CATHY ANN BENCIVENGO, District Judge.
This matter is before the Court on Defendants' motions for summary judgment. Specifically, Defendants United Parcel Service of America, Inc. ("UPS"), and UPS Health and Welfare Package for Retired Employees (the "Plan," and together with UPS, the "UPS Defendants") filed a motion for summary judgment [Doc. No. 48] on the first, second, third and fifth causes of action. Defendant Health Care Service Corporation doing business as Blue Cross and Blue Shield of Illinois ("Blue Cross") joined the UPS Defendants' motion. [Doc. No. 49.] Blue Cross also filed a separate motion for summary judgment on the fourth cause of action. [Doc. No. 50.] The motions have been fully briefed, and the Court has deemed the motions suitable for determination without a hearing. For
Plaintiff Gary King retired from UPS on March 14, 2011. Upon his retirement, King's wife, Linda King, became a participant in and beneficiary of the Plan. The Summary Plan Description (the "SPD") for the Plan describes the substantive benefits provided and the procedures for appealing denials of claims. [Doc. No. 15-3 at 3.]
The SPD states:
[Id. at 136.] In September 2010, the Retiree Plan issued a "Summary of Material Modifications" (the "2010 SMM") that amended the Plan. The 2010 SMM lists both the UPS Health and Welfare Package (which applies to active employees) and the Plan in the heading. A footer on the last page the 2010 SMM states: "This notice is intended to fulfill UPS's legal obligation to notify employees of material changes to the UPS Health and Welfare Package and the UPS Health and Welfare Package for Retired Employees. This notice formally amends the coverage available under the Plans." [Doc. No. 15-3 at 34.]
Immediately below the header on the first page, the 2010 SMM contains the following language across the page (italics in original):
[Doc. No. 15-3 at 31.] Immediately below this italicized language the text divides into two columns. At the top of the left-hand column is the heading "Health Care Reform
Underneath these two paragraphs is a third heading also in bold Times New Roman font followed by five paragraphs, each separated by a double-space, taking the reader onto the second page of the 2010 SMM. Approximately a third of the way down the left-hand column on the second
UPS is the Plan Administrator and the Plan Sponsor. [Doc. No. 15-3 at 143144.] The SPD states:
[Doc. No. 15-3 at 143.] The SPD also states that UPS is allowed to delegate its administrative duties to outside administrative service providers and states that medical coverage under the Plan is administered by several entities, including Defendant Blue Cross. [Id.]
The SPD describes a two level appeals process for denied claims. The first level appeal must be filed with the claims administrator (i.e., Blue Cross) within 180 days of receipt of the initial written denial from the claims administrator. [Doc. No. 15-3 at 131.] If the first level appeal is denied, a second level appeal must be filed with the UPS Claims Review Committee ("CRC") within 60 days of receipt of the first level appeal denial from the claims administrator. [Doc. No. 15-3 at 132.]
In November 2012, Mrs. King suffered an infection which required back surgery and extensive post-surgery medical care and rehabilitation. It appears that Mrs. King, or someone on her behalf, contacted Blue Cross in some manner on multiple occasions to seek pre-approval for some of her medical procedures. Along these lines, Plaintiff's opposition includes several letters dated between November 28, 2012, and February 11, 2013, from Blue Cross to Mrs. King indicating approval of certain procedures "as medically necessary as defined by the member's Health Care Benefits booklet or [SPD]." [Doc. No. 59-2 at 5-23.]
[See, e.g., Doc. No. 59-2 at 8.]
On or around February 19, 2013, Plaintiff received an Explanation of Benefits ("EOB") from Blue Cross concerning claims for medical services Mrs. King received in November 2012. [Doc. No. 59-2 at 25-26.] The EOB stated that $949,755 was billed by the medical provider, of which $133,601.41 was approved for coverage, and that Plaintiff may owe the medical provider $578,551.34. [Id.] The EOB explained that the reason the majority of the services listed on the EOB were not covered was because the maximum benefit under the Plan had been met. [Id. at 26.] On March 14, 2013, Blue Cross sent Plaintiff a letter stating that Mrs. King had exceeded her lifetime maximum benefit on January 1, 2013. [Doc. No. 50-2 at 13.]
On March 14, 2013, Mrs. King sent a letter to the Blue Cross "Claim Review Section" concerning the EOB. [Doc. No. 15-3.] On May 30, 2013, Mrs. King filed the instant lawsuit. There is no evidence in the record that Blue Cross had responded to Mrs. King's letter at the time the complaint was filed. On June 3, 2013, Plaintiff's counsel sent a letter to the CRC, attaching a copy of the complaint and asking UPS to "immediately reconsider its decision to impose the lifetime dollar amounts on [Mrs. King's] claim." [Doc. No. 15-3 at 179-180.] On June 14, 2013, the CRC responded to Plaintiffs counsel stating that the June 3, 2014 letter had been forwarded to Blue Cross for completion of the first level appeal review, and advising that if the first level appeal is denied, Mrs. King would have the right to file a second level appeal with the CRC. [Doc. No. 15-3 at 173-174.] On July 10, 2013, Blue Cross sent Mrs. King a letter stating that her first level appeal was denied. [Doc. No. 50-2.]
On September 9, 2013, Plaintiff filed a first amended complaint, adding allegations that Blue Cross had denied her first level appeal. The FAC asserts claims for declaratory relief, breach of contract, and breach of fiduciary duty and prays for payment of the full amount of Mrs. King's medical bills associated with her back surgery and subsequent care and a declaration that the Plan does not have a lifetime maximum benefit limit.
Defendants moved to dismiss the first amended complaint, arguing, among other things, that the italicized language at the top of the 2010 SMM combined with the asterisk next to the "Health Care Reform
On July 11, 2014, the CRC wrote to Plaintiff's counsel advising that the CRC would be meeting on August 7, 2014, to construe the Plan in light of the Court's order denying the motions to dismiss. [Doc. No. 48-2 at 10.] The letter invited
On October 23, 2014, Defendants filed the instant summary judgment motions. On December 26, 2014, Mrs. King passed away, and on January 26, 2015, the Court ordered that Mr. King be substituted as Plaintiff.
Ordinarily, a party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). However, "in the ERISA context, `a motion for summary judgment is merely the conduit to bring the legal question before the district court and the usual tests of summary judgment, such as whether a genuine dispute of material fact exists, do not apply.'" Harlick v. Blue Shield of California, 686 F.3d 699, 706 (9th Cir.2012).
The first question for the Court is the standard of review. Defendants argue that the Court is required to review the CRC's determination that the Plan contains a lifetime maximum benefit of $500,000 that applies to Mrs. King's claims under an abuse of discretion standard. Plaintiff does not dispute that an abuse of discretion standard applies, presumably because the law is well settled that the standard applies when, as is the case here, an ERISA plan confers "discretionary authority as a matter of contractual agreement." Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir.2006) (emphasis in original) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)). Further, "[a]buse of discretion review applies to a discretion-granting plan even if the administrator has a conflict of interest." Abatie, 458 F.3d at 965; see also Conkright v. Frommert, 559 U.S. 506, 512, 130 S.Ct. 1640, 176 L.Ed.2d 469 (2010) ("[W]hen the terms of a plan grant discretionary authority to the plan administrator, a deferential standard of review remains appropriate even in the face of a conflict."). "In such cases, the conflict is a factor in the abuse of discretion review. The weight of that factor depends on the severity of the conflict." Harlick, 686 F.3d at 707 (internal quotations and citations omitted).
"[A]n insurer that acts as both the plan administrator and the funding source for benefits operates under what may be termed a structural conflict of interest." Id.; McDaniel v. Chevron Corp., 203 F.3d 1099, 1108 (9th Cir.2000) ("[A]n apparent conflict of interest exists whenever a plan administrator is responsible for both funding and paying claims.").
Here, the SPD states UPS is the Plan Administrator and funding source for the Plan. However, UPS delegated its exclusive discretion to interpret the Plan terms to the CRC [Doc. No. 48-2 at 2], which the Plan explicitly permits [Doc. No. 15-3 at 143]. The CRC in turn consulted with outside counsel separate from defense counsel in this litigation before reaching its decision. [Doc. No. 48-2 at 3.] In addition, the CRC gave Plaintiff an opportunity to participate in the second level review process, and Plaintiff declined. Further, Plaintiff has not offered any evidence or argument as to how any conflict impacted the CRC's decision. See generally Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 117, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008) (noting that a conflict is "more important... where circumstances suggest a higher likelihood that it affected the benefits decision."); Abatie, 458 F.3d at 969 ("The level of skepticism with which a court views a conflicted administrator's decision may be low if a structural conflict of interest is unaccompanied, for example, by any evidence of malice, of self-dealing, or of a parsimonious claims-granting history."). Accordingly, the CRC's decision is entitled to the broad deference required by the abuse of discretion standard, notwithstanding that UPS is both the administrator and funding source for the Plan.
Under the abuse of discretion standard, a plan administrator's decision to deny benefits must be upheld "if it is based upon a reasonable interpretation of the plan's terms and if it was made in good faith." McDaniel, 203 F.3d at 1113. "In the ERISA context, even decisions directly contrary to evidence in the record do not necessarily amount to an abuse of discretion. An ERISA administrator abuses its discretion only if it (1) renders a decision without explanation, (2) construes provisions of the plan in a way that conflicts with the plain language of the plan, or (3) relies on clearly erroneous findings of fact." Boyd v. Bert Bell/Pete Rozelle NFL Players Retirement Plan, 410 F.3d 1173, 1178 (9th Cir.2005) (internal quotations omitted). The "inquiry is not into whose interpretation of the plan documents is most persuasive, but whether the plan administrator's interpretation is unreasonable." Winters v. Costco Wholesale Corp., 49 F.3d 550, 553 (9th Cir.1995) (quoting Barnett v. Kaiser Found. Health Plan, Inc., 32 F.3d 413, 416 (9th Cir.1994)).
Here, the CRC provided Plaintiff with a four-page letter explaining the basis for its decision that the Plan is subject to a $500,000 lifetime maximum benefit. As the Court held in its denial of Defendants' motions to dismiss, this interpretation is reasonable based on the language of the SPD and 2010 SMM. Thus, the CRC's interpretation and decision with respect to Plaintiff's benefits does not conflict with the plain language of the Plan. Finally, the CRC's decision was solely a matter of interpreting the language of the Plan documents themselves, so it did not involve any
Plaintiff argues that the CRC's interpretation is unreasonable is because it conflicts with his and Mrs. King's "reasonable expectations," relying on Saltarelli v. Bob Baker Group Medical Trust, 35 F.3d 382, 387 (9th Cir.1994). In Saltarelli, the Ninth Circuit held that an exclusion in an ERISA plan was unenforceable because it "was not clear, plain, and conspicuous enough to negate layman [insured's] objectively reasonable expectations of coverage." More recently, the Ninth Circuit summarized the doctrine of reasonable expectations as follows:
Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899, 904-05 (9th Cir.2009) (quoting 16 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 49:20, at 111-12 (4th ed.2000)).
The Ninth Circuit has issued inconsistent opinions concerning whether the doctrine of reasonable expectations applies to self-funded benefit plans like the Plan here. See id.
Plaintiff next argues that any lifetime maximum benefit in the Plan violates the PPACA. This issue requires an understanding of the interplay between the Public Health Service Act ("PHSA"), ERISA, and the PPACA. Among its many other provisions, the PPACA amended the PHSA to ban lifetime limits on the dollar value of benefits for any group health participant or beneficiary. 42 U.S.C. § 300gg-11(a)(1). At the same time, the PPACA added a provision to ERISA stating that the requirements of part A of Title XXVII of the PHSA (as amended by the PPACA), which includes the lifetime limit ban, shall apply to group health plans. ERISA § 715(a)(1) (codified at 29 U.S.C. § 1185d(a)(1)). Meanwhile, Section 732 of ERISA, codified at 29 U.S.C. § 1191a(a)(1), which pre-dates the PPACA states:
Defendants refer to this statute, which is part of ERISA and pre-dates the PPACA, as the "Retiree Plan Exception," and argues that it exempts employer plans covering only retirees (and therefore fewer than two participants who are current employees) from the coverage mandates of the PHSA, including the amendments thereto by the PPACA.
29 U.S.C. § 1185d(a)(2). Thus, according to Plaintiff, because part A of title XXVII of the PHSA (as amended by the PPACA) includes a ban on lifetime limits, while ERISA excludes retiree-only plans from such limits, there is an irreconcilable conflict, meaning section 715(a)(2) requires the PPACA lifetime limit ban to apply.
Defendants' argument is more persuasive. The fact that ERISA excepts retiree only plans from certain group health plan requirements of the PHSA (as amended by the PPACA), while the PHSA does not itself contain a similar exception for retiree only plans, does not create a conflict or reveal any specific intent on the part of Congress that notwithstanding the Retiree Plan Exception, the group health plan requirements of the PPACA are intended to apply to retiree-only plans. Although the interplay and chronology of the various acts necessitated a careful review of the relevant statutory provisions, Plaintiff has not persuaded the Court that Congress repealed ERISA's Retiree Plan Exception by implication when it enacted the PPACA. See generally Chemehuevi Indian Tribe v. Jewell, 767 F.3d 900, 907 (9th Cir.2014) ("[R]epeal by implication is disfavored.").
Another flaw of Plaintiff's argument is that pursuant to Section 732 of ERISA (29 U.S.C. § 1191a(a)(1)), the very conflict language on which Plaintiff relies also does not apply to retiree-only plans. Thus, the requirement that conflicts be resolved in favor of the group health plan requirements in the PPACA does not apply to retiree-only plans.
Finally, although their interpretation is not binding, the Internal Revenue Service, Department of the Treasury; the Employee Benefits Security Administration, Department of Labor; and the Office of Consumer Information and Insurance Oversight, Department of Health and Human Services, stated in the preamble to interim rules related to the PPACA's impact on group health plans that "the exceptions of ERISA section 732 and Code section 9831[
In light of the foregoing, the $500,000 lifetime maximum benefit in the Plan does
Plaintiff's third and fourth claims are for breach of fiduciary duty against the UPS Defendants and Blue Cross, respectively. To establish a breach of fiduciary duty, "a plaintiff must establish each of the following elements: (1) the defendant's status as an ERISA fiduciary acting as a fiduciary; (2) a misrepresentation on the part of the defendant; (3) the materiality of that misrepresentation; and (4) detrimental reliance by the plaintiff on the misrepresentation." Burstein v. Ret. Account Plan For Employees of Allegheny Health Educ. & Research Found., 334 F.3d 365, 384 (3d Cir.2003), as amended (Aug. 1, 2003) (quotations and citation omitted); In re Computer Sciences Corp. ERISA Litig., 635 F.Supp.2d 1128, 1140 (C.D.Cal.2009) (same). In addition, "an ERISA fiduciary has ... an affirmative duty to inform when the [fiduciary] knows that silence might be harmful. Accordingly, a fiduciary breaches its duties by materially misleading plan participants, regardless of whether the fiduciary's statements or omissions were made negligently or intentionally." In re Computer Sciences Corp. ERISA Litig., 635 F.Supp.2d at 1139-40.
As for Plaintiff's breach of fiduciary duty claim against the UPS Defendants, Plaintiff's opposition does nothing more than cite to ERISA's fiduciary duty requirements and then state that Plaintiff's claim "is based on imposing the lifetime limits on Mrs. King, the deceptive nature of the SPD, Defendants' subsequent failure to advise her that the lifetime limit does not apply to her Plan, and their refusal to timely inform her that the [sic] she had exceeded the purported limits." [Doc. No. 59-1.] As discussed above, because the Plan has a lifetime limit, the UPS Defendants did not breach any duties by imposing that limit on Plaintiff. Further, while the SPD and 2010 SMM may have been ambiguous, Plaintiff offers no evidence or explanation as to how they were deceptive. Finally, Plaintiff does not identify any duty on the part of the UPS Defendants to inform her that she had exceeded the lifetime maximum benefits under the Plan, or that the notice that she did receive that the lifetime maximum had been exceeded was untimely. In sum, Plaintiff does not offer any evidence creating an issue of material fact sufficient to defeat summary judgment on his breach of fiduciary duty claim against the UPS Defendants.
As for Plaintiff's claim for breach of fiduciary duty against Blue Cross, Plaintiff once again fails to create a genuine issue of material fact to defeat summary judgment. Plaintiff premises this breach of fiduciary duty claim either on Blue Cross' misrepresentation about the existence of the lifetime maximum benefit, or in the alternative Blue Cross' failure to adequately inform Plaintiff of the limit. In light of the holding above that the Plan has a lifetime maximum benefit, Plaintiff's breach of fiduciary duty claim is necessarily limited to the latter argument.
Under ERISA, "a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan ... or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C. § 1002(21)(A). Third party administrators, like Blue
In response, Plaintiff's only evidence of Blue Cross's discretionary authority is Section 8.1(c) of the Plan, but this section refers to UPS and the CRC, not Blue Cross. Likewise, Meguerditchian v. Aetna Life Ins. Co., 999 F.Supp.2d 1180 (C.D.Cal.2014), on which Plaintiff relies, is distinguishable because the claims administrator there had discretionary authority to interpret the plan and determine eligibility.
Moreover, even if Blue Cross is an ERISA fiduciary, there is no evidence that Blue Cross made any misrepresentations to Plaintiff about the plan terms, and the evidence shows that Blue Cross did inform Plaintiff of the lifetime maximum benefit on multiple occasions. Further, Blue Cross's letters approving procedures as medically necessary specifically stated that the approvals were not guarantees of payment and that payment was subject to the limitations in the Plan. Plaintiff does not cite to any authority requiring an ERISA fiduciary to affirmatively advise a plan participant of the status of her lifetime limit within a certain time frame that Blue Cross did not satisfy here. Nor does Plaintiff identify any evidence that Blue Cross actually knew (or could have known) that the lifetime maximum had been exceeded before Blue Cross conveyed that information to Plaintiff in February 2013. Accordingly, Blue Cross is entitled to summary judgment on Plaintiff's breach of fiduciary duty claim.
For the foregoing reasons, Defendants motions for summary judgment [Doc. Nos. 48, 50] are
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