as she failed to exhaust her administrative remedies by filing a claim under the BTA Policy with the Plan; or, alternatively, (2) because the Plan's determination that Dale Mers' death did not result independently of all other causes of loss was not "downright unreasonable," the Plan's denial of benefits must be affirmed, as a matter of law, using the deferential, "abuse of discretion" standard of review. On September 26, 1996, Mers filed her motion for summary judgment, contending that (1) given AIC's inherent conflict of interest in evaluating Mers' claim for benefits, the Plan's denial must be reviewed de novo, rather than under an "arbitrary and capricious" standard; and (2) because Dale Mers' death was caused by his unusually strenuous work activity at the Habitat for Humanity project and was wholly unexpected and unforeseeable, his death constitutes an "accident" within the meaning of the BTA Policy--an accident for which she is entitled, as a matter of law, to payment of benefits.
A. Standards for Summary Judgment
Summary judgment is appropriate where the pleadings, answers to interrogatories, admissions, affidavits, and other materials show that there is "no genuine issue as to any material fact," and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). Only genuine disputes over "material facts" can prevent a grant of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). "Material facts" are those that might affect the outcome of the suit under governing law. Id. A "genuine issue" exists if there is "sufficient evidence favoring the non-moving party for a jury to return a verdict for that party." Id. at 249. When considering a motion for summary judgment, the Court must view the facts, and all the inferences drawn from those facts, in the light most favorable to the nonmovant. Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir. 1991); Roman v. U.S. Postal Service, 821 F.2d 382, 385 (7th Cir. 1987).
B. Mers' Failure To Exhaust Her Administrative Remedies
The parties agree that Mers has failed to exhaust her administrative remedies, as Mers (through circumstances arguably beyond her control) never has presented her claim for benefits under the BTA Policy to the Plan fiduciaries and/or administrator for consideration. Exhaustion of administrative remedies prior to filing suit generally is required because it (1) "enhances the ability of plan fiduciaries to expertly and efficiently manage their plans by preventing premature judicial intervention," Powell v. AT&T Comm., Inc., 938 F.2d 823, 826 (7th Cir. 1991); (2) assists the courts by ensuring that a plaintiff's claims have been "fully considered" by plan fiduciaries, Id.; and (3) "gives effect to Congress' apparent intent, in mandating internal claims procedures, to minimize the number of frivolous lawsuits, to promote consistent treatment of claims, to provide a nonadversarial dispute resolution process, and to decrease the cost and time of claims settlement." Wilczynski v. Lumbermens Mutual Cas. Co., 93 F.3d 397, 402 (7th Cir. 1996). Consequently, the Seventh Circuit has made clear that "application of the exhaustion doctrine . . . is a matter within the discretion of the trial court," and that "as a matter of sound policy [the court] should usually [apply it]." Kross v. Western Elec. Co., Inc., 701 F.2d 1238, 1244-45 (7th Cir. 1983). Yet, courts should not, and generally will not, invoke the exhaustion doctrine to dismiss a claim for benefits where utilizing a Plan's internal procedures would yield an inadequate remedy or where pursuing administrative avenues would be, at best, a futile gesture. See Smith v. Blue Cross & Blue Shield United of Wis., 959 F.2d 655, 658-59 (7th Cir. 1992); Dale v. Chicago Tribune Co., 797 F.2d 458, 466 (7th Cir. 1986).
Here, there can be little doubt that any effort by Mers to recover benefits under the BTA Policy directly from the Plan would be futile. The Plan makes abundantly clear in its various briefs and in its statements to this Court that it would have denied (and, if given the opportunity, will deny) Mers' claim under the BTA Policy, as that policy contains the identical basic coverage and exclusion language on which the Plan based its denial of benefits under the 24-Hour policy. Thus, it would be extraordinarily wasteful and grossly inefficient to dismiss Mers' suit at this late stage and to require Mers to present her BTA Policy claim to the Plan fiduciary; the Plan's position is certain and, by its own admission, unwavering--Mers cannot recover benefits from the Plan for Dale Mers' death because his death was not caused by an accident, independent of all other causes.
C. Appropriate Standard For Reviewing The Plan's Denial Of Benefits
Actions challenging the denial of benefits under ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), are subject to the standard of review announced in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989). In Firestone, the Supreme Court observed that "a denial of benefits challenged under Section 1132(a)(1)(B) is to be reviewed under a de novo standard." Firestone, 489 U.S. at 113. Where, however, discretion to interpret ERISA plan terms is reserved by, or delegated to, a plan administrator or fiduciary, courts are required to review those interpretations applying an "arbitrary and capricious" standard. Id.; Pagan v. NYNEX Pension Plan, 52 F.3d 438, 441 (2d Cir. 1995). The Seventh Circuit recently said about Firestone:
The court announced that the arbitrary and capricious standard of review was to be replaced by de novo review unless the terms of the agreement granted the fiduciary discretion in the award or denial of benefits. . . . When the fiduciary has discretion, we review its decisions for abuse. . . . As in trusts law, whether something constitutes an abuse depends on the terms of the instrument; the more discretion that is conferred upon the trustee or fiduciary, the more deference the consequent decision is entitled. . . . [When] the amount of discretion is virtually unconstrained, the court should review the decision under an arbitrary and capricious standard. . . . Under that standard we evaluate several factors: The impartiality of the decisionmaking body, the complexity of the issues, the process afforded the parties, the extent to which the decisionmakers utilized the assistance of experts where necessary, and finally the soundness of the fiduciary's ratiocination.
Chalmers v. Quaker Oats Co., 61 F.3d 1340, 1343-44 (7th Cir. 1995).
The parties agree that Marriott is the Plan sponsor, that Marriott and AIG are the Plan's named fiduciaries, and that the Corporate Benefits Department of Marriott is the Plan Administrator. The parties further recognize that the Summary Plan Description, which sets forth the terms of both the BTA Policy and the 24-Hour policy, (1) gives Marriott "sole, absolute and final discretion to determine eligibility for benefits and to resolve any factual issues relevant to benefit eligibility or benefit enrollment"; and (2) grants AIG "sole, absolute and final discretion to construe the terms of the Plan." (Ex. H, Pltf. 12(M) Statement, p.3) Thus, this Court must review the Plan's decision to deny coverage for Dale Mers' death under the deferential "arbitrary and capricious" standard.
While Mers maintains that her present claim should be reviewed de novo because the Plan was never presented with, and, thus, did not specifically deny, a claim for benefits under the BTA Policy, Mers conveniently ignores the fact that the Plan denied her claim under the 24-Hour Policy based upon its conclusion that Dale Mers' death was not caused by an accident, independent of other causes--a conclusion that similarly bars payment of benefits under the basic coverage and exclusionary language of the BTA Policy. Indeed, in her successful effort to side-step application of the administrative exhaustion doctrine to her present action, Mers explicitly recognizes that the formal presentation of a claim under the BTA Policy would be futile in light of AIG's stated interpretation of the Plan's terms and its unequivocal resolution of the factual issues pertaining to Dale Mers' death. Hence, the Plan's decision to deny coverage under the 24-Hour Policy effectively operates to deny coverage under the BTA Policy, and, as a result, Mers' present claim--a claim that necessarily requires this court to review the propriety of the Plan's decision under the 24-Hour Policy--is subject to the "arbitrary and capricious" standard of review.
Mers correctly points out, however, that this Court should afford less deference to, and should view with greater suspicion, the Plan's decision to deny coverage for Dale Mers' death because AIC was operating under a conflict of interest when it denied Mers' claim. As previously indicated, AIC--the company to whom Marriott delegated responsibility for resolving factual questions and determining eligibility for benefits--is a subsidiary of AIG--the Plan's insurer. Consequently, the Court presumes that AIC, when considering Mers' request for benefits, was, in fact, presented with a conflict of interest:
Courts have found substantial potential for conflict to exist where a plan administrator or fiduciary serves the dual roles of a decision-maker with regard to the granting or denial of claims and an insurer "which must constantly strive to make its revenues exceed its costs."