Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 94 C 3146 Charles R. Norgle, Sr., Judge.
Before COFFEY, FLAUM and RIPPLE, Circuit Judges.
Faith Wilczynski commenced this action against her former employer, Lumbermens Mutual Casualty Company ("Lumbermens"). Ms. Wilczynski's amended complaint seeks a declaration of her entitlement to certain disability and health care benefits and a statutory fine under ERISA for Lumbermens' failure to provide her with documents pertinent to her claim. The district court granted Lumbermens' motion to dismiss the amended complaint on the ground that Ms. Wilczynski had not exhausted Lumbermens' internal administrative remedies prior to filing suit. The district court also took the view that, with respect to the statutory fine claim, the amended complaint fails to state a claim against Lumbermens. For the reasons set forth in the following opinion, we affirm the judgment of the district court in part, and reverse and remand in part.
While still an employee of Lumbermens, Faith Wilczynski elected to participate in a long-term disability benefit plan. The disability plan, sponsored by Lumbermens, provides benefits, under certain circumstances, to employees who become totally disabled and unable to work. The disability plan is an "employee benefit plan" governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. sec. 1001 et seq.
Ms. Wilczynski developed neurological symptoms in 1987 and, at some point thereafter, was diagnosed with multiple sclerosis. By July 1991, as a result of the multiple sclerosis and a pregnancy, she was no longer able to work. She applied for disability benefits from Lumbermens and, beginning in September 1991, received benefits under the disability plan. The payments continued until December 1993, when Lumbermens informed her that it was terminating her benefits because she was no longer "disabled." The decision to terminate her benefits was made retroactive to September 1993. The notification letter invited Ms. Wilczynski to request internal review of the termination decision.
At all times relevant to this appeal, Lumbermens' disability plan provided insureds with three levels of internal administrative appeal. The initial level of review is conducted within Lumbermens' Employee Claim Department; the second level is conducted by a panel consisting of a Director of Compensation and Benefits and two vice-presidents. Ms. Wilczynski unsuccessfully pursued these first two levels of internal administrative review. After the second-level review of her claim was denied, Ms. Wilczynski retained counsel to assist her with the third and final level of internal administrative review.
On April 11, 1994, while Ms. Wilczynski was still eligible to seek final administrative review of the claim, her attorney advised Lumbermens that Ms. Wilczynski was seeking a review of her claim and that, in order to prepare her appeal, it was necessary to obtain the claim file containing the evidence relied upon by Lumbermens in making the decision to terminate her benefits. The letter demanded the "complete contents" of Lumbermens' file. R.11, Ex.B at 1. Lumbermens did not respond to this request. Relying on 29 C.F.R. sec. 2560.503-1(g), Ms. Wilczynski's attorney therefore wrote a second letter to Lumbermens asserting the right to "review pertinent documents." The letter advised Lumbermens that, "unless we have the entire claim file by Monday, May 2nd, we will consider all administrative appeal efforts futile and exhausted and will proceed to Federal Court." R.11, Ex.C at 1. When Lumbermens still did not furnish the claim file, Ms. Wilczynski filed her original complaint in the district court. *fn1 Lumbermens did not provide Ms. Wilczynski with access to the claim file until August 10, 1994 -- several months after the lawsuit was filed.
Ms. Wilczynski also participated in a health benefit plan for Lumbermens' employees. Lumbermens' termination of Ms. Wilczynski's employment on January 3, 1994 triggered a notice to her of her right to continue receiving healthcare benefits, at her own expense, under the COBRA amendment to ERISA, 29 U.S.C. sec. 1161 et seq. The notice informed Ms. Wilczynski that, in order to continue coverage, she would be required to send a COBRA coverage election notice to Cobraserv, a third-party administrator, by May 20, 1994. In her amended complaint, Ms. Wilczynski alleges that she mailed the election notice on May 2, 1994. Claiming that it did not receive her election notice by the May 20 deadline, however, Cobraserv denied Ms. Wilczynski's request for COBRA coverage and refused her tender of COBRA coverage premiums.
Appeals of COBRA coverage claims are reviewed initially by Cobraserv; Lumbermens then reviews the claims in accordance with the appeal procedures of the underlying health benefit plan. Here, Lumbermens' procedures to review the denial of COBRA coverage are the same as those in use for the disability plan. Ms. Wilczynski sought and obtained internal review of Cobraserv's decision that she was not eligible for coverage, but she did not seek review of that decision at Lumbermens. Instead, she amended her complaint to include a claim for COBRA coverage.
The amended complaint contains three claims in two counts. Count I seeks a determination of Ms. Wilczynski's right to disability benefits and reasserts her claim for a statutory fine against Lumbermens under ERISA. See 29 U.S.C. sec. 1132(c). Count II requests a determination of her right to health insurance benefits under the COBRA amendment to ERISA. Lumbermens filed a motion to dismiss all three claims. With respect to each of the benefit claims, Lumbermens moved to dismiss on the ground that Ms. Wilczynski had failed to exhaust the administrative remedies provided by each plan. Lumbermens moved to dismiss the statutory fine claim on the ground that the amended complaint does not state a claim upon which relief could be granted.
The district court granted Lumbermens' motion to dismiss. *fn2 The district court took the view that Ms. Wilczynski had failed to exhaust Lumbermens' internal administrative remedies and that neither of the two exceptions to the exhaustion requirement -- futility or lack of meaningful access to the review procedures -- applies to excuse the failure. The district court ruled that Ms. Wilczynski's complaint failed to allege sufficiently the futility of pursuing the review procedures and that, with respect to the disability claim, Lumbermens had denied her meaningful access to a full and fair review by withholding the claim file.
The district court further concluded that 29 U.S.C. sec. 1132(c) -- the statutory fine provision -- does not apply to Lumbermens' failure to provide Ms. Wilczynski's claim file. That section applies only to documents that are required to be furnished by the text of ERISA, it concluded, and Ms. Wilczynski's entitlement to the claim file is covered by the Code of Federal Regulations. Even if the applicable regulation were covered by section 1132(c), the court continued, it does not require that the documents be furnished to the claimant; the regulation merely requires that the ...