The Fifth Circuit recently affirmed a Mississippi district court’s ruling in favor of the plaintiff on a wrongful denial of benefits claim, in spite of plaintiff’s failure to exhaust administrative remedies and filing the claim beyond the plan’s contractual limitations period.

In Baptist Memorial Hospital-Desoto, Inc. v. Crain Automotive, Inc., the spouse of a Crain Automotive employee received treatment at Baptist Memorial Hospital-Desoto (BMHD), which submitted a claim for the treatment. The Crain Automotive plan administrator called BMHD’s billing office to complain that the charges were excessive and that he wanted to settle the claim for a lower amount. Calls between the hospital and the plan administrator continued for a time until BMHD’s phone calls to Crain went unreturned. BMHD then filed suit against Crain Automotive for recovery of plan benefits.

The majority opinion asserted that, under the plan’s contractual limitations period, BMHD had 30 days to file its claim after the last unsuccessful attempt to contact Crain. This limitations period was far too short, the Court held, particularly in a situation such as this one where the plan administrator failed to properly deny the claim and misled the party submitting the claim. The majority also found that Crain was not required to exhaust its administrative remedies because the plan administrator failed to substantially comply with the procedural requirements for denying a claim.

The dissent argued that the majority mistakenly divorced exhaustion and timeliness by evaluating the limitations period under a “worst-case scenario” rather than examining what actually occurred. The dissent reasoned that BMHD had 214 days to file its suit under the contractual limitations period, which was not an unreasonable limitation, even if the claim did not accrue until Crain ceased to respond to BMHD. The dissent further argued that, if the claim did not accrue at least by the date on which BMHD was on notice that Crain did not intend to pay the claim, then it never accrued and therefore should be dismissed for lack of ripeness.