins. Co., 784 F.2d 577, 578 (5th Cir.
1986).
B. ERISA Claims
Hughes’s Complaint is brought pursuant to ERISA, and therefore the claim must be
dismissed if he failed to exhaust all viable administrative remedies provided for in the LINA Plan.
The Fifth Circuit has held that “[c]laimants seeking benefits from an ERISA plan must first exhaust
available administrative remedies under the plan before bringing suit to recover benefits.”
McGowin v. Manpower Int'l, Inc., 363 F.3d 556, 559 (5th Cir. 2004) (quoting Bourgeois v. Pension
Plan for Employees of Santa Fe Int'l Corp., 215 F.3d 475, 479 (5th Cir. 2000). One of the core
policies behind this requirement is that “ERISA trustees, not federal courts, [should] be responsible
for their ERISA actions so that not every ERISA action becomes a federal case.” Id. The failure to
exhaust administrative remedies under ERISA is proper grounds for a granting a motion for
summary judgment. Coop. Ben. Adm'rs, Inc. v. Ogden, 367 F.3d 323, 336 (5th Cir. 2004). An
untimely administrative appeal is similarly fatal to an ERISA claim. Moss v. UNUM Provident
Group Corp., 2015 WL 1508354, at *4 (W.D. La. Mar. 31, 2015).
When an insurer is both a plan administrator and a payor, the Court should evaluate
whether a conflict of interest played a role in the decision to terminate benefits. “[W]hen judges
12

review the lawfulness of benefit denials, they will often take account of several different
considerations of which a conflict of interest is one.” Metropolitan Life Ins. Co. v. Glenn, 554 U.S.
105, 117 (2008). Weighing a conflict of interest does not “impl[y] a change in standard of review,
say, from deferential to de novo.” Id. at 115. Instead, “ ‘conflicts are but one factor among many
that a reviewing judge must take into account,’ . . . the specific facts of the conflict will dictate its
importance.” Holland v. Int'l Paper Co. Retirement Plan, 576 F.3d 240, 247–48 (5th Cir. 2009)
(quoting Glenn 554 U.S. at 117). “A conflict of interest should prove more important . . . where
circumstances suggest a higher likelihood that it affected the benefits decision . . . It should prove
less important (perhaps to a vanishing point) where the administrator has taken active steps to
reduce potential bias and promote accuracy.” Glenn 554 U.S. at 117. A court may afford more
weight to a conflict of interest when the administrative process employed to render the denied
claim indicated “procedural unreasonableness.” Id. at 118; Schexnayder v. Hartford Life and
Accident Ins. Co., 600 F.3d 465, 469 (5th Cir. 2010). Procedural unreasonableness refers to a
situation where the “method employed by the plan administrator to make the benefit decision was
unreasonable.” Truitt v. Unum Life Ins. Co. of America, 729 F.3d 497, 510 (5th Cir. 2013) (quoting
Schexnayder, 600 F.3d at 469–71)).
The Fifth Circuit found a conflict of interest to be a minimal factor when a structural
conflict of interest existed, but the conflict did not result in an economically-driven motivation to
deny claims, and the administrator took steps to minimize conflict. Holland, 576 F.3d at 249. These
steps included relying on the opinions of independent medical professionals when deciding claims.
Id. Conversely, in Schexnayder, the Fifth Circuit weighed the conflict of interest factor more
heavily when the “circumstances suggest[ed] procedural unreasonableness” because the
administrator failed to address the Social Security Association’s award of disability benefits in its
13

denial letters, and the administrator did not take steps to minimize the structural conflict of interest.
600 F.3d at 47071.
C. Discussion
1. Motion for Summary Judgment
To prevail on its motion for summary judgment, LINA must demonstrate that there is no
dispute of material fact that Hughes failed to timely exhaust his administrative remedies. See
Celotex v. Catrett, 477 U.S. 317, 322 (1986). The terms of the policy required policyholders to
provide updated medical and financial information within thirty days of a written request from the
insurer. Additionally, the plan provided a three-year contractual limitations period for filing suit.
LINA contends that the plan also contained a 180-day time limit for filing appeal, and argues that
because Hughes failed to file an administrative appeal within that period, he has failed to exhaust
his administrative remedies.
However, the plan itself does not include a 180-day limit for filing an appeal. While LINA
did include this limitation in the termination letter, R. Doc. 22-2 at 295, there is no authority to
suggest that terms within a benefits termination letter can become binding policy provisions.
Additionally, even if the 180-day limitation was included in the Summary Plan Description
(“SPD”), the United States Supreme Court held “we cannot agree that the terms of statutorily
required plan summaries (or summaries of plan modifications) necessarily may be enforced (under
§ 502(a)(1)(B)) as the terms of the plan itself. CIGNA Corp. v. Amara, 563 U.S. 421, 436 (2011);
see also Koehler v. Aetna Health Inc., 683 F.3d 182, 189 (5th Cir. 2012) (“Thus, CIGNA changes
our case law to the extent that the plan text ultimately controls the administrator's obligations in a
§ 1132(a)(1)(B) action . . .”). Because the 180-day limitation was not included in the terms of the
policy, it is not automatically an enforceable provision. Further, there is absolutely no evidence
14

the 180-day limitation was actually included in the summary plan description, as it is not in the
administrative record and no one has been able to find or produce it. Under the terms of the policy,
Hughes’s administrative remedies required him to file an administrative appeal before filing a
claim with this Court. Hughes filed two separate appeals. After receiving LINA’s October, 2014
letter denying his second appeal, Hughes contacted an attorney, who subsequently filed a lawsuit
with this Court. As such, Hughes complied with the administrative procedures described in the
policies and there is no evidence to suggest Hughes did not exhaust his administrative remedies.
Therefore, Defendant LINA’s Motion for Summary Judgment must be DENIED. 5
2. Motion for Judgment on the Administrative Record
Under ERISA, federal courts have exclusive jurisdiction to review determinations made by
employee benefit plans, including disability benefit plans. 29 U.S.C. § 1132(a)(1)(B). A district
court must generally limit its review to an analysis of the administrative record. Vega v. Nat. Life
Ins. Services, Inc., 188 F.3d 287, 300 (5th Cir. 1999). “[A] denial of benefits challenged under §
1132(a)(1)(B) is generally reviewed under a de novo standard unless the benefit plan gives the
administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe
the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). “[W]hen
an administrator has discretionary authority with respect to the decision at issue, the standard of
review should be one of abuse of discretion.” Vega, 188 F.3d at 295.
When evaluating an appeal for denial of ERISA benefits, the Court must consider whether
a conflict-of-interest played a role in the benefits denial. See Glenn 554 U.S. at 117. Under Fifth
Circuit law, the Court “may afford more weight to a conflict of interest” when the denial appears

5

Because there is no evidence to support the 180-day limitation applied to this policy, Hughes is not
required to demonstrate there was just cause for the delay to defeat summary judgment.

15

to be based on “procedural unreasonableness.” Id. at 118; Schexnayder v. Hartford Life and
Accident Ins. Co., 600 F.3d 465, 469 (5th Cir. 2010). Here, LINA is both the plan administrator
and the payer, which creates a potential conflict of interest, because LINA saves money every time
benefits are terminated. A conflict of interest does not change the standard of review, but is one
factor the Court should consider when evaluating the decision to terminate benefits. Because LINA
had discretionary authority to determine benefit eligibility, the Court will review LINA’s decision
for abuse of discretion, while mindful of the inherent conflict of interest in this case.
It is undisputed that Hughes is permanently paralyzed. He is in frequent pain, suffers from
additional complications arising from his injury, and has not shown substantial medical
improvement. It is obvious he will never return to his work as an electrician. Despite this fact,
LINA has denied his permanent disability benefits on at least four different occasions. This alone
suggests “procedural unreasonableness.” However, this is not the only troubling aspect of LINA’s
denial in this case. After terminating disability benefits for a permanently paralyzed policyholder,
LINA relied on the 180-day limit for filing an appeal to bar Hughes’s claim—despite the fact that
180 day limit is not located anywhere in the policy. Like the insurer in Schexnayder, LINA did not
address Hughes’s permanent paralysis or the Social Security Administration’s award of permanent
disability benefits. This suggests procedural unreasonableness. See Schexnayder, 600 F.3d at
47071.
Further, LINA admits that Hughes’s benefits had been reinstated on three previous
occasions, indicating the only reason his benefits were permanently denied in this case was that he
missed the 180-day appeal deadline. As indicated above, because the 180-deadline is not included
in the policy, it does not govern the plan procedures, and should not have been the basis of the
benefits termination. These facts, viewed in light of the clear conflict of interest LINA has in this
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case, demonstrates that LINA’s denial was an abuse of discretion.
Next, LINA contends that this suit is untimely, as it was filed outside the three-year
contractual limitations period included in the policy. Under the terms of the policy, “[n]o action
will be brought . . . unless brought within three years after the time within which proof of loss is
required by the policy.” R. Doc. 22-1 at 27. Here, LINA initially terminated benefits in 2011. R.
Doc. 22-2 at 294. Hughes attempted to file an appeal in July 2012, R. Doc. 22-2 at 194. On August
1, 2012, LINA wrote Hughes a letter explaining that “ERISA requires that you go through the
Company’s administrative appeal review process prior to pursuing any legal action challenging
our claim determination.” R. Doc. 22-2 at 190. It went on to explain that LINA was still
determining whether the appeal would be accepted, and would let Hughes know when it reached
a decision. Based on LINA’s letter, Hughes was not entitled to file a legal claim contesting the
benefits denial decision until LINA reached a decision regarding the appeal. A month later, on
September 12, 2012, LINA notified Hughes that his appeal had been closed. At this point—not
before—Hughes was on notice that he had exhausted his administrative requirements, and could
file a claim in this action. Thus, the three-year contractual limitation period started, at the earliest,
on September 12, 2012. As such, the present suit was timely, as it was filed July 24, 2015. 6
Even if the Court accepts LINA’s argument that the three-year contractual period began
to run prior to the September, 2012 denial of Hughes’s appeal, this suit is still timely under the
doctrine of estoppel. The Fifth Circuit has recognized the theory of ERISA estoppel. Mello v. Sara
Lee Corp., 431 F.3d 440, 444–45 (5th Cir. 2005). To prevail on this theory, a plaintiff must show

6

LINA communicated to Hughes that his second appeal was being considered in 2014 and did not finally
issue a denial of the appeal until October, 2014. While it is possible that the three-year contractual limitation period
started anew as of that date, it is unnecessary to discuss that issue, as this suit was filed less than three years from the
date Hughes’s administrative appeal was denied.

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three elements: “(1) a material misrepresentation, (2) reasonable and detrimental reliance upon
that representation, and (3) extraordinary circumstances.” Nichols v. Alcatel USA, Inc., 532 F.3d
364, 374 (5th Cir. 2008) (citing Mello, 431 F.3d at 444–45). Here, LINA indicated it was still
considering Hughes’s appeal until it sent the letters 7 explaining that no additional appeals would
be considered. Thus, LINA was either considering accepting the allegedly untimely appeal until
September, 2012, or it made a material misrepresentation. If it was actually considering the appeal
until September, 2012, the Court finds that the three-year statute of limitations would not have
begun to run until that date.
However, even if LINA never actually considered the appeal, as it contends it was not
required to do, Hughes believed the appeal was still pending, as LINA allowed plaintiff to submit
additional information about this claim and told him he could not file a suit until he had exhausted
his administrative remedies. Relying on this, Hughes did not obtain an attorney or file a lawsuit in
this matter. Thus, Hughes detrimentally relied on LINA’s material misrepresentation that the
appeal would still be considered. As such, Hughes has established the first two elements of ERISA
estoppel.
Finally, to prevail on the theory of ERISA estoppel, Hughes must demonstrate
extraordinary circumstances. The Fifth Circuit has not defined what constitutes “extraordinary
circumstances” for the purposes of ERISA estoppel. See High v. E-Sys. Inc., 459 F.3d 573, 580
n.3 (5th Cir. 2006). However, the Third Circuit has explained that this “generally involve[s] acts
of bad faith on the part of the employer, attempts to actively conceal a significant change in the
plan, or commission of fraud.” Jordan v. Fed. Exp. Corp., 116 F.3d 1005, 1011 (3d Cir. 1997).

7

LINA sent two letters denying Hughes’s appeal. The first, in September, 2012 and a second in October,
2014. Because this suit was filed within three years of September, 2012, it was timely, even if the appeal leading to
the October, 2014 letter was insufficient to reset the three-year contractual limitations period.

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Here, LINA denied benefits for a policy holder who was permanently paralyzed and receiving
permanent social security benefits. Then, when Hughes appealed, LINA told him he could not file
a lawsuit until he had exhausted his administrative remedies. After denying the appeal based on a
nonexistent policy provision, LINA contends that Hughes cannot file a lawsuit because it falls
outside the three-year contractual limitations window, despite the fact that LINA told Hughes he
could not file a lawsuit as late as August 1, 2012. R. Doc. 22-2 at190. 8 While this conduct may
not rise to the level of fraud or bad faith, the Court finds it demonstrates “exceptional
circumstances” such that the doctrine of ERISA estoppel applies, and shall prevent LINA from
arguing this suit was untimely. Thus, Plaintiff’s Motion for Judgment on the Administrative
Record is GRANTED.
In his motion, Plaintiff argues that in addition to retroactive reinstatement of benefits, both
pre- and post-judgment interest, as well as attorney’s fees, are appropriate in this matter. Plaintiffs
can recover prejudgment interest in ERISA cases. Perez v. Bruister, 823 F.3d 250, 274 (5th Cir.
2016). “It is not awarded as a penalty, but as compensation for the use of funds.” Whitfield v.
Lindemann, 853 F.2d 1298, 1306 (5th Cir. 1988). Because ERISA does not mandate a rate for
prejudgment interest, state law determines the applicable interest rate. Perez, 823 F.3d at 274.
Under Louisiana law, interest is recoverable as a matter of right from the date of judicial demand.
Canova v. Travelers Ins. Co., 406 F.2d 410, 411 (5th Cir. 1969). Judicial interest rates are
established pursuant to Louisiana Revised Statute 13:4202. In re Complaint of MNM Boats, Inc.,
No. CIVA07-1938 C4, 2010 WL 1038264, at *1 (E.D. La. Mar. 17, 2010). The Court finds that in

8

In its October 1, 2014 letter denying Hughes’s administrative appeal, LINA explicitly states “Please note
that you have a right to bring legal action regarding your claim under [ERISA].” R. Doc. 22-2 at 130. Viewing those
facts in the light most favorable to LINA, the contractual limitations period could not have begun to run from the
initial benefits termination.

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order to adequately compensate Hughes for his denied benefits, pre- and post-judgment interest is
appropriate in this matter.
The parties disagree as to whether attorney’s fees are appropriate in this case. The Court
declines to reach a decision on the attorney fee issue at this time, and would like the parties to
submit additional information regarding attorney’s fees in this case. Therefore,
IT IS ORDERED that Defendant LINA’s Motion for Summary Judgment, R. Doc. 20, is
DENIED.
IT IS FURTHER ORDERED that Plaintiff Hughes’ Motion for Judgment on the
Administrative Record, R. Doc. 24, is GRANTED.
IT IS FURTHER ORDERED that Defendant LINA’s Motion to Strike Declarations, R.
Doc. 37, and Motion for Leave to File Sur-Reply, R. Doc. 38, are DISMISSED AS MOOT.
New Orleans, Louisiana, this 22nd day of September, 2016.

UNITED STATES DISTRICT JUDGE

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