ANDERSON et al v. LIBERTY MUTUAL INSURANCE

Filing 24

ORDER ON MOTION FOR JUDGMENT ON THE RECORD By JUDGE JOHN A. WOODCOCK, JR. (sfw)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
GALE ANDERSON, et al.,
Plaintiff,
v.
LIBERTY MUTUAL INSURANCE,
Defendant.

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1:17-cv-00346-JAW

ORDER ON MOTION FOR JUDGMENT ON THE RECORD
A beneficiary of an accidental death and dismemberment insurance policy
challenges the insurer’s decision to deny benefits under the policy. Because the
beneficiary’s claim is barred for failing to exhaust internal remedies and because the
insurer’s denial for failure to provide requested documents was reasonable, the Court
grants judgment in favor of the insurer.
I.

FACTS AND PROCEDURAL HISTORY
A.

The Parties

John R. Anderson (Decedent) was an employee of Bangor Publishing Company
or a related entity (BPC) and participated in an employee benefit plan (the Plan).
Administrative Record (AR) 1, 53. John Anderson’s mother is Nancy Anderson, and
his father is Gale Anderson. Compl. ¶¶ 1-2 (ECF No. 1); AR 6-7. Gale Anderson is
the sole beneficiary under the Plan. AR 28, 50.
Liberty Life Assurance Company of Boston (Liberty Life, named in the caption
as Liberty Mutual Insurance) issued a group life insurance policy (the Policy) funding

life insurance benefits available through the Plan. AR 54-88. Liberty Life also
administers claims for life insurance benefits the Plan makes available. AR 64, 71,
82-85.

The Plan provides basic life and accidental death and dismemberment

(AD&D) benefits to covered employees of BPC. AR 55-57.
B.

The Plan

Under the Plan, AD&D “benefits are payable when a Covered Employee suffers
a loss solely as the result of accidental Injury that occurs while covered.” AR 74.
However, AD&D benefits are not payable “for any loss that is contributed to or caused
by . . . controlled substances . . . that are voluntarily taken, ingested or injected, unless
as prescribed or administered by a Physician.” AR 79. Benefits are also not payable
for any loss caused or contributed by “the presence of alcohol in the Covered Person’s
blood which raises a presumption that the Covered Person was under the influence
of alcohol and contributed to the cause of the accident.” Id.
Under the “Notice and Proof of Claim” provision of the Plan, “Satisfactory Proof
of loss must be given to Liberty Life no later than 30 days after the date of loss.” AR
85. “Failure to furnish such proof within [30 days] shall not invalidate or reduce any
claim if it was not reasonably possible” to provide proof in that time, but “[s]uch Proof
must by furnished as soon as reasonable possible, and in no event, except in the
absence of legal capacity of the claimant, later than one year from the time Proof is
otherwise required.” Id. Liberty Life also “reserves the right to determine if the
Covered Person’s Proof of loss is satisfactory,” id., and possesses “the authority, in its
sole discretion, to construe the terms of [the Plan Document] and to determine benefit
eligibility.” AR 84.
2

The “Appeal Process” provision of the Plan states:
Liberty will notify in writing any Covered Person or beneficiary whose
claim is denied in whole or part. That written notice will explain the
reasons for denial. If the claimant does not agree with the reasons given,
he may request an appeal of the claim. To do so, the claimant should
write to Liberty within 60 days after the notice of denial was received.
AR 82.
Under the “Legal Proceedings” provision of the Plan, “Legal actions are
contingent upon first having followed the Claims and Appeals procedure outlined in
this policy.” AR 84.
C.

The Claim

On January 30, 2016, John Anderson died while operating a snowmobile when
it collided with a tree. AR 29, 48. At the time of his death, the decedent had $45,000
in basic life coverage and $45,000 in AD&D coverage under the Plan. AR 25, 50. On
February 22, 2016, the decedent’s employer sent an “employee proof of death” form,
a death certificate, and a beneficiary designation form to Liberty Life. AR 49-52.
D.

The Documents Requests

On February 25, 2016, Liberty Life sent the beneficiary, Gale Anderson, a
letter stating that it “will proceed with our review of the [AD&D] claim submitted by
[BPC].” AR 42. Liberty Life also requested certain documents from him to complete
its investigation, including a police report, witness statements, a toxicology report,
an autopsy report, and a signed authorization. Id. The letter also recited the Plan’s
AD&D exclusions. AR 42-43.
On April 1, 2016, Liberty Life sent a second letter requesting the same list of
documents set forth in its February 25, 2016 letter. AR 39. On May 4, 2016, Liberty
3

Life sent a third letter, reducing its document requests to the police report, toxicology
report, and a signed authorization from Mr. Anderson in order to complete its
“investigation of the AD&D Benefits.” AR 36. Liberty Life sent two more letters to
Mr. Anderson requesting the same reduced set of documents on June 9, 2016, and
July 15, 2016. AR 30, 33.
On July 27, 2016, Liberty Life paid the beneficiary, Mr. Anderson, $45,000
through his attorney for basic life insurance benefits. AR 22, 25. In the letter
enclosing the payment for the basic life insurance claim, Liberty Life again requested
the expanded list of documents it first requested on February 25, 2016 in order to
complete its investigation of the AD&D claim. AR 22.
On August 25, 2016, Liberty Life spoke with the assistant to Mr. Anderson’s
attorney, who said she saw something come through the other day and that she would
send something to Liberty Life. AR 6. On August 29, 2016, Liberty Life left a
telephone message with Mr. Anderson’s attorney. Id. On August 31, 2016, Mr.
Anderson’s attorney advised Liberty Life that he had additional information that he
would send to Liberty Life by the end of the week. AR 5. Mr. Anderson’s attorney
said that he thought there was going to be a disagreement on the exclusion for
intoxication, and he indicated that he did not agree with the manner in which the
measurement was taken. AR 5-6.
On September 30, 2016 and October 31, 2016, Liberty Life left further
telephone messages for Mr. Anderson’s attorney. AR 5. Liberty Life sent another

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letter requesting the documents to Mr. Anderson’s attorney on November 2, 2016.
AR 18.
E.

The Denial

On December 5, 2016 Liberty Life sent another letter to Mr. Anderson’s
attorney requesting the documents. AR 15. In bold text, Liberty Life advised the
attorney:
Please note, if these documents have not been received within
the next 30 days or by January 05, 2017, the AD&D portion of
this claim will be closed due to failure to provide[.]
AR 15.
On January 11, 2017, Liberty Life sent Mr. Anderson’s attorney a letter
recounting the series of communications and informing him that no AD&D benefits
are payable under the Policy because “the requested documents for the AD&D claim
were not provided to Liberty within the Notice and Proof of Loss time frame required
under the policy.” AR 10-12. The denial letter also excerpted the “Notice and Proof
of Claim” provision, AR 11, and indicated that he “may request a review of this denial
by writing to the Liberty representative signing this letter” and “[i]f Liberty does not
receive your written request within 60 days of your receipt of this notice, our claim
decision will be final, this file will remain closed, and no further review of this claim
will be conducted.” AR 12.
There is no evidence in the record that Mr. Anderson appealed Liberty Life’s
adverse determination or that Mr. Anderson (or his counsel) ever sent the requested
documents to Liberty Life.

5

F.

The Lawsuit

On August 14, 2017, the Andersons1 filed a complaint with the Aroostook
County Superior Court alleging breach of contract and seeking declaratory judgment
and damages for $50,000 in AD&D coverage. Notice of Removal Attach 1 Compl.
(ECF No. 1). On September 5, 2017, Liberty Life removed the case to federal court.
Notice of Removal (ECF No. 1). On September 12, 2017, Liberty Life filed its Answer
to the Complaint. Answer (ECF No. 4).
On November 27, 2017, Liberty Life filed a motion for judgment on the record.
Def. Liberty Life Assurance Co. of Boston’s Mot. for J. on the R. for Judicial Review
(ECF No. 18) (Def.’s Mot.). On December 18, 2017, Mr. Anderson filed his response.
Pls.’ Resp. to Def.’s Mot. for J. on the R. for Judicial Review (ECF No. 19) (Pl.’s Opp’n).
After receiving permission from the Court, Liberty Life filed a reply on January 31,
2018. Def. Liberty Life Assurance Co. of Boston’s Reply Mem. (ECF No. 23) (Def.’s
Reply).

In a footnote, Liberty Life questions whether Nancy Anderson, as executor of the Decedent’s
Estate, is a proper plaintiff because she is not a beneficiary of the Plan and because the benefits are a
non-probate asset not distributed through the Estate. Def.’s Mot. at 6 n.3. The Plaintiffs did not
respond to that argument. Normally the Court would not need to address an argument raised in such
a manner. Nat’l Foreign Trade Council v. Natsios, 181 F.3d 38, 61 n.17 (1st Cir. 1999) (“We have
repeatedly held that arguments raised only in a footnote or in a perfunctory manner are waived”). But
the Court has a duty to assure itself of its jurisdiction, including Article III standing to sue, even when
parties have not raised the issue. See Pagan v. Calderon, 448 F.3d 16, 26 (1st Cir. 2006). For Ms.
Anderson to have standing, she must show (1) that she is suffering or is threatened with an injury-infact; (2) that there is a causal connection between Liberty Life’s action of which she complains and her
threatened injury; and (3) that action by the Court favorable to her would likely redress her threatened
injury. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-61 (1992). Although Ms. Anderson likely
has sincere personal concerns about the outcome of the case, she has not demonstrated that she is
suffering from or is threatened with an injury-in-fact because she has no legal interest in the funds at
stake. Accordingly, the Court dismisses Nancy Anderson from the case and refers only to Gale
Anderson for the remainder of the order. Even if Ms. Anderson were not dismissed, the Court’s
decision as to Gale Anderson would apply with equal force to Nancy Anderson and the result would be
the same as to her.
1

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II.

THE PARTIES’ POSITIONS
A.

Liberty Life’s Motion

Liberty Life argues that Mr. Anderson’s state law claims are preempted by the
Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. (ERISA).
Def.’s Mot. at 6-10; Notice of Removal at 2 (ECF No. 1). Liberty Life contends that
Mr. Anderson’s claim should be dismissed because he failed to exhaust the Plan’s
administrative remedies before filing suit. Id. 10-12. It claims the dismissal should
be with prejudice because Mr. Anderson’s time window to pursue an internal appeal
has expired. Id. at 12-14.
Liberty Life also points out that the Plan unambiguously confers discretionary
authority to construe the terms of the Plan and to determine benefits eligibility. Id.
at 14-15. It asserts that even if Mr. Anderson’s claims are not barred for failure to
exhaust internal remedies, Liberty Life did not abuse its discretion by denying his
claim for failing to provide information reasonably requested. Id. at 15-16. Liberty
Life maintains that its requests for records were reasonable and appropriate because
it made numerous requests over an extended period of time, the records were
pertinent to its investigation, and because Mr. Anderson’s counsel suggested he had
information adverse to Mr. Anderson’s claim but failed to produce it. Id. at 16-17.
Liberty Life submits that “any contrary ruling would send the wrongful message that
claimants may withhold any relevant, requested records that they deem adverse to
their claims.” Id. at 17.

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B.

Gale Anderson’s Response

Preliminarily, Mr. Anderson concedes that “this matter is subject to complete
preemption by ERISA.” Pl.’s Opp’n at 3-4. He “respectfully request[s] leave of the
Court to amend [his] Complaint pursuant to Federal Rules of Civil Procedure 15(a)(2)
to bring this matter in conformity with the pleading requirements of ERISA.” Id. at
4.
Next, Mr. Anderson asserts that Liberty Life’s motion for judgment on the
record should be treated as a motion for summary judgment, so “the Court should
view the record, and all inferences derived therefrom, in a light most favorable to
[him].” Id. at 1. Mr. Anderson claims there was a significant delay in receiving the
toxicology report from the Maine Warden’s Service, so he did not obtain it before
September 16, 2016 but intimates he did eventually send the report to Liberty Life.
Id. at 3; Def.’s Mot. at 16 n.8. Mr. Anderson does not dispute that ERISA preempts
the state law claims, and requests leave to amend his Complaint to bring it into
conformity with ERISA pleading requirements.2 Pl.’s Opp’n at 2.
Mr. Anderson claims that Liberty Life did not properly notify him of its denial
of benefits and right to appeal. Id. at 4. “[T]he letter of denial should have been sent,
or at the very least copied, to the beneficiary himself in accordance with the provisions
of the Plan and not solely to the attorney . . . .” Id. Mr. Anderson contends that
Liberty Life should be precluded from asserting failure to exhaust administrative
remedies, citing an ERISA regulation that requires, “In no event may such a period

Since the parties agree that ERISA completely preempts the state law claims, the Court
construes Mr. Anderson’s claims as actions brought to recover benefits under ERISA.
2

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expire less than 60 days after receipt by the claimant of written notification of denial
of claim.” Id. at 5 (citing 29 C.F.R. §2560.503-1(g)(3)) (emphasis supplied by Mr.
Anderson).
Mr. Anderson also submits that his claim should not be denied because the
modern trend is to require that an insurer show it was prejudiced by an insured’s
delay. Id. at 5-6 (citing Ouellette v. Maine Bonding & Cas. Co., 495 A.2d 1232 (Me.
1985)). He claims that Liberty Life has not shown it was prejudiced by the delays.
Id. at 6.
Mr. Anderson maintains that the language of the Plan, the December 5, 2016
letter, and the January 11, 2017 letters were “misleading in that a person of ordinary
intelligence would not conclude that he/she is giving up all rights of judicial review”
by declining to file an internal appeal “given the permissive and/or voluntary
language of those provisions setting forth a claimant’s appeal rights.” Id. at 6-9.
“Absent from the language of the Plan as well as from any correspondence sent by
Defendant was a statement or warning to the effect that by not requesting a review,
the Plaintiff[ ] w[as] effectively waiving [his] right to sue in federal court.” Id. at 7.
Mr. Anderson argues that the language in the plan that “[l]egal actions are contingent
upon first having followed the Claims and Appeals procedure outlined in this policy”
is an insufficient warning because, in choosing not pursue a review, a claimant has
not failed to comply with all claims and appeals procedures if that review process is
permissive or voluntary. Id.

9

Mr. Anderson argues that Liberty Life should be precluded from asserting
failure to exhaust administrative remedies because it imposed an arbitrary deadline
in closing the claim, quoting language in the plan: “Such Proof must be furnished as
soon as reasonably possible, and in no event, except in the absence of legal capacity
of the claimant, later than one year from the time Proof is otherwise required.” Id.
(quoting AR 85, emphasis supplied by Mr. Anderson). Mr. Anderson maintains that
“[s]ince February 25, 2016 was the first time in which ‘proof was otherwise required,’
the deadline to provide such proof was February 25, 2017.” Id.
Finally, Mr. Anderson maintains that even if his claim is to be dismissed for
failure to exhaust administrative remedies, it should be dismissed without prejudice.
Id. at 9 (citing Rivera-Diaz v. Am. Airlines, Inc., 229 F.3d 1133, 2000 WL 1022888,
2000 U.S. App. LEXIS 18008 (1st Cir. 2000)).
C.

Liberty Life’s Reply

Liberty Life replies to Mr. Anderson’s request that his Complaint be amended.
Def.’s Reply at 1. It states that it has no objection to the Court’s granting leave to
amend the Complaint to treat Mr. Anderson’s claim as arising out of § 502(a)(1)(B) of
ERISA. Id.
Liberty Life dismisses as baseless Mr. Anderson’s argument that notice of the
claim denial was ineffective because it sent the letter to Mr. Anderson’s attorney,
rather than to him directly, arguing that delivery to a plaintiff’s attorney is sufficient
notice to a plaintiff. Id. at 2-3. Likewise, Liberty Life denies that permissive
language avoids the exhaustion requirement in any case, but also Liberty Life doubts
whether Mr. Anderson was misled, emphasizing that Mr. Anderson was represented
10

by counsel. Id. at 3-4. Liberty Life points out that Mr. Anderson’s claims about when
he received and sent the toxicology report are not part of the record, are made without
affidavit, and when Liberty Life left further messages and sent letters between
September 20, 2016 and January 2017, Mr. Anderson never indicated that he had
already sent the toxicology report. Id. at 5.
Liberty Life insists that its decision to close Mr. Anderson’s claim was not
arbitrary because “the only reasonable interpretation” of the proof of loss provision
“is that is that a claimant may be excused from providing proof of loss within 30 days
of the loss if it was not reasonably possible to do so, provided that proof of loss is
submitted as soon as reasonably possible within a 395-day window (one year plus 30
days).” Id. at 6. Liberty Life rejects Mr. Anderson’s interpretation that “if it was
reasonably possible to submit proof of loss within say 95 days of the loss, a claimant
nonetheless may wait 300 more days to do so without any recourse.” Id. Liberty Life
also argues that Mr. Anderson’s citation to notice-prejudice requirements imposed on
liability insurers by some state courts do not apply to ERISA plans. Id. at 7-8.
Finally, Liberty Life argues that even if the toxicology report were part of the
record, the toxicology report confirms that the Decedent had a blood alcohol
concentration of .395, several times the amount that causes substantial impairment
in vehicle control, so its decision to deny the claim would not be arbitrary and
capricious even if Mr. Anderson’s lawsuit were not otherwise barred. Id. at 7.
III.

LEGAL STANDARD
“The decision to which judicial review is addressed is the final ERISA

administrative decision,” so parties ordinarily cannot admit “extra-administrative
11

record evidence . . . .” Orndorf v. Paul Revere Life Ins. Co., 404 F.3d 510, 519 (1st Cir.
2005). Courts review benefits decisions by plan administrators de novo, unless the
benefits plan grants the administrator discretion to make benefits decisions.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Terry v. Bayer Corp.,
145 F.3d 28, 37 (1st Cir. 1998). “[D]e novo review generally consists of the court’s
independent weighing of the facts and opinions” and “grants no deference to
administrators’ opinions or conclusions based on these facts.” Orndorf, 404 F.3d at
518; see also Richards v. Hewlett-Packard Corp., 592 F.3d 232, 239 (1st Cir. 2010).
Where, as here, a plan fiduciary has the discretion to determine eligibility for and
entitlement to benefits, the district court must uphold the fiduciary’s decision unless
it is “arbitrary, capricious, or an abuse of discretion.” Buffonge v. Prudential Ins. Co.
of Am., 426 F.3d 20, 28 (1st Cir. 2005); Glista v. Unum Life Ins. Co. of Am., 378 F.3d
113, 125 (1st Cir. 2004) (quoting Gannon v. Metro. Life Ins. Co., 360 F.3d 211, 212-13
(1st Cir. 2004)).
Under this standard, the plan administrator’s decision will be upheld so long
as the termination is both reasonable and supported by substantial evidence. Id. at
126; see also Leahy v. Raytheon Co., 315 F.3d 11, 17 (1st Cir. 2002) (“The arbitrary
and capricious standard asks only whether a factfinder’s decision is plausible in light
of the record as a whole . . .”). “Substantial evidence” means evidence reasonably
sufficient to support a conclusion. Doyle v. Paul Revere Life Ins. Co., 144 F.3d 181,
184 (1st Cir. 1998). Sufficient evidence is not nullified by the mere existence of

12

contradictory evidence. Id.; see also Gannon, 360 F.3d at 213 (“[T]he existence of
contrary evidence does not, in itself, make the administrator’s decision arbitrary”).
There is tension between the arbitrary and capricious standard and the usual
inferences at summary judgment:
The arbitrary and capricious standard asks only whether a factfinder’s
decision is plausible in light of the record as a whole, or, put another
way, whether the decision is supported by substantial evidence in the
record. The summary judgment standard, however, asks whether the
factfinder’s decision is inevitable even when all the evidence is
marshaled in the objecting party’s favor and all reasonable inferences
therefrom are shaped to fit that party’s theory of the case.
Leahy, 315 F.3d at 17 (internal citations omitted). The First Circuit acknowledges
that this dichotomy can be “baffling” but has concluded that it would “distort[ ] the
law” “to treat the summary judgment standard as if it permitted [courts] to review
the ingredients of the administrative record de novo, without deference to the plan
administrator’s findings . . . .” Id. at 17-18. Instead, “in a very real sense, the district
court sits more as an appellate tribunal than as a trial court. It does not take
evidence, but, rather, evaluates the reasonableness of an administrative
determination in light of the record compiled before the plan fiduciary.” Id.
The First Circuit resolves this tension by adapting the “procedural device” of
summary judgment to the ERISA context. “In such cases, ‘summary judgment is
simply a vehicle for deciding the issue,’ and, consequently, ‘the non-moving party is
not entitled to the usual inferences in its favor.’” Cusson v. Liberty Life Assur. Co. of
Boston, 592 F.3d 215, 224 (1st Cir. 2010) abrogated on other grounds by Montanile v.
Bd. of Trustees of Nat. Elevator Indus. Health Benefit Plan, 577 U. S. ____, 136 S. Ct.
651 (2016) (quoting Leahy, 315F.3d at 18, Orndorf, 404 F.3d at 517). Rather, “[i]t is
13

the responsibility of the [plan] administrator to weigh conflicting evidence.” Vlass v.
Raytheon Employees Disability Trust, 244 F.3d 27, 32 (1st Cir. 2001). The issue is
“‘not which side [the Court] believe[s] is right, but whether the insurer had
substantial evidentiary grounds for a reasonable decision in its favor.’” Brigham v.
Sun Life of Can., 317 F.3d 72, 85 (1st Cir. 2003) (quoting Doyle, 144 F.3d at 184)
(internal modifications omitted).
This unique procedural approach to ERISA appeals through motions for
judgment on the administrative record is reflected in the District of Maine’s local
rules specifically dedicated to claims under ERISA. See SPECIAL PROCEDURES
ERISA BENEFIT CASES, ERISA SURVEY

OF

FOR

FED. CIRCUITS § 1.VIII.D (2016) (“The

[district courts] typically require that the case be resolved on motions for summary
judgment (or, alternatively, motion for judgment on the administrative record) unless
a party can show cause for holding a trial or evidentiary hearing . . . .”) (citing D. ME.
LOCAL RULE 16.1(a)(6), 16.2(c)(4)).
IV.

DISCUSSION
A.

Amendment of the Pleadings

In his response, Mr. Anderson concedes that he may not proceed with his state
law claims because they are preempted by ERISA, and he proposes to amend his
Complaint to proceed solely on an ERISA claim. Pl.’s Opp’n at 1. But he never
formally moved to amend his Complaint nor did he submit a proposed amended
complaint for the Court to act on. At the same time, Liberty Life has no objection to
Mr. Anderson proceeding under § 502(a)(1)(B) of ERISA. Def.’s Reply at 1. Although
unconventional, the Court views this byplay between the Plaintiff and Defendant as
14

effectively trying the ERISA issue by consent under Federal Rule of Civil Procedure
15(b)(2). The Court also interprets Mr. Anderson’s memorandum as a motion to
dismiss his state law claims, and the Court does so with prejudice because Mr.
Anderson concedes that he may not proceed with his state law claims as they are
subject to “complete preemption.” Pl.’s Opp’n at 3-4.
B.

Mr. Anderson’s claim is barred and even if were not, Liberty
Life’s denial was not an abuse of discretion

“ERISA requires employee benefit plans to provide any participant whose
claim for benefits is denied with an opportunity for review by the fiduciary denying
the claim.” Drinkwater v. Metro. Life Ins. Co., 846 F.2d 821, 825 (1st Cir. 1988). “[A]
claimant must have exhausted the plan’s administrative remedies before bringing
suit to recover benefits . . . unless ‘the administrative route is futile or the remedy
inadequate.’” Terry, 145 F.3d at 40 (quoting Drinkwater, 846 F.2d at 826); Medina v.
Metro. Life Ins. Co., 588 F.3d 41, 47 (1st Cir. 2009). Claimants must also exhaust the
internal appeals process in a timely manner. Terry, 145 F.3d at 40.
There is no dispute that Mr. Anderson chose not to pursue an internal appeal
with Liberty Life. Since the sixty-day time window for an internal appeal elapsed
before Mr. Anderson brought his legal challenge, his lawsuit is barred unless an
exception to the exhaustion doctrine applies or unless there was some material defect
in Liberty Life’s notice or procedures relating to the denial of his claim. Mr. Anderson
“has not attempted to make any showing of futility or inadequacy,” so those
exceptions do not apply. See id.

15

1.

Liberty Life’s notice of denial was not defective simply
because it sent the letter to Mr. Anderson’s attorney,
rather than to Mr. Anderson himself

Mr. Anderson’s first argument—that Liberty Life’s denial letter was defective
because it was sent to his attorney rather than to Mr. Anderson personally—fails
because “[i]n contemplation of law, notice to the attorney is notice to the claimant.”
Loubriel v. Fondo del Seguro del Estado, 694 F.3d 139, 143 (1st Cir. 2012). Mr.
Anderson cites no authority for his argument, and the Court did not locate any
support within ERISA or the caselaw. See Irwin v. Dep't of Veterans Affairs, 498 U.S.
89, 93 (1990) (“If Congress intends to depart from the common and established
practice of providing notification through counsel, it must do so expressly”). To the
contrary, for the claim procedures for a plan to be deemed “reasonable” under ERISA,
the procedures must not “preclude an authorized representative of a claimant from
acting on behalf of such claimant in pursuing a benefit claim or appeal of an adverse
benefit determination.” 29 C.F.R. § 2560.503-1(b)(4). Furthermore, Mr. Anderson
conspicuously does not contend that he was prejudiced because his attorney never
received the letter or never informed him about the letter.
2.

Liberty Life need not show that it was prejudiced by Mr.
Anderson’s delay

Some states prohibit insurers from denying claims because the claimant failed
to provide notice of loss within the policy’s time limits unless the insurer shows it was
prejudiced by the claimant’s delay.

Under UNUM Life Insurance Company of

America v. Ward, 526 U.S. 358, 367-73 (1999), if the applicable state law imposes a
notice-prejudice rule, ERISA does not preempt application of that rule to an untimely

16

initial claim for benefits under an ERISA plan.

See Fortier v. Hartford Life &

Accident Ins. Co., No. 16-cv-322-LM, 2017 WL 4011147, 2017 U.S. Dist. LEXIS
146251, at *16-19 (D.N.H. Sept. 11, 2017). Maine has adopted a notice-prejudice rule
for liability insurers. See Ouellette v. Maine Bonding & Cas. Co., 495 A.2d 1232, 1235
(Me. 1985) (“[T]o avoid either its duty to defend or its liability thereunder based on
an insured’s delay in giving notice, a liability insurer must show (a) that the notice
provision was in fact breached, and (b) that the insurer was prejudiced by the
insured’s delay”); Franco v. Selective Ins. Co., 184 F.3d 4, 7 (1st Cir. 1999) (“Under
Maine law, a failure to give notice will only excuse an insurer if the insurer—who
bears the burden—can show that it was prejudiced by the lack of notice”); Spellman
v. UPS, 540 F. Supp. 2d 237, 247, n.38 (D. Me. 2008) (“The Maine law also resembles
the notice-prejudice rule that the Supreme Court upheld in UNUM”).
Other courts have declined to apply state notice-prejudice rules in the ERISA
context where, as here, the state law is limited to initial claims in the liability
insurance context. See Monast v. Johnson & Johnson, 680 F. Supp. 2d 299, 306 (D.
Mass. 2010) (“the fact that the state legislature has expressly limited the rule to
liability insurers weighs heavily against extending the rule to disability insurers”)
(quoting Walley v. Agri–Mark Inc., 2002 WL 1796917, *2, 2002 U.S. Dist. LEXIS
14268, *6 (D. Mass. 2002)). Even if the Court interpreted Maine’s notice-prejudice
rule to cover initial ERISA claims, it provides little assistance to Mr. Anderson. His
claim was not denied for failing to file his initial claim in a timely manner. His claim
was denied nearly a year afterward for failing to provide required documents. Mr.

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Anderson has not explained why Liberty Life’s denial for this separate reason would
fall within the scope of Maine’s notice-prejudice rule covering late-filed claims.
But the Court need not decide whether Maine’s notice-prejudice rule from the
liability insurance context applies to initial ERISA claims because, even assuming
that the notice-prejudice rule applies to Mr. Anderson’s initial claim for AD&D
benefits and that Liberty Life failed to demonstrate prejudice from the delay in
producing documents, the rule is different when addressing untimely ERISA appeals.
Mr. Anderson should have presented his notice-prejudice argument to the plan
during an internal appeal, but he chose not to appeal Liberty Life’s denial.
The federal courts that have considered similar requests to extend the noticeprejudice requirement yet another step to ERISA appeals have not required ERISA
plans to show they were prejudiced by claimants’ delay in pursing internal appeals.
See Edwards v. Briggs & Stratton Ret. Plan, 639 F.3d 355, 363 (7th Cir. 2011) (“state
notice-prejudice rules typically apply only to initial denials of benefits”); Chang v.
Liberty Life Assur. Co. of Boston, 247 F. App’x 875, 878 (9th Cir. 2007) (unpublished)
(“There is no California nor federal case that has applied a notice-prejudice rule
outside the initial review context” Fortier v. Hartford Life & Accident Ins. Co., No. CV
16-CV-322-LM, 2017 WL 4011147, *6, 2017 U.S. Dist. LEXIS 146251, *17 (D.N.H.
Sept. 11, 2017) (noting that one district court, in dictum, suggested that noticeprejudice rule could apply, but collecting cases declining to extend the rule to
untimely ERISA appeals). This approach makes sense, since extending the noticeprejudice rule to untimely ERISA appeals would significantly frustrate the

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exhaustion requirement that the federal courts have consistently enforced in the
ERISA context.
3.

There is an emerging exhaustion exception for
misleadingly permissive terms or notices, but it does not
assist Mr. Anderson because he was represented by
counsel and has not shown that he was actually misled

The federal courts of appeals are divided on the propriety of plans using
permissive rather than mandatory language in the provisions and notices governing
internal appeals processes and deadlines. One circuit concluded that permissive
language informing claimants that they “may” appeal their denial is sufficient to bar
subsequent lawsuits when claimants do not exhaust those internal remedies. See
Wert v. Liberty Life Assur. Co. of Boston, 447 F.3d 1060, 1063 (8th Cir. 2006) (“This
exhaustion requirement applies so long as the employee has notice of the procedure,
even if the plan, insurance contract, and denial letters do not explicitly describe the
review procedure as mandatory or as a prerequisite to suit”).
Four circuits concluded that permissive language can be misleading, and that
in order to bar subsequent lawsuits for failing to exhaust internal appeals, plans will
often need to use mandatory language, such as informing claimants that they “must”
pursue an internal appeal in order to file suit later. See Spinedex Physical Therapy
USA Inc. v. United Healthcare of Arizona, Inc., 770 F.3d 1282, 1298-99 (9th Cir. 2014)
(“Where plan documents could be fairly read as suggesting that exhaustion is not a
mandatory prerequisite to bringing suit, claimants may be affirmatively misled by
language that appears to make the exhaustion requirement permissive when in fact
it is mandatory as a matter of law”; Kirkendall v. Halliburton, Inc., 707 F.3d 173,

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180-81 (2d Cir. 2013) (“This exception to the general exhaustion requirement is
grounded in the statutory dictate that the plan description “‘shall be written in a
manner calculated to be understood by the average plan participant, and shall be
sufficiently accurate and comprehensive to reasonably apprise such participants and
beneficiaries of their rights and obligations under the plan’”) (quoting 29 U.S.C. §
1022(a)); Watts v. BellSouth Telecommunications, Inc., 316 F.3d 1203, 1207-09 (11th
Cir. 2003) (“The claim ought not to be barred by the doctrine of exhaustion if the
reason the claimant failed to exhaust is that she reasonably believed, based upon
what the summary plan description said, that she was not required to exhaust her
administrative remedies before filing a lawsuit”); Gallegos v. Mount Sinai Med. Ctr.,
210 F.3d 803, 810-11 (7th Cir. 2000) (same, on estoppel grounds).
Mr. Anderson has a point that the denial letter and plan terms might have
been misleading to an ordinary claimant. The denial letter says, “[Y]ou may request
a review of this denial by writing to the Liberty representative signing this letter”
(emphasis supplied), but also says, “If Liberty does not receive your written request
within 60 days of your receipt of this notice, our claim decision will be final, this file
will remain closed, and no further review of this claim will be conducted.” AR 12.
While the passive voice in the latter sentence creates some ambiguity, the context
ensures that the average reader will believe this refers only to review by Liberty Life,
not by a court.3 With no mention of other legal remedies, ordinary readers are

If the sentence were rewritten using the active voice, an ordinary reader would assume it
would say: “If Liberty does not receive your written request within 60 days of your receipt of this notice,
Liberty’s claim decision will be final, we will continue to keep your file in closed status, and we will
3

20

unlikely to realize they sacrifice their legal remedies by failing to request an internal
appeal. The Plan does state that “legal actions are contingent upon first having
followed the Claims and Appeals procedure,” AR 84, but that Appeals Process
provision says, “If the claimant does not agree with the reasons given, he may request
an appeal of the claim. To do so, the claimant should write to Liberty within 60 days
after the notice of denial was received.” AR 82 (emphasis supplied). Neither the
denial letter nor the terms of the plan uses the kind of mandatory language or clear
warning about exhaustion that would inform ordinary claimants that they forfeit
their ability to challenge adverse decisions in court if they decline what reasonably
appears to be a voluntary or optional internal appeal.
Unlike the ordinary claimant that ERISA and its regulations seek to protect,
however, Mr. Anderson was represented by counsel throughout his claim process.
Liberty Life sent the denial letter to his attorney. Mr. Anderson has not produced
any evidence that he failed to exhaust only because he relied upon the permissive
language in the denial notice and Plan and thus reasonably determined that he did
not need to timely request an internal appeal before filing this lawsuit. In these
circumstances, under even the more lenient cases recognizing an exception to the
exhaustion requirement, Mr. Anderson needed to exhaust his internal remedies. See
Kirkendall, 707 F.3d at 181 (asking “whether [the plaintiff] failed to exhaust her
administrative remedies because of this ambiguity; that is, whether she did indeed
reasonably interpret the plan terms not to require her to file a benefits claim”); Watts,

conduct no further review of this claim.” Read in this fashion, the language in this sentence could not
reasonably be seen as barring a lawsuit.

21

316 F.3d at 1208 (“To attorneys and judges familiar with the law in general and with
ERISA law in particular, it may seem obvious that administrative remedies must
come before a lawsuit, but to the average plan participant, who by virtue of being an
ERISA claimant will sometimes be sick or disabled, there is nothing obvious about
it”); Gallegos, 210 F.3d at 811 (recognizing an exception to the exhaustion doctrine
for misleading permissive language but declining to apply it to the plaintiff because
“[she] has not demonstrated that she relied on [the plan’s] representations to her
detriment because she has not shown that but for [the plan’s] representations she
would have filed an administrative appeal within the 60–day limitations period”).
4.

Liberty Life’s requests for documents were reasonable

Mr. Anderson’s final argument—that Liberty Life improperly closed his claim
by imposing an arbitrary deadline for him to submit proof of his claim—goes to the
question of exhaustion and the merits of Liberty Life’s denial. The argument fails for
both purposes. Mr. Anderson cites no authority for this contention. Other courts
have upheld denials for failure to provide reasonably requested documents. See e.g.,
Heffernan v. UNUM Life Ins. Co. of America, 101 Fed. Appx. 99, 107 (6th Cir. 2004)
(unpublished); Bali v. Blue Cross & Blue Shield Ass’n, 873 F.2d 1043, 1048 (7th Cir.
1989), disapproved of on other grounds by Diaz v. Prudential Ins. Co. of Am., 424 F.3d
635 (7th Cir. 2005). It is Mr. Anderson who presents a strained interpretation of the
Notice and Proof of Claim provision. Liberty Life need not adopt Mr. Anderson’s view
that the plan’s outer limit on providing proof after 395 days following the date of loss
works to protect claimants from denials for failure to provide proof “as soon as
reasonably possible” before the 395 day hard deadline. Even if the Court agreed with
22

Mr. Anderson’s interpretation of the provision, the Court’s review of plan
interpretations is cabined. Liberty Life’s interpretation—that the provision requiring
claimants to provide proof “as soon as reasonably possible” allows it to deny claims
after repeated unanswered requests over the course of a year and thirty days’ notice
that denial is imminent—was not an abuse of discretion.
It would be different if a plan made unreasonably hasty demands for
documents or prematurely closed a claim on a claimant working diligently to obtain
the information, but this record shows a series of reasonable requests over an
extended period of time. The denial was not arbitrary or unreasonable, especially
because Mr. Anderson admits he gained access to the toxicology report roughly four
months before Liberty Life closed his claim, and there are indications in the record
that he likely had access to the contents of the report at least a month before that.
Mr. Anderson now hints at an apparently unsuccessful attempt to send the report,
but that assertion was not in an affidavit, there is no trace of it in in the ERISA
record, and Mr. Anderson has not sought to modify or supplement the record.
Accordingly, the Court concludes that Mr. Anderson’s lawsuit is barred for
failing to exhaust the Plan’s internal appeal remedies, and even if not barred, the
denial for failure to submit proof was not an abuse of discretion.
C.

Dismissal with prejudice is proper

When a plaintiff fails to exhaust administrative remedies, courts ordinarily
dismiss without prejudice so that the claimant might correct the oversight by properly
pursuing the alternate remedies and, if still necessary, refile the lawsuit. See LebronRios v. U.S. Marshal Serv., 341 F.3d 7, 14 (1st Cir. 2003). But when the claimant will
23

be unable to properly exhaust and refile, courts often dismiss with prejudice. See e.g.,
Downs v. Runyon, 99 F.3d 1138, 1996 WL 616718, *1, 1996 U.S. App. LEXIS 27811,
*3 (6th Cir. 1996) (unpublished); McGuinness v. U.S. Postal Serv., 744 F.2d 1318,
1321 (7th Cir. 1984) (“If it were certain that McGuinness could get nowhere with the
Postal Service’s remedial processes, there would be no point in giving him a chance
to go back to them; it would be clear that his suit was untimely, and it would have to
be dismissed with prejudice”); Labiosa-Herrera v. Puerto Rico Tel. Co., 153 F. Supp.
3d 541, 548 (D.P.R. 2016) (“If plaintiff could file a new complaint within the 300 day
statutory time frame, she could remedy the exhaustion problem. The 300–day period
for the suspension and Espinoza’s comment, however, expired in January 2013.
Therefore, it is proper to dismiss plaintiff[’s] claims with prejudice”) (internal
citations omitted); Navarro v. Wall, No. C.A. 08-12ML, 2008 WL 4890756, *4 (D.R.I.
Nov. 12, 2008).
Several courts concluded that a dismissal for failure to exhaust ERISA plan
remedies should be with prejudice when the time window to pursue those remedies
lapsed before the claimant filed suit. See e.g. Holmes v. Proctor & Gamble Disability
Benefit Plan, 228 F. App’x 377, 379 (5th Cir. 2007) (unpublished); Gayle v. United
Parcel Serv., Inc., 401 F.3d 222, 230 (4th Cir. 2005); Malke v. Metro. Life Ins. Co., No.
CIV.A. 11-11571-DPW, 2012 WL 6738250, *2, 2012 U.S. Dist. LEXIS 182230, *5 (D.
Mass. Dec. 27, 2012).
While the First Circuit has not expressly given such an instruction, it is the
logical implication of its decision in Terry v. Bayer Corporation. 145 F.3d at 40. The

24

Terry Court upheld the district court’s grant of summary judgment in favor of the
plan’s Benefit Committee after the Benefit Committee denied the plaintiff’s claim
because the plaintiff did not timely file his ERISA administrative appeal within the
sixty-day window under the plan. Id. The Court is persuaded that there would be no
point in dismissing without prejudice so that Mr. Anderson can exhaust his internal
remedies by pursuing an appeal with Liberty Life, when Liberty Life would
immediately deny that internal appeal as untimely, and when a court would uphold
that denial under Terry if challenged in another lawsuit.
An unpublished case from the First Circuit, Rivera-Diaz v. Am. Airlines, Inc.,
229 F.3d 1133, 2000 WL 1022888, *1, 2000 U.S. App. LEXIS 18008, *2-4 (1st Cir.
2000), does not alter this conclusion. In Rivera-Diaz, the First Circuit “dismissed
without prejudice” on exhaustion grounds because, unlike here, the plaintiff in that
case had never successfully filed a claim with the ERISA plan, “[t]hus, his claim for
denial of benefits, whether under ERISA or in tort, appear[ed] not yet to have
accrued.” Id.
Mr. Anderson specifically requests a dismissal without prejudice “based upon
a finding that the administrative process was closed prematurely” and based on his
contention that his claim for benefits should “be decided upon the merits.” Pl.’s Opp’n
at 9-10.

However, the Court has concluded that Liberty Life did not close the

administrative process prematurely and that Liberty Life was within its rights to
consider the matter closed when Mr. Anderson failed to respond to repeated requests
for relevant documents and failed to administratively appeal its denial. To dismiss

25

without prejudice would give Mr. Anderson false hope that his claim can be revived
and could well result in further litigation and expense for both parties, when the
ultimate result in favor of Liberty Life is preordained.
A dismissal without prejudice in the circumstances of Rivera-Diaz follows the
usual approach and is consistent with the Court’s approach here, where it dismisses
with prejudice only because the time in which the claimant could have exhausted has
long since elapsed.
V.

CONCLUSION
The Court GRANTS Plaintiff Gale Anderson’s motion to dismiss Counts One

and Two of his Complaint; the Court dismisses each Count with prejudice. Pursuant
to Federal Rule of Civil Procedure 15(b)(2), the Court GRANTS Plaintiff Gale
Anderson’s motion to amend his Complaint to assert under Count Three a claim for
benefits under § 502(a)(1)(B) of ERISA.
The Court DISMISSES Plaintiff Nancy Anderson because she does not have
standing to make a claim for benefits under the Liberty Life Assurance Company of
Boston policy.
The Court GRANTS Defendant Liberty Life Assurance Company of Boston’s
Motion for Judgment on the Record for Judicial Review (ECF No. 18) on Count Three
of the Amended Complaint. The Court DISMISSES with prejudice Gale Anderson’s
Complaint (ECF No. 1).
SO ORDERED.

/s/ John A. Woodcock, Jr.
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JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 20th day of July, 2018

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