Eighth Circuit: Exhaustion of Administrative Remedies Not Required When Plan Documents Contain No Review Procedures

After her spouse’s death due to a heroin overdose, a participant brought benefit claims under her employer’s ERISA life insurance and accidental death and disability (AD&D) policies (which covered the spouse). The insurer paid the life insurance benefit but denied the AD&D claim, asserting that the policy’s “intentionally self-inflicted injury” exclusion applied. The participant sued, and the insurer argued that the lawsuit should be dismissed because the participant had failed to first exhaust administrative remedies. The trial court disagreed, holding that exhaustion of the plan’s internal claims procedures was not required where no language about procedures existed in the underlying plan document and concluding that the plan’s intentionally self-inflicted injury exclusion did not apply to this situation (see our Checkpoint article). The insurer appealed, conceding that the written plan documents did not include internal review or appeal procedures but arguing that the suit was still barred because the participant failed to exhaust the administrative remedies set forth in the insurer’s denial letter.

The appellate court rejected the insurer’s argument, emphasizing that the requirement to exhaust administrative remedies before filing suit is consistently premised on those remedies being expressly prescribed in the participant’s written plan documents. The court explained that requiring the participant to exhaust internal review procedures that were not in the plan documents would render her reliance on those documents “largely meaningless” and noted that its decision aligns with regulations that require ERISA plans to set forth written claims procedures in plan documents and summary plan descriptions. Turning to the merits of the case, the appellate court rejected the insurer’s argument that it properly denied the participant’s claim under the AD&D policy’s intentionally self-inflicted injury exclusion. The court concluded that, although the spouse’s heroin use was a purposeful act that contributed to a fatal overdose, this did not mean that the injury resulting from that act, i.e., a fatal overdose, was necessarily intentional. The court reasoned that whether the exclusion applies depends on whether the injury in question was indeed intentional (not just foreseeable or likely), even if the injury-causing conduct was risky or reckless. Concluding that the plain language of the exclusion did not apply to unintended injuries like the spouse’s heroin overdose, the court affirmed the trial court’s award of benefits to the participant.

EBIA Comment: This decision highlights the importance of providing claims procedures that are consistent with ERISA’s requirements. As the appellate and trial courts noted, the plan document is at the center of ERISA. While it is generally acceptable and convenient to set forth a plan’s claims procedures in a document that is separate from the formal plan document, it is crucial to expressly incorporate these procedures by reference—otherwise they are not actually part of the plan. For more information, see EBIA’s ERISA Compliance manual at Sections VIII.E (“ERISA-Required Plan Provisions”), VIII.G (“Other Important Plan Provisions”), and XXXVI.B (“Exhaustion of Plan Administrative Claims Procedures”).

Contributing Editors: EBIA Staff.