Kristy Schwade and her son were participants in a medical benefits plan funded by her former employer.
The plan’s subrogation rights were set out in the summary plan description (“SPD”), which made clear that the plan administrator had no obligation to provide medical benefits if the participant did not sign a subrogation agreement or execute other documents needed to protect the plan’s subrogation rights.
The SPD also established the administrative appeal procedure required before a participant could take any legal action against the plan, including a 180-day appeal deadline, and stated that any benefits denial would be provided in an explanation of benefits (“EOB”) form.
Schwade’s son was injured by his daycare provider. Initially, the plan paid his medical expenses. Later, in June 2007, the plan administrator sent Schwade a letter stating that it could not process her claim unless she completed a questionnaire about her son’s injury and signed a subrogation agreement. The subrogation agreement warned Schwade that failure to execute the agreement would relieve the plan of all obligations to pay benefits. Schwade did not respond to the letter.
Between August and November 2007, the plan administrator sent Schwade 54 EOB forms, 48 of which explained that the claim had been denied based on her failure to provide accident information. Each EOB form explained how to file an appeal, and the deadline to do so.
After the last appeal deadline expired, Schwade’s attorney wrote the plan administrator, complaining that it had ignored Schwade’s claim for the “sole reason” that she would not sign a “boilerplate” subrogation agreement, the terms of which the attorney found unacceptable.
The attorney later sent several letters stating that the plan’s subrogation rights limited Schwade’s ability to recover damages for her son’s injuries in a civil action. He proposed instead that the plan and Schwade split any such recovery. The plan did not respond to the letters.
When Schwade was sued by a medical provider for services rendered, she filed a third-party complaint against the plan.
The plan administrator moved for summary judgment, arguing that Schwade had failed to exhaust her administrative remedies under the plan. The district court granted summary judgment to the administrator.
In upholding the district court’s decision, the Eleventh Circuit rejected Schwade’s argument that her attorney’s “written expressions of disagreement with the denial of benefits” amounted to an administrative appeal, and noted that the attorney’s letters, even if they could be considered an appeal, were untimely.
Schwade also argued that she was excused from exhausting her administrative remedies because the plan administrator failed to follow its own claims procedures. The Eleventh Circuit rejected this argument, noting that the only remedy for such failure was to remand the case to the administrator, which Schwade had not requested.
Additionally, the court rejected Schwade’s argument that an appeal would have been futile, because she failed even to attempt an administrative remedy, and she pled “only bare allegations of futility,” rather than the “clear and positive” showing of futility required in the Eleventh Circuit.
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