Makar v. Health Care Corp. of Mid-Atlantic (Carefirst)

• Decision Date: 07 April 1989
• Docket Number: MID-ATLANTIC,No. 88-2526,88-2526
• Citation: Makar v. Health Care Corp. of Mid-Atlantic (Carefirst), 872 F.2d 80 (4th Cir. 1989)
• Parties: Dorothy T. MAKAR; Anthony L. Makar, her husband, Plaintiffs-Appellants, v. HEALTH CARE CORPORATION OF the(CAREFIRST); Provident Life & Accident Insurance Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 80

872 F.2d 80

Dorothy T. MAKAR; Anthony L. Makar, her husbandPlaintiffs-Appellants, v.HEALTH CARE CORPORATION OF the MID-ATLANTIC (CAREFIRST)Provident Life & Accident Insurance CompanyDefendants-Appellees.

No. 88-2526.

United States Court of Appeals Fourth Circuit.

Argued Dec. 6, 1988.

Decided April 7, 1989.

Gerald Francis Gay(Richard R. Beauchemin, Arnold, Beauchemin & Tingle, P.A., Baltimore, Md., on brief), for plaintiffs-appellants.

Gregory Lee VanGeison(Frank J. Vecella, Anderson, Coe & King, on brief); Thomas E. Lynch, III, Baltimore, Md., (Carol A. O'Day, Miles & Stockbridge, Baltimore, Md., on brief), for defendants-appellees.

Before HALL and WILKINSON, Circuit Judges, and BUTZNER, Senior Circuit Judge.

WILKINSON, Circuit Judge:

The question here is whether claimants under the Employee Retirement Income Security Act of 1974 (ERISA),29 U.S.C. Sec. 1001 et seq., must pursue the remedies provided by employee benefit plans in which they participate before bringing an ERISA action for denial of benefits.We hold that appellants must exhaust such remedies.We vacate the judgment of the district court in favor of defendants and remand the case for dismissal without prejudice to any future ERISA actionappellants may have in order to allow them to pursue their plan remedies.

I.

On November 30, 1986, Dorothy Makar sought medical attention at St. Agnes Hospital in Catonsville, Maryland; she was discharged one week later.On December 15, 1986, she was readmitted to St. Agnes for surgery to remove her cancerous left kidney.

Mrs. Makar was an employee of Montgomery Ward Corporation and was therefore eligible to participate in the medical benefits agreement between Montgomery Ward and the Health Care Corporation of the Mid-Atlantic (CareFirst).CareFirst is authorized to do business in Maryland as a health maintenance organization; it is not an indemnity insurer.The CareFirst plan, in other words, entitles its participants to seek medical treatment through a network of health care facilities.Participants are required to select a single facility to serve as their primary health care provider.

In order to resolve participants' complaints, the CareFirst plan includes a comprehensive, internal grievance procedure.The procedure is invoked by sending a letter to the plan's grievance committee outlining the nature of the participant's complaint and the desired remedy.The committee then investigates the complaint and provides the grievant a hearing before an impartial committee.The committee's decision must be communicated in writing to the parties and may be appealed to a subcommittee of the CareFirst board of directors.Mrs. Makar chose to participate in the CareFirst plan and designated the Catonsville Medical Center as her primary care facility.

Anthony Makar, Dorothy Makar's husband, was employed by Michelin Tire Corporation.Michelin's benefit plan includes a group health insurance policy issued by Provident Life and Accident Insurance Company.This plan provides an appeals process for benefits that have been denied.The plan's final decision must be in writing and must state specific reasons for any denial of benefits.

Although they sought reimbursement from CareFirst and Provident upon Dorothy Makar's second discharge from the hospital, appellants did not fully avail themselves of the procedures provided by these two plans.Appellants, for example, failed to file a written grievance with the CareFirst grievance committee as required by the express terms of the CareFirst plan.Moreover, they did not pursue the appeals provided by the Provident plan.In sum, neither Provident's nor CareFirst's grievance procedures were fully utilized in an attempt to resolve this dispute.Instead, the Makars filed suit on August 20, 1987 in the Circuit Court for Baltimore County against Provident and CareFirst, asserting common law claims for monies due and owing, and breach of contract, and claiming punitive damages for defendants' alleged bad faith refusal to pay Mrs. Makar's medical expenses.

Although plaintiffs made no mention of ERISA in their complaint, CareFirst and Provident removed the action to federal district court based on ERISA's sweeping preemptive effect and the complete preemption exception to the well-pleaded complaint rule.SeeMetropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55(1987);Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39(1987).On October 21, 1987, Provident moved to dismiss, contending, inter alia, that plaintiffs' common law claims were preempted by ERISA,29 U.S.C. Sec. 1144, and that the Makars did not meet the prerequisites of an ERISA action because they failed to exhaust their plan remedies.On November 17, 1987, CareFirst moved to dismiss the complaint, or, in the alternative, for summary judgment.Plaintiffs opposed defendants' motions and moved the district court to remand the action to the Circuit Court for Baltimore County.

The district court entered judgment for defendants.The parties had agreed that the CareFirst and Provident plans were employee benefit plans within the terms of ERISA.After Pilot Life, 481 U.S. at 41, 107 S.Ct. at 1549, any contention that the state claims here are not preempted by ERISA would be frivolous, and the district court so found.The district court also held that plaintiffs failed to exhaust the remedies available to them under the Provident and CareFirst employee welfare benefit plans.This appeal followed.

II.

ERISA does not contain an explicit exhaustion provision.Nonetheless, an ERISAclaimant generally is required to exhaust the remedies provided by the employee benefit plan in which he participates as a prerequisite to an ERISA action for denial of benefits under 29 U.S.C. Sec. 1132.This exhaustion requirement rests upon the Act's text and structure as well as the strong federal interest encouraging private resolution of ERISA disputes.SeeKross v. Western Elec. Co., 701 F.2d 1238, 1243-45(7th Cir.1983).

ERISA requires benefit plans covered by the Act to provide internal dispute resolution procedures for participants whose claims for benefits have been denied.29 U.S.C. Sec. 1133.Employee benefit plans must provide adequate, written notice of the specific reasons for such a denial and must afford participants a reasonable opportunity for a "full and fair review" of the decision denying the claim.Id.See also29 C.F.R. Sec. 2560.503-1(1987)(Department of Labor regulations governing plan remedies).Congress' apparent intent in mandating these internal claims procedures was to minimize the number of frivolous ERISA lawsuits; promote the consistent treatment of benefit claims; provide a nonadversarial dispute resolution process; and decrease the cost and time of claims settlement.SeeAmato v. Bernard, 618 F.2d 559, 567(9th Cir.1980).It would be "anomalous" if the same reasons which led Congress to require plans to provide remedies for ERISAclaimants did not lead courts to see that those remedies are regularly utilized.Id.Se...