Peppiatt v. Aetna Life Insurance Company et al
MEMORANDUM OF DECISION & ORDER - For the reasons stated above, the Defendants' motion for judgment on the pleadings, dismissing the complaint pursuant to Rule 12(c), is granted, as the Plaintiff has failed to exhaust her administrative remedies. The Clerk of the Court is directed to close this case. Further, the Defendants Motion to Dismiss, ECF No. 10 , is denied as moot. SEE ATTACHED DECISION for details. So Ordered by Judge Arthur D. Spatt on 12/4/2017. (Coleman, Laurie)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
SANDRA A. PEPPIATT,
DECISION & ORDER
-againstAETNA LIFE INSURANCE COMPANY, and
BANK OF AMERICA CORPORATION,
Counsel for the Plaintiff
830 Third Avenue, 5th Floor
New York, NY 10022
Robert J. Axelrod, Esq., Of Counsel
DLA Piper LLP
Counsel for the Defendants
1251 Avenue of the Americas
New York, NY 10020
Michael D. Hynes, Esq.,
Brian H. Benjet, Esq., Of Counsel
SPATT, District Judge:
This is an Employee Retirement Income Security Act (“ERISA”) action commenced by
Sandra A. Peppiatt (“Peppiatt” or the “Plaintiff”) against the Defendants, Aetna Life Insurance
Company (“Aetna”), and Bank of America Corporation (“Bank of America”) (collectively the
“Defendants”). The complaint alleges that the Defendants refused to cover a trial implantation of
a neurostimulator pulse generator to treat the Plaintiff’s severe intractable supraorbital neuralgia.
The Plaintiff asserts that such actions violate ERISA § 502(a)(1)(B) and ERISA § 502(a)(3)
seeking unpaid benefits and interest.
Presently before the Court are two motions by the Defendants, one to dismiss Counts II
and IV of the Plaintiff’s complaint, pursuant to Federal Rule of Civil Procedure (“FED. R. CIV. P.”
or “Rule”) 12(b)(6), and a second for judgment on the pleadings, dismissing the complaint
pursuant to Rule 12(c).
For the following reasons, the Court grants the Defendants’ motion for judgment on the
pleadings, dismissing the complaint pursuant to Rule 12(c) and denies the motion to dismiss Count
II and IV of the Plaintiff’s complaint, pursuant to Rule 12(b)(6) as moot.
A. THE FACTUAL BACKGROUND
The Plaintiff suffers from severe intractable supraorbital neuralgia, a condition that causes
throbbing, paroxysmal, or constant pain that is present in the sub-occipital region as well as other
parts of the posterior scalp. Complaint ¶ 1.
On December 5, 2011, the Plaintiff was unsuccessfully treated for the condition with
Gamma Knife radiosurgery treatment, a procedure that focuses a high dose of radiation. Id. ¶ 17.
Approximately ten months later, on October 19, 2012, the Plaintiff underwent a rhizotomy,
a surgical procedure which severed nerve roots in her spinal cord. Id. ¶ 18.
On December 2, 2013, Peppiatt underwent another rhizotomy as well as MVD or
microvascular decompression. Id. ¶ 19.
After failing to respond to these procedures, the Plaintiff’s neurological surgeon informed
her of another treatment option, neuromodulation, which would require the insertion of trial and
permanent peripheral nerve stimulating electrodes (the “Procedure”). Id. ¶ 20.
On February 1, 2016, Aetna, the insurance company that provided third-party
administration services to Bank of America, the parent company of the Plaintiff’s employer,
responded to a letter from the Plaintiff’s neurological surgeon informing the provider that the
Procedure was not covered under the Plaintiff’s insurance plan, a Bank of America Health &
Insurance Group Benefits Program (the “Plan”). Id. ¶¶ 14-15, 21.
The Plaintiff’s neurological surgeon sent a letter to Aetna on February 24, 2016 which
objected to Aetna’s denial of coverage and requested that the company reconsider its decision. Id.
¶ 23. The Plaintiff also sent Aetna a letter on March 1, 2016, stating in pertinent part, “I would
like to appeal this decision.” Declaration of Robert J. Axelrod in Support of Plaintiff’s Opposition
to Aetna Life Insurance Company and Bank of American Corporation’s Joint Motion for Judgment
on the Pleadings (“Axelrod Decl.”), Exhibit 6.
On March 31, 2016, Aetna upheld its decision and refused to grant an appeal as to this
“precertification request.” Complaint ¶ 24; Axelrod Decl., Exhibit 3.
On April 13, 2016, Aetna again upheld its decision, stating in pertinent part:
We were asked if a medical procedure or service would be covered by your
insurance plan. With this review, your request has reached the final level of review
available through us. A Medical Director who was not involved in previous
determinations reviewed your request with all supporting documentation
submitted. After review, it has been determined that the proposed service(s) would
not be eligible … Because pre-service approval is not a requirement for coverage
of this service under the member’s plan, this is a courtesy evaluation of the
proposed service(s). Therefore, there is no formal right to appeal this evaluation
decision. … A final determination regarding coverage is not made until a claim for
services is submitted. If a claim for services is submitted and denied, there will be
an opportunity to appeal the claim denial determination at that time.
Complaint ¶ 25; Axelrod Decl., Exhibit 1.
On July 26, 2016, the Plaintiff requested an independent medical review. Complaint ¶ 26.
On August 4, 2016, Aetna sent a letter stating in pertinent part, “Please disregard our appeal
decision letter dated March 31, 2016. The procedures under review do not require precertification
… Because the procedures do not require precertification, they are not eligible for the appeal
process, which means they are not eligible for external review.” Id. ¶ 27; Axelrod Decl., Exhibit
On August 8, 2016, Aetna sent another letter to the Plaintiff, stating in pertinent part, “We
previously performed a full and final review of your predetermination request. After that review,
we let you and your physician know that our determination was final. There will be no further
internal reviews available for this predetermination request.” Complaint ¶ 28.
The Plaintiff opted to surgically implant the trial trigeminal stimulating electrode on
September 20, 2016. One week later, the Plaintiff had the trial electrode removed and the
permanent peripheral nerve stimulating electrode and implantable pulse generator inserted. Id. ¶¶
29-30. Peppiatt reported to her neurological surgeon in follow-up visits in 2016 and 2017 that
subsequent to the Procedure, she was not experiencing pain. Id.
Aetna ultimately denied coverage of the procedure in a series of Explanations of Benefits
(“EOBs”). The Plaintiff paid $117,351 out-of-pocket for the Procedure. Id. ¶ 58.
In the Plaintiff’s complaint, she lists two EOBs, one from October 18, 2016 and one from
December 13, 2016 in which Aetna denied Peppiatt’s claims which were for the sum of
$205,946.11. Id. The Defendants contend that Aetna sent the Plaintiff five EOBs denying the
Plaintiff’s claims for the Procedure, dated December 6, 2016, December 27, 2016, February 1,
2017, February 14, 2017 and February 15, 2017. Declaration of Shelly L. Bender in Support of
Defendants’ Motion for Judgment on the Pleadings (“Bender Decl.”), Exhibit B.
According to the Bank of America Health & Insurance Summary Plan Description (“Plan
Description”), the Plaintiff must appeal a denial of benefits after receiving services within 180
days after receiving the adverse determination. Bender Decl., Exhibit A at 220.
The Plan Description states, in pertinent part, “If you fail to file a request for review within
the required time period, you’re considered to have permanently waived and abandoned your claim
and you may not refile it. … You can bring a civil action against a component plan for benefits,
but only after you’ve exhausted your administrative review rights under that plan.” Id. at 218-19.
On April 24, 2017, the Plaintiff initiated the instant action by filing the complaint.
A. STANDARD OF REVIEW: FED. R. CIV. P. 12(C)
The standard of review for a motion for a judgment on the pleadings pursuant to Rule 12(c)
is the same as a motion to dismiss a complaint pursuant to Rule 12(b)(6). Irish Lesbian & Gay
Org. v. Giuliani, 143 F.3d 638, 644 (2d Cir. 1998).
In considering a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept the
factual allegations set forth in the complaint as true and draw all reasonable inferences in favor of
the Plaintiff. See, e.g., Walker v. Schult, 717 F.3d 119, 124 (2d Cir. 2013); Cleveland v. Caplaw
Enters., 448 F.3d 518, 521 (2d Cir. 2006); Bold Elec., Inc. v. City of New York, 53 F.3d 465, 469
(2d Cir. 1995); Reed v. Garden City Union Free Sch. Dist., 987 F. Supp. 2d 260, 263 (E.D.N.Y.
Under the Twombly standard, the Court may only dismiss a complaint if it does not contain
enough allegations of fact to state a claim for relief that is “plausible on its face.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007). The Second
Circuit has expounded that, after Twombly, the Court’s inquiry under Rule 12(b)(6) is guided by
First, although a court must accept as true all of the allegations contained in a
complaint, that tenet is inapplicable to legal conclusions, and [t]hreadbare recitals
of the elements of a cause of action, supported by mere conclusory statements, do
not suffice. Second, only a complaint that states a plausible claim for relief survives
a motion to dismiss and [d]etermining whether a complaint states a plausible claim
for relief will . . . be a context-specific task that requires the reviewing court to draw
on its judicial experience and common sense.
Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 664, 129
S. Ct. 1937, 1940, 173 L. Ed. 2d 868 (2009)).
A complaint must include “a short and plain statement of the claim showing that the pleader
is entitled to relief,” in order to survive a motion to dismiss. FED. R. CIV. P. 8(a)(2). Under Rule
8, a complaint is not required to allege “detailed factual allegations.” Kendall v. Caliber Home
Loans, Inc., 198 F. Supp. 3d 168, 170 (E.D.N.Y. 2016) (quoting Twombly, 550 U.S. at 555). “In
ruling on a motion pursuant to FED. R. CIV. P. 12(b)(6), the duty of a court ‘is merely to assess the
legal feasibility of the complaint, not to assay the weight of the evidence which might be offered
in support thereof.’” DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 113 (2d Cir. 2010) (quoting
Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998)). The Court “[is] not bound to accept as true
a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555.
“[F]ederal courts have complete discretion to determine whether or not to accept the
submission of any material beyond the pleadings offered in conjunction with a Rule 12(b)(6)
motion.” Giugliano v. F3² Capital Partners, LLC, No. 14-cv-7240, 2015 WL 5124796 (E.D.N.Y.
Sept. 1, 2015) (Spatt, J.) (citation and quotation marks omitted). In adjudicating this motion, the
Court is permitted to consider:
(1) facts alleged in the complaint and documents attached to it or incorporated in it
by reference, (2) documents “integral” to the complaint and relied upon in it, even
if not attached or incorporated by reference, (3) documents or information
contained in [the] defendant’s motion papers if plaintiff has knowledge or
possession of the material and relied on it in framing the complaint, (4) public
disclosure documents required by law to be, and that have been, filed with the
Securities and Exchange Commission, and (5) facts of which judicial notice may
properly be taken under Rule 201 of the Federal Rules of Evidence.
Environmental Servs. v. Recycle Green Servs., 7 F. Supp. 3d 260, 270 (E.D.N.Y. 2014) (Spatt, J.)
(emphasis added) (quoting In re Merrill Lynch & Co., 273 F. Supp. 2d 351, 356-57 (S.D.N.Y.
2003), aff’d in part and vacated in part on other grounds sub nom. Dabit v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 395 F.3d 25 (2d Cir. 2005), vacated on other grounds, 547 U.S. 71, 126 S.
Ct. 1503, 164 L. Ed. 2d 179 (2006)); accord Oberstein v. SunPower Corp., No. 07-cv-1155, 2010
WL 1705868, at *3 (E.D.N.Y. April 28, 2010); Healthnow New York, Inc. v. Catholic Health Sys.,
Inc., No. 14-cv-986S, 2015 WL 5673123 (W.D.N.Y. Sept. 25, 2015). The Court notes that Aetna’s
administrative record and the Plan Description are well within this Court’s discretion to consider
for the purposes of deciding the instant motion.
B. THE PLAINTIFF FAILED TO EXHAUST HER ADMINISTRATIVE REMEDIES
The Defendants argue that the Plaintiff failed to exhaust the administrative remedies
available under her plan and, as a result, her claims must be dismissed.
While ERISA does not contain an exhaustion requirement, Kirkendall v. Halliburton, Inc.,
707 F.3d 173, 179 (2d Cir. 2013), before a plaintiff may bring an action under ERISA, she must
exhaust the administrative remedies detailed in her plan. See Eastman Kodak Co. v. STWB, Inc.,
452 F.3d 215, 219 (2d Cir. 2006) (“ERISA requires … that plan participants avail themselves of
[claims] procedures before turning to litigation.” (internal citations omitted)); see also Heimeshoff
v. Hartford Life & Acc. Ins. Co., – U.S. –, 134 S. Ct. 604, 610, 187 L. Ed. 2d 529 (2013) (noting
that Federal Courts “have uniformly required that participants [in ERISA plans] exhaust internal
review before bringing a claim for judicial review”); Burke v. PriceWaterHouseCoopers LLP Long
Term Disability Plan, 572 F.3d 76, 79 (2d Cir. 2009) (per curiam) (“[A]n ERISA action may not
be brought in federal court until administrative remedies are exhausted.”); Chapman v.
ChoiceCare Long Island Term Disability Plan, 288 F.3d 506, 511 (2d Cir. 2002) (“We require
exhaustion of benefit claims brought under ERISA[.]”). The purposes behind such a requirement
(1) uphold Congress' desire that ERISA trustees be responsible for their actions, not
the federal courts; (2) provide a sufficiently clear record of administrative action if
litigation should ensue; and (3) assure that any judicial review of fiduciary action
(or inaction) is made under the arbitrary and capricious standard, not de novo.
Kennedy v. Empire Blue Cross & Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993).
In the Second Circuit, “a failure to exhaust ERISA administrative remedies is not
jurisdictional, but is an affirmative defense.” Paese v. Hartford Life & Accident Ins. Co., 449 F.3d
435, 446 (2d Cir. 2006); accord Am. Med. Ass’n v. United HealthCare Corp., No. 00-cv-2800,
2007 WL 1771498, at *5 (S.D.N.Y. June 18, 2007) (stating that “[w]hile the ERISA exhaustion
requirement is not jurisdictional, neither is it an insignificant procedural hurdle”).
However, “courts routinely dismiss ERISA claims … on a 12(b)(6) motion to dismiss
where the plaintiff fails to plausibly allege exhaustion of remedies.” Abe v. New York Univ., No.
14-civ.-9323, 2016 WL 1275661, at *5 (S.D.N.Y. Mar. 30, 2016) (collecting cases); see also
Zarringhalam v. United Food & Commercial Workers Int’l Union Local 1500, 906 F. Supp. 2d
140, 152 (E.D.N.Y. 2012) (“A failure to exhaust administrative remedies provides grounds for
dismissal or summary judgment in favor of the opposing party.”); Greifenberger v. Hartford Life
Ins. Co., No. 03-cv-3238, 2003 WL 22990093, at *4 (S.D.N.Y. Dec. 18, 2003) (“[When a
claimant] fails to allege that he or she has exhausted administrative remedies, the claim must be
dismissed.”), aff’d, 131 Fed. Appx. 756, 758 (2d Cir. 2005). See, e.g., Star Multi Care Servs., Inc.
v. Empire Blue Cross Blue Shield, 6 F. Supp. 3d 275, 292 (E.D.N.Y. 2014); Kesselman v. Rawlings
Co., LLC, 668 F. Supp. 2d 604, 608 (S.D.N.Y. 2009). In fact, this circuit has “recognized ‘the
firmly established federal policy favoring exhaustion of administrative remedies in ERISA cases.’”
Halo v. Yale Health Plan, 819 F.3d 42, 55 (2d Cir. 2016) (quoting Kennedy, 989 F.2d at 594);
Leonelli v. Pennwalt Corp., 887 F.2d 1195, 1199 (2d Cir. 1989).
ERISA’s regulatory framework establishes minimum requirements for plan procedures
involving claims to ensure that reasonable procedures are established regarding notification, filing
of claims, and the appeals process. See 29 C.F.R. § 2560.503-1(a)-b. Requiring exhaustion before
resorting to a lawsuit in federal court affords a “safeguard that encourages employers and others
to undertake the voluntary step of providing medical and retirement benefits to plan participants.”
Halo, 819 F.3d at 55 (internal citations omitted).
Here, the Plaintiff failed to follow the appeal requirements as detailed in the Plan
Description, which is fatal to her claim. The Plan Description lays out the proper procedure to
follow in the case of a denial of benefits. In the Plaintiff’s case, she opted to have the Procedure
on September 27, 2016 and October 7, 2016. Complaint ¶ 30. According to her complaint, she
received two EOBs, one dated October 18, 2016, and another dated December 13, 2016, which
denied her claims for $205,946.11. Id. ¶ 58. Pursuant to the Plan Description, the Plaintiff was
required to file an appeal of the denial of benefits within 180 days of receiving the adverse decision.
Bender Decl., Exhibit A at 220. Neither the complaint nor the record contain any allegation or
support that an appeal of those EOBs were filed. This failure to adequately plead that the Plaintiff
exhausted the administrative appeal process established by the Plan Description precludes this suit.
While Aetna has produced additional EOBs that purport to show the Defendants’ denial of
seven claims from December 6, 2016 to February 15, 2017, see Bender Decl., Exhibit B, there is
nothing in the complaint or record that alleges that Peppiatt appealed the denial of these claims.
Regardless, of whether the Court uses the EOBs mentioned in the complaint or the administrative
record, the 180-day appeals period has long passed without action.
The Plaintiff’s conclusory assertion in her complaint that she “has exhausted all her
administrative remedies” does not save her claims. See Papasan v. Allain, 478 U.S. 265, 286, 106
S. Ct. 2932, 2944, 92 L. Ed. 2d 209 (1986) (“Although for the purposes of [a] motion to dismiss
we must take all the factual allegations in the complaint as true, we are not bound to accept as true
a legal conclusion couched as a factual allegation.”); Iqbal, 556 U.S. at 679 (“While legal
conclusions can provide the framework of a complaint, they must be supported by factual
allegations.”); Kirch v. Liberty Media Corp., 449 F.3d 388, 398 (2d Cir. 2006) (“[C]onclusory
allegations or legal conclusions masquerading as factual conclusions will not suffice to defeat a
motion to dismiss.” (internal citations omitted)); In re Am. Exp. Co. S’holder Litig., 39 F.3d 395,
400-01 n.3 (2d Cir. 1994) (2d Cir. 1994) (“[C]onclusory allegations of the legal status of a
defendant’s acts need not be accepted as true for purposes of ruling on a motion to dismiss.”).
Further, the Plaintiff’s conclusory pleadings and assertions in her briefing that she received
a “final appellate decision, leading to exhaustion,” are irrelevant as (1) the Plan’s documentation
specified the review process which could only be initiated after a claim was denied in EOBs; and
(2) the communications received from Aetna informed the Plaintiff that her pre-service approval
was a courtesy to the Plaintiff and in no way a final decision. Axelrod Decl., Exhibit 1.
In the instant case, the Court finds that the Plaintiff failed to allege that she had exhausted
her appeal process under the Plan and as such, is barred from seeking relief from this Court.
C. THE EXHAUSTION REQUIREMENT WAS NOT RENDERED FUTILE
The Plaintiff further argues that exhaustion was made futile by Aetna’s prior
representations to the Plaintiff and her physician. The Second Circuit does allow an ERISA
claimant to be exempted from the exhaustion requirement when such a process would be “futile.”
Kennedy, 989 F.2d at 594.
However, such an exception to exhaustion is only applied “[w]here claimants make a clear
and positive showing that pursuing administrative remedies would be futile.” Davenport v. Harry
N. Abrams, Inc., 249 F.3d 130, 133 (2d Cir. 2001) (quoting Kennedy, 989 F.2d at 594) (emphasis
in original). This requires an “unambiguous application for benefits and a formal or informal
administrative decision denying benefits [so] it is clear that seeking further administrative review
of the decision would be futile.” Id. (internal citations omitted). See also Barnett v. Int’l Bus.
Machines Corp., 885 F. Supp. 581, 588 (S.D.N.Y. 1995).
In cases where courts have determined that exhaustion was futile, there is usually either an
act of bad faith by a defendant, or an explicit and unequivocal statement made by a defendant
informing the plaintiff that her denial of coverage is final. See, e.g., Paese, 449 F.3d at 448-49
(“This argument finds considerable support in [the defendant]’s March 20 letter to [the plaintiff]
containing its final decision, which, as quoted above, stated that [the defendant]’s ‘claim decision
is now final’ and informed [plaintiff] that he had ‘exhausted any administrative remedies available
to [him] under the policy.’”).
The Plaintiff’s futility argument falls short of the clear and positive showing required for
the exception to apply. Although the Plaintiff characterizes her initial correspondence with Aetna
as an “appeal,” such an argument is faulty as the Plaintiff failed to allege nor does the record reflect
that she followed the appeals process set forth in the Plan Description. See Egan v. Marsh &
McLennan Cos., Inc., No. 07-cv-7134, 2008 WL 245511, at *10 (S.D.N.Y. Jan. 30, 2008) (“Under
Second Circuit case law, courts look to whether plaintiffs have utilized and exhausted
administrative remedies provided for under the plan at issue, rather than pursuant to plaintiff’s
understanding of what may constitute the best method of addressing his claims.” (emphasis in
original)). The Defendants’ provided the Plaintiff a clear appeals process, which required her to
appeal Aetna’s final determination of coverage after submitting a claim. Neglecting to follow this
process dooms her futility argument.
Further, Peppiatt has failed to identify any document from Aetna in the course of their preProcedure correspondence that plausibly indicates that its pre-service approval decision was final
nor does she claim any bad faith on the part of either of the Defendants. After a careful review of
the record before the Court, there is nothing that the Court can reasonably construe as a signal that
the pre-service approval decision was final.
Although the Plaintiff argues that Aetna’s
correspondence stated that she was not entitled to benefits, see Axelrod Decl., Exhibit 4, this is far
short of the clear and positive evidence required, as there was no representation by the Defendants
that continuing to pursue her claims through the proper channels was hopeless, and the document
specified that it was only in reference to “a predetermination [request] as a courtesy to you.” Id.
Aetna made it clear to the Plaintiff that because “pre-service approval is not a requirement
for coverage of this service under the member’s plan, [it was] a courtesy evaluation of the proposed
service(s). … A final determination regarding coverage is not made until a claim for services is
submitted. If a claim for services is submitted and denied, there will be an opportunity to appeal
the claim dential determination at that time.” Id., Exhibit 1 (emphasis added).
‘denial’ of benefits contained in [the defendant’s] letter to [plaintiff] did not render futile further
pursuit of her claims through the proper channels.” Davenport, 249 F.3d at 134 (internal citations
omitted). Further, as the record demonstrates, the appeal process of EOBs was not duplicative of
the pre-service approval review process. Therefore, the Court cannot say that the appeals process
was flawed in a manner that would render following the appropriate procedure under the Plan by
appealing the EOBs as futile.
In light of the above, the Plaintiff falls far short of the heavy burden of stating a plausible
claim that exhausting her administrative remedies would be futile.
For the reasons stated above, the Defendants’ motion for judgment on the pleadings,
dismissing the complaint pursuant to Rule 12(c), is granted, as the Plaintiff has failed to exhaust
her administrative remedies. The Clerk of the Court is directed to close this case. Further, the
Defendants’ Motion to Dismiss, ECF No. 10, is denied as moot.
It is SO ORDERED:
Dated: Central Islip, New York
December 4, 2017
__/s/ Arthur D. Spatt__
ARTHUR D. SPATT
United States District Judge
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