CANDY W. DALE, Magistrate Judge.
Before the Court are cross motions for summary judgment filed by Plaintiff Brooks LeCates and Defendant Blue Cross of Idaho, as well as Blue Cross's evidentiary motion asking the Court to strike the affidavits LeCates submitted in opposition to Blue Cross's motion for summary judgment. (Dkt. 16, 22, 23.) The motions are fully briefed, and the Court heard oral argument from the parties on August 29, 2016.
LeCates seeks payment of benefits due under his health insurance plan for hospitalization and medical treatment he received for injuries sustained in a motorcycle accident. Blue Cross contends LeCates failed to exhaust his administrative remedies under the terms of the Plan, and for that reason, argues the Complaint should be dismissed with prejudice. LeCates contends he exhausted all required administrative remedies, or alternatively, that further pursuit of such remedies would have been futile. As to the merits, Blue Cross and LeCates differ over the interpretation of the "illegal act exclusion" Blue Cross applied and upon which it based its denial of benefits determination.
After carefully considering the parties' written memoranda, relevant case law, and the parties' arguments, the Court will grant Blue Cross's motion to strike; deny Blue Cross's motion for summary judgment; and grant LeCates's motion for summary judgment.
LeCates is an eligible dependent of an enrollee in a group health plan sponsored by Gritman Medical Center ("Gritman"). That group plan, titled "ASC Preferred Blue Master Group Plan," was effective January 1, 2014, through December 31, 2014. (Dkt. 16-7 at 35-112.)
Gritman is identified as the Plan Administrator, and benefits under the Plan are paid by Gritman. (Dkt. 16-7 at 85.) According to the Plan, Gritman is the "sole fiduciary of the Plan, [and] has all discretionary authority to interpret the provisions and control the operation and administration of the Plan.... All decisions made by the Plan Administrator...shall be final and binding on all parties."
Blue Cross is defined as a nonprofit mutual insurance company, hired by Gritman, to act as the third party Contract Administrator to perform claims processing and other administrative services as outlined in the Plan. (Dkt. 16-7 at 78.) The Plan states that Blue Cross, as the Contract Administrator, is "not an insurer of health benefits under this Plan, is not a fiduciary of the Plan and does not exercise any of the discretionary authority and responsibility granted to the Plan Administrator. The Contract Administrator is not responsible for Plan financing and does not guarantee the availability of benefits under this Plan." Id.
The Plan provides for various benefits but also contains certain exclusions in the "Exclusions and Limitations Section." (Dkt. 16-7 at 90 - 16-7 at 94.) Specifically, the Plan states:
(Dkt. 16-7 at 92.) (emphasis added).
Under the terms of the Plan, Blue Cross was responsible for processing claims for benefits in accordance with the Administrative Services Agreement between Blue Cross and Gritman. (Dkt. 16-7 at 96.) In addition, Blue Cross was vested with authority and discretion to determine eligibility for coverage under the terms of the Plan, and to determine the amount of benefits owed on covered claims. (Dkt. 16-7 at 109.)
The Plan contains a section outlining the inquiry and appeals procedures in Section XV. (Dkt. 16-7 at 102.) Participants who wish to formally appeal a post-service claim decision by Blue Cross, who acts on behalf of the Plan Administrator, may do so through the following process:
(Dkt. 16-7 at 103.) (Emphasis added.) "A Participant must first exhaust BCI's internal grievance and appeal process. Exhaustion of that process includes completing all levels of appeal." (Dkt. 16-7 at 104.)
Elsewhere, the Plan outlines the appeals process in plain language in the section titled, "Rights of Plan Participants." (Dkt. 16-7 at 111.) In that section, the Plan states that, if a claim for benefits is denied, "you will receive a written explanation of the reason for the denial. If you do not agree with the denial, you have the right to ask the Plan Administrator to review the claim. If you are not satisfied with the result of such a review, you may file suit in a state or federal court." (Dkt. 16-7 at 111.)
LeCates, a 22-year-old male, was injured on April 12, 2014, when he was riding his road bike (motorcycle), lost control, and hit a fence. (Dkt. 16-3 at 22.) According to the Accidental Injury Questionnaire LeCates completed, LeCates lost control of the motorcycle when he hit soft gravel on a corner while traveling on Highway 12 near Lenore, Idaho.
Blue Cross initially paid benefits to medical care providers following LeCates's inquiry about why his providers' bills were going unpaid. But, on April 16, 2014, Blue Cross notified LeCates in writing that benefits for his inpatient stay at the hospital beginning April 12, 2014, were denied based upon the illegal act exclusion in the policy. (Dkt. 16-3 at 17.)
On or about May 26, 2014, LeCates received Explanation of Benefits statements denying $45,841.01 in medical charges submitted by St. Joseph Regional Medical Center. (Dkt. 16-3 at 42-43). In contrast to Blue Cross's April 16, 2014 letter, the EOB noted the reason for the denial was that the services were not medically necessary and not eligible for coverage.
On July 17, 2014, LeCates
On July 28, 2014, Blue Cross acknowledged receipt of LeCates's request for reconsideration of his claim for medical benefits. (Dkt. 16-3 at 11.) The letter requested a signed authorization form to allow LeCates's representative to appeal the claim decision on his behalf. LeCates submitted the authorization form on July 31, 2014. (Dkt. 16-3 at 10.) By letter dated August 7, 2014, Blue Cross informed LeCates it had received the appeal and the signed authorization form as of August 4, 2014, and that it was reviewing the appeal. Blue Cross indicated that, unless it needed additional information, a response would be sent within 30 days from the date it received the signed authorization form. (Dkt. 16-3 at 9.)
Blue Cross sent a second denial letter dated September 2, 2014, responding to LeCates's appeal requesting reconsideration of his claim for services from April 12, through April 16, 2014. (Dkt. 16-3 at 1-2.) Blue Cross indicated it was upholding its denial under the illegal act exclusion, stating as follows:
(Dkt. 16-3 at 1-2.) Blue Cross indicated previously approved claims for medical services rendered were being adjusted and reversed. The letter further explained that, once the claims were adjusted, LeCates would receive a new EOB, that new appeal rights would become available, and that LeCates "may submit a second appeal requesting further review" within 180 days from the date of the new EOB. (Dkt. 16-3 at 2.)
A new EOB dated September 8, 2014, indicated additional claims previously approved were denied. (Dkt. 16-7 at 113 - 118.) According to the EOB, the appeal procedures involved writing a letter with supporting documentation contesting the denial of benefits. Upon receipt of a decision upholding the initial decision, the EOB explained the plan participant "may have the right to file a second appeal. An external review process may be available to you following completion of the internal review process. Under Section 502(a) of the Employment retirement Income Security Act, you may also have the right to file a civil action following the exhaustion of the complete appeals process." (Dkt. 16-7 at 118.)
LeCates did not file any further appeals, and instead filed a complaint in this Court on March 5, 2015. (Dkt. 1). On March 25, 2015, Blue Cross notified Gritman of the Complaint. (Dkt. 16-6 at 27.) In an email response dated April 6, 2015, Gritman indicated it had received the materials Blue Cross sent to it regarding the denial of benefits and that it agreed with Blue Cross's denial of LeCates's claims for benefits. (Dkt. 16-7 at 32.)
LeCates's suit against Blue Cross seeks benefits due under the Plan pursuant to Section 502(a)(1)(B) of ERISA (29 U.S.C. § 1132(a)(1)(B)), and for an award of any equitable remedies available under Section 502(a)(3) (29 U.S.C. § 1132(a)(3)).
Blue Cross asserts that, following receipt of the adverse benefit decision on April 16, 2014, the Plan required LeCates to file a written appeal. Blue Cross acknowledges LeCates did so on July 17, 2014. Blue Cross argues, however, the Plan required LeCates to file a second level appeal before he could file suit. In contrast, LeCates argues he exhausted his available administrative remedies, because he received not one, but two denial letters dated April 16, 2014, and September 2, 2014. LeCates argued at the hearing that a second level appeal, which would have been submitted after receipt of the September 2, 2014 denial letter, was discretionary based upon the interpretation of the Plan language. Alternatively, LeCates argues further appeals would have been futile, because the September 8, 2014 EOB proffered the same reason for denial of his claims as proffered in both the April 16 and September 2 letters, and he had no further information tosubmit.
Although Blue Cross moves for summary judgment, the defense of "failure to exhaust nonjudicial remedies should be raised in a motion to dismiss, or be treated as such if raised in a motion for summary judgment." Ritza v. Int'l Longshoremen's and Warehousemen's Union, 837 F.2d 365, 368-69 (9th Cir. 1988), overruled on other grounds in Albino v. Baca, 747 F.3d 11162 (9th Cir. 2014). A defendant may raise the exhaustion defense early in the case, on an incomplete record, via an unenumerated Fed. R. Civ. P. 12(b) motion "as a matter of abatement." Wyatt v. Terhune, 315 F.3d 1108, 1119 (9th Cir. 2003); Payne v. Peninsula School Dist., 653 F.3d 863, 881 (9th Cir. 2011) (discussing unenumerated Rule 12(b) motions in context of IDEA).
To resolve a Rule 12(b) motion raising failure-to-exhaust issues, "the court may look beyond the pleadings and decide disputed issues of fact." Wyatt, 316 F.3d at 1119-20. In such instances, the court "has a broad discretion as to the method to be used in resolving the factual dispute." Ritza, 837 F.2d at 369. However, the court "must assure that [the plaintiff] has [had] fair notice of his opportunity to develop the record." Wyatt, 315 F.3d at 1120, n. 14.
Distinguishing unenumerated Rule 12(b) motions from motions brought specifically under Rule 12(b)(6) and 56, Ritza further explained that "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of [the] claims." Ritza, 837 F.2d at 369 (internal citations and punctuation omitted). Even so, because failure to exhaust is an affirmative defense, a defendant bears the burden of persuasion. Wyatt, 315 F.3d at 1119.
"ERISA itself does not require a participant or beneficiary to exhaust administrative remedies in order to bring an action under [section] 502 of ERISA, 29 U.S.C. § 1132." Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620, 626 (9th Cir. 2008). However, based on both the text of ERISA and its legislative history, the Court of Appeals for the Ninth Circuit held that "federal courts have the authority to enforce the exhaustion requirement in suits under ERISA, and that as a matter of sound policy they should usually do so." Amato v. Bernard, 618 F.2d 559, 568 (9th Cir. 1980). The Ninth Circuit has consistently held that, before bringing suit under Section 502, an ERISA plaintiff claiming a denial of benefits "must avail himself or herself of a plan's own internal review procedures before bringing suit in federal court." Diaz v. United Agric. Employee Welfare Benefit Plan & Trust, 50 F.3d 1478, 1483 (9th Cir. 1995). See also Hixon v. Hewitt Associates, No. 1:12-cv-00489-EJL-REB, 2013 WL 2338111, at *3 (D. Idaho May 28, 2013) (applying the exhaustion requirement in an ERISA case).
A plaintiff may be excused from the exhaustion requirement provided the plaintiff provides support for the excuse. "[B]are assertions of futility are insufficient to bring a claim within the futility exception, which is designed to avoid the need to pursue an administrative review that is demonstrably doomed to fail." Diaz, 50 F.3d at 1485 (emphasis added). A plan's refusal to pay does not, by itself, show futility. Foster v. Blue Shield of Ca., 2009 WL 1586039, at *5 (C.D. Cal. June 3, 2009).
For example, in Diaz, the Ninth Circuit found insufficient the plaintiff's argument that "defendants ha[d] demonstrated by their continued refusal to pay that they ha[d] no intention of doing so." 50 F.3d at 1485-86. The court noted that the plaintiff's futility argument was "really circular, for defendants' current denial is pegged entirely to [Plaintiffs'] failure to have pursued the administrative route .... In this instance [Plaintiffs'] own delinquency in pursuing an internal appeal prevented the possibility of an administrative look at the merits, and the record contains nothing but speculation to suggest that the administrators would have reached a preconceived result in that respect." 50 F.3d at 1485-86.
Courts generally require that a plaintiff asserting futility proffer facts and circumstances indicating why administrative review would be futile. For example, in A.F. v. Providence Health Plan, 2016 WL 81796 at *7 (D. Or. Jan. 7, 2016), the court considered evidence of the insurer's policy refusing to pay for certain benefits prior to a certain date; similarly situated plaintiffs who had been denied benefits after exhausting the appeals process; and testimony from the insurance company's representative that plaintiffs had exhausted their internal remedies as sufficient for establishing futility.
In addition to the futility exception, a second exception to the exhaustion requirement exists. The Courts of Appeal for the Eleventh, Seventh, and Second Circuits apply a narrow exception, exempting from the general exhaustion requirement those plan participants who "reasonably interpret" an ERISA plan not to require exhaustion and, as a result, fail to exhaust administrative remedies prior to filing suit in federal court. Kirkendall v. Halliburton, Inc., 707 F.3d 173, 180 (2nd Cir. 2013). See also Watts v. BellSouth Telecomms., Inc., 316 F.3d 1203, 1209-10 (11th Cir. 2003) ("If a plan claimant reasonably interprets the relevant statements in the summary plan description as permitting her to file a lawsuit without exhausting her administrative remedies, and as a result she fails to exhaust those remedies, she is not barred by the court-made exhaustion requirement from pursuing her claim in court."); Gallegos v. Mount Sinai Med. Ctr., 210 F.3d 803, 810 (7th Cir. 2000) (same, on estoppel grounds).
The reasonableness of the plan participant's interpretation "must be judged from the perspective of the average plan participant." Watts, 316 F.3d at 1207 (citing 29 U.S.C. § 1022(a) "The summary plan description ... shall be written in a manner calculated to be understood by the average plan participant."); cf. Lee v. Blue Cross/Blue Shield of Ala., 10 F.3d 1547, 1551 (11th Cir. 1994); (ambiguities in the summary plan description and plan construed against the drafter); Bergt v. Ret. Plan for Pilots Employed by Markair, Inc., 293 F.3d 1139, 1145-46 (9th Cir. 2002) (same); Hansen v. Cont'l Ins. Co., 940 F.2d 971, 982 (5th Cir. 1991) (same)).
The Second Circuit explained the rationale behind this exception to the exhaustion requirement is to encourage plan descriptions to be written "in a manner calculated to be understood by the average plan participant," so they are "sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." Kirkendall, 707 F.3d at 180 (quoting 29 U.S.C. § 1022(a)). Exempting from the general exhaustion requirement those plan participants who "reasonably interpret" their ERISA plan not to impose an exhaustion requirement will have the effect of encouraging employers and plan administrators to clarify their plan terms, and consequently lead more employees to pursue benefits claims through their plan's claims procedure in the first instance. Watts, 316 F.3d at 1209.
Based upon the parties' arguments and the persuasive authority from the Eleventh, Second, and Seventh Circuits, the Court finds LeCates reasonably interpreted the Plan to not require a second level of appeal.
In contrast, the second level appeal process is couched in discretionary language. The Plan in Section XV(C)(4) indicates that, if the original decision is upheld, the plan participant "may" send an additional written appeal. Elsewhere in the Plan, in the section entitled "Rights of Plan Participants," the Plan indicates that, if the plan participant is not satisfied with the reasons given for the denial, "you may file suit in a state or federal court." There is no mention of a requirement to send a second appeal letter upon receipt of the denial of benefits letter. Although the Plan in Section XV(D) indicates that a participant "must" exhaust the internal grievance and appeal process, which includes completing "all levels of appeal," the Court finds the Plan terms cannot reasonably be read to require the filing of a second level appeal before a lawsuit may be filed.
The use of language such as "may" and "should" and "wish," given their plain and ordinary meaning, indicates a plan participant has the opportunity to participate in a voluntary, rather than mandatory, second level review procedure. Gallegos, 210 F.3d at 810. Moreover, in both the section titled Rights of Plan Participants, and in the section describing the appeal process, the second level appeal is not described as a prerequisite to filing suit. Here, Blue Cross's September 2, 2014 letter upholding its decision on reconsideration was reasonably understood by LeCates as terminating the internal review process.
LeCates's understanding is further supported by the granting of additional appeal rights in the September 2, 2014 letter. The letter explained "new" appeal rights would become available, and LeCates "may" submit a second appeal within 180 days from the date of the newly issued EOB. The issuance of a new EOB on September 8, 2014, the granting of an additional 180 days from the date of the newly issued EOB, and the use of discretionary language, are all contradictory to the language in the Plan in Section XV(C)(4). There, the Plan indicates that an additional written appeal "may" be sent within 60, not 180, days. The 180 day period applies, per the Plan language, to a first level appeal, which LeCates already had filed. The fact LeCates's attorney filed suit within the 180 day period
In conjunction with the letters he received, the Court finds LeCates's interpretation of the Plan is reasonable. It is apparent that LeCates and his attorney believed they had pursued the avenues available to LeCates and concluded he could bring his claims in this Court, and needed to file a complaint within 180 days of September 8, 2014. A natural reading of the plain language of the Plan, together with the September 2, 2014 letter, is that further administrative review was optional. Nowhere does the Plan explicitly state that pursuit of both a first level and second level appeal is required before a claim may be taken to court. See Watts, 316 F.3d at 1209 (explaining that the failure to clearly state pursuit of administrative remedies is required before bringing suit led the claimant to reasonably conclude exhaustion was not necessary).
LeCates is not barred by the exhaustion requirement from pursuing his claims in this Court.
Before turning to the merits of the cross motions for summary judgment, the Court first will address Blue Cross's motion to strike. LeCates introduced the affidavits of D. Timothy Anstine and Josh E. Buessing, experts who explain the various testing techniques used to determine blood alcohol concentration. (Dkt. 19, 20.) Blue Cross argues the evidence is improper, because in an ERISA matter, the Court and the parties are limited to an examination of the administrative record. LeCates argues Blue Cross failed to engage in any meaningful investigation, and that if it had, the information in the affidavits would have been discovered.
The Ninth Circuit adheres to the general rule that a district court may review only the administrative record when considering whether the plan administrator abused its discretion, but may admit additional evidence on de novo review. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006). The Court may, "in its discretion, consider evidence outside the administrative record to decide the nature, extent, and effect on the decision-making process of any conflict of interest; the decision on the merits, though, must rest on the administrative record once the conflict (if any) has been established, by extrinsic evidence or otherwise." Id.
Here, LeCates seeks to introduce the affidavits in support of the decision on the merits, not with respect to the effect on the decision-making process of any conflict of interest. Accordingly, the Court may not, and will not, stray from the administrative record.
LeCates brings his claim against Blue Cross
Summary judgment is appropriate only when there is no genuine issue of material fact, so that the dispute may be decided solely on legal grounds. Fed. R. Civ. P. 56. "[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator ... discretionary authority to determine eligibility for benefits." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The Plan in this case gives the administrator discretion to determine eligibility, and therefore the Court will review the decision to deny benefits for abuse of discretion. Id.
But, if the plan administrator is also the funding source, or insurer, for an ERISA plan, that conflict of interest must be weighed as a factor in determining whether there is an abuse of discretion. Tremain v. Bell Indus., Inc., 196 F.3d 970, 976 (9th Cir. 1999). Tremain v. Bell Indus., Inc., 196 F.3d 970, 976 (9th Cir. 1999). A conflict of interest exists in such circumstances because, while the administrator is responsible for administering the plan so that those who deserve benefits receive them, the administrator also "has an incentive to pay as little in benefits as possible to plan participants because the less money the insurer pays out, the more money it retains in its own coffers." Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 966 (9th Cir. 2006) (citation omitted).
To determine whether an administrator operates under a conflict of interest, the beneficiary must provide "material, probative evidence, beyond the mere fact of the apparent conflict, tending to show that the fiduciary's self-interest caused a breach of the administrator's fiduciary obligations to the beneficiary." Friedrich v. Intel Corp., 181 F.3d 1105, 1109 (9th Cir. 1999). If the beneficiary makes such a showing, the second step shifts the burden to the plan, which is then required to produce evidence showing that "the conflict of interest did not affect the decision to deny benefits." Id. If the plan does not meet its burden, the decision to deny benefits is reviewed de novo by the district court. Id.
The parties do not dispute that the abuse of discretion standard applies. However, LeCates contends a conflict of interest exists, requiring the Court to weigh the conflict as a factor in determining whether Blue Cross's decision was arbitrary and capricious. Here, Gritman is the plan administrator and the funding source, not Blue Cross. At the hearing, LeCates asserted the agreement between Gritman and Blue Cross contained a reinsurance provision, requiring Blue Cross to shoulder some portion of the funding, which in turn constitutes a conflict of interest for Blue Cross. Yet, LeCates did not point to support in the record for that assertion, and the Court has not unearthed evidence of the existence or the terms of such an agreement.
Reviewing Gritman's role, the only evidence in the record of Gritman's involvement was Blue Cross's email to it on March 25, 2015, and Gritman's email response dated April 6, 2015. In that email, Gritman indicated it had received the materials Blue Cross sent regarding the denial of benefits and that it agreed with Blue Cross's denial of LeCates's claims. There is no evidence of bad faith or improper motivation inherent in the email exchange.
Nonetheless, where, as in this case, the Plan gives the administrator discretion, and the administrator has a conflict of interest, the Court "is instructed to judge its decision to deny benefits to evaluate whether it is reasonable." Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 675 (9th Cir. 2011). See also Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917, 929 (9th Cir. 2012) (quoting Conkright v. Frommert, 559 U.S. 506, 521 (2010)); Day v. AT&T Disability Income Plan, 698 F.3d 1091, 1096 (9th Cir. 2012)). Reasonableness does not mean the Court would make the same decision. Salomaa, 642 F.3d at 675. The Court is to judge the reasonableness of the plan administrator's decision skeptically when the administrator has a conflict of interest. Id. Even without such skepticism, deference to the plan administrator's judgment does not mean the Plan prevails in every case. Id.
The test for abuse of discretion in a factual determination is whether the Court is left with a "definite and firm conviction that a mistake has been committed," and the Court may not substitute its view for that of the fact finder. Id. at 676. To make that determination, the Court considers "whether application of the correct legal standard was (1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts in the record." Stephan, 697 F.3d at 929 (internal quotation marks omitted); Salomaa, 642 F.3d at 676.
Turning now to the Plan provision upon which Blue Cross relied in denying LeCates's claim for benefits, the Court applies contract principles derived from state law, but is guided by the policies expressed in ERISA and other federal labor laws. Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 982, 985 (9th Cir. 1997). The Ninth Circuit requires terms in an ERISA plan to be interpreted "`in an ordinary and popular sense as would a [person] of average intelligence and experience.'" Gilliam v. Nevada Power Co., 488 F.3d 1189, 1194 (9th Cir. 2007) (quoting Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 982, 985 (9th Cir. 1997)). More specifically, the Ninth Circuit directs the Court to "first look to explicit language of the agreement to determine, if possible, the clear intent of the parties. The intended meaning of even the most explicit language can, of course, only be understood in the light of the context that gave rise to its inclusion." Gilliam, 488 F.3d at 1194 (quoting Armistead v. Vernitron Corp., 944 F.2d 1287, 1293 (6th Cir. 1991)). When a plan is ambiguous, the Court is permitted to examine extrinsic evidence to determine the intent of the parties. Id.
Each provision in an agreement must be construed consistently with the entire document such that no provision is rendered nugatory. Id. But, when a plan is ambiguous, the Court must examine extrinsic evidence to determine the intent of the parties. Id. If, after applying the normal principles of contractual construction, the insurance contract is fairly susceptible of two different interpretations, the rule of construction requiring the interpretation most favorable to the insured will be adopted. Blankenship v. Liberty Life Assur. Co. of Boston, 486 F.3d 620, 625 (9th Cir. 2007). However, the rule requiring interpretation most favorable to the insured in the event of ambiguous terms will apply except where the plan: (1) grants the administrator discretion to construe its terms, (2) is the result of a collective-bargaining agreement, or (3) is self-funded. Blankenship, 486 F.3d at 625. Here, because the Plan grants the administrator discretion to construe its terms, the rule does not apply and the Court must be guided by whether Blue Cross abused its discretion. Id.
Blue Cross argues the plain meaning of the illegal act exclusion in the Plan supports its interpretation that LeCates was engaged in an illegal act at the time of the accident. Blue Cross cites several cases which have held similar plan provisions are not ambiguous and which found that driving with more than the legal limit of blood alcohol was an illegal activity within the policy terms. For example, in Tourdot v. Rockford Health Plans, Inc., 439 F.3d 351 (7th Cir. 2006), the court examined a plan provision excluding payment for medical services if the accident resulted from the commission of "any illegal act." At the time of the accident, the plaintiff's blood alcohol level measured by a Breathalyzer test showed a BAC of 0.10g/dL. A later blood test administered in the emergency room showed the plaintiff's blood-alcohol level to be 0.14 g/dL. The plaintiff was cited for inattentive driving.
Referring to Wisconsin law, Rockford Health Plans denied coverage on the basis of the illegal act exclusion. Wisconsin law in effect at that time considered a person operating a motor vehicle with a blood-alcohol concentration above .10 g/dL in violation of the law. Wis. Stat. Ann. § 885.235(1) (West 2006). The court in Tourdot held the illegal act provision was not ambiguous, and that the plaintiff's operation of his motorcycle while intoxicated fell within the illegal act exclusion. Tourdot, 439 F.3d at 354. See also Sisters of the Third Order of St. Francis v. Swedishamerican Group Health Benefit Trust, 901 F.2d 1369, 1372 (7th Cir. 1990) (finding an exclusion for expenses "incurred while engaged in any illegal or criminal enterprise or activity" unambiguous and that injuries sustained while drunk driving fell within the exclusion when the plaintiff was driving with more than twice the lawful level of alcohol in his blood); Folks v. Kirk Paper Corp. Medical & Dental Ben. Plan, 1999 WL 16326 *3 (N.D. Cal. 1999) (finding the plan did not abuse its discretion in denying the plaintiff's claim for benefits for medical expenses incurred as a result of driving while intoxicated under a plan provision excluding coverage for engaging in "an assault or other illegal act," and the plaintiff was convicted of drunk driving and vehicular manslaughter); SGI/Argis Employee Ben. Trust Plan v. Canada Life Assur. Co., 151 F.Supp.2d 1044, 1048 (E.D. Ark. 2001) (finding that insured was engaged in an illegal act when an unchallenged blood alcohol test taken ninety minutes after the accident showed an alcohol level of .344%, more than three times the legal limit).
Blue Cross cites several of the above examples in support of its argument that the illegal act exclusion in the Plan is not ambiguous and the Court should uphold Blue Cross's interpretation of the exclusion here. However, in Bekos v. Providence Health Plan, 334 F.Supp.2d 1248, 1256 (D. Or. 2004), the federal district court in Oregon found the phrase, "other illegal act,"
The Court finds none of the cases cited by either LeCates or Blue Cross particularly persuasive as argued by the parties. The parties argue the Plan language here is either ambiguous or not ambiguous, relying upon similar plan language in the cases cited above. However, the Court finds an analysis comparing plan language and phrasing misplaced. Instead, the Court adopts the logic applied in Tourdot and SGI/Argis, based upon the definition of "alcohol concentration" under Idaho law.
Idaho law considers it unlawful for any person who is "under the influence of alcohol...or any combination of alcohol, drugs and/or any other intoxicating substances, or who has an alcohol concentration of 0.08, "as defined in subsection (4) of this section, or more, as shown by analysis of his blood, urine, or breath, to drive or be in actual physical control of a motor vehicle...." Idaho Code § 18-8004(1)(a). Subsection (4) defines what constitutes a blood alcohol concentration of .08:
Idaho Code § 18-8004(4). Persons having an alcohol concentration of less than .08 as defined in subsection (4), "as shown by analysis of his blood, urine or breath, by a test requested by a police officer shall not be prosecuted for driving under the influence of alcohol" except as provided in the statute. Idaho Code § 18-8004(2).
To meet Idaho Code § 18-8004(4)'s laboratory standards, the Idaho State Police has enacted several administrative rules governing blood collection and alcohol testing at an approved laboratory. See IDAPA 11.03.01.13. Specifically, any blood sample tested must contain at least 10 milligrams of sodium fluoride per cubic centimeter of blood plus an appropriate anticoagulant, and the results of an analysis on blood for alcohol concentration "shall be reported in units of grams of alcohol per one hundred (100) cubic centimeters of whole blood." IDAPA 11.03.01.013.02. (emphasis added.)
An in-depth review of the case law yields the realization that Idaho law is unique in its definition of "blood alcohol concentration." For example, in Tourdot, the court looked to state law to determine whether the term "illegal act" had a plain meaning. 439 F.3d at 354. The court held that an illegal act does have a plain meaning, in that it refers to any activity contrary to law. Id. The court then asked whether the plaintiff's activities fell within that classification. Id. Under Wisconsin law at the time, any person with a blood-alcohol concentration above 0.10g/dL who operated a motor vehicle violated the law. Under Wisconsin law, alcohol concentration was defined simply as "the number of grams of alcohol in 100 milliliters of a person's blood or the number of grams of alcohol in 210 liters of a person's breath." Wis. Stat. Ann. § 885.235(1)(a) (West 2006). The plaintiff was administered a Breathalyzer test at the scene of the accident, indicating a BAC of 0.10g/dL. Blood was later taken at the hospital. Wisconsin law did not provide a statutory reference as to what type of blood test was required.
Similarly, in SGI/Argis, the court looked to Texas law regarding what constituted legal intoxication such that the illegal act exclusion in the policy would apply.
Here, applying the same logic as the courts in Tourdot and SGI/Argis, the Court finds the illegal act exclusion in the Plan must be read in light of Idaho law. In that context, the Court finds the exclusion for expenses incurred "for the treatment of injuries sustained while...engaging in an illegal act" unambiguous, because the phrase "engaging in an illegal act" refers to acts that the Idaho legislature has deemed contrary to law. Tourdot, 439 F.3d at 354. A conviction is not required. SGI/Argis, 151 F.Supp.2d at 1048.
But, the Court finds Blue Cross abused its discretion in concluding that LeCates, under the facts present in the record, was ineligible for benefits under the illegal act exclusion. The Court recognizes Idaho considers drunken driving against the law, as does Wisconsin and Texas and every other state in the United States. But, Idaho sees fit to regulate what type of blood test can be used to support a finding of blood alcohol concentration greater than 0.08. Illegal intoxication is defined as a blood alcohol concentration of .08 grams of alcohol per 100 centimeters of whole blood. Further, the sample must contain at least 10 milligrams of sodium fluoride per cubic centimeter of blood plus an appropriate anticoagulant. And finally, an approved laboratory must test the blood.
The blood test conducted on LeCates does not meet the definition of unlawful activity defined by Idaho law, and therefore does not fall within the definition of illegal intoxication for the purposes of driving under the influence. Importantly, in neither Tourdot, SGI/Argis, nor any of the other cases upon which Blue Cross relies in interpreting similar illegal act exclusions in the context of driving while intoxicated, do state legislatures require a specific type of blood test. Idaho, however, has chosen to precisely define what constitutes a blood alcohol concentration of .08 or more, and requires the blood test to be taken on whole blood, not serum blood.
The denial letter specifically stated Blue Cross relied upon the blood test results from the blood taken at the hospital as support for its conclusion LeCates was over the legal limit for blood alcohol concentration, or intoxicated, at the time of the accident. But, the blood serum test result does not meet the legal requirement to support a conclusion of illegal intoxication under Idaho law. Nonetheless, Blue Cross made its determination without any other support in the record. The facts and evidence relied upon by Blue Cross here do not adequately support the inference made by Blue Cross that LeCates was engaged in an illegal act—i.e. driving while intoxicated as defined by Idaho law.
Unlike in SGI/Argis, LeCates was not three times over the legal limit such that an inference could be made based upon a serum blood test that LeCates met the legal requirement for a finding of intoxication under Idaho law. In fact, there is no evidence Blue Cross noted the difference, or was even aware of the difference, between test results using whole, versus serum, blood. Nor was a second, independent test, such as a breathalyzer, administered to confirm the blood test results like in Tourdot.
There is no evidence Blue Cross considered the facts and circumstances of the accident, which would have been contained in the police report. Blue Cross never requested a copy of the report.
The facts in the administrative record here, considered as a whole, do not support Blue Cross's factual determination that LeCates was engaged in an illegal act. Other than the test results of one aspect of the routine metabolic panel administered in the emergency room, there is no other evidence in the record to support Blue Cross's determination LeCates was driving while intoxicated.
When it comes to driving under the influence as defined under Idaho law, "illegal" must be proven by evidence beyond a reasonable doubt. While the Court does not necessarily find that such an evidentiary standard applies to Blue Cross, the sole piece of evidence or fact relied upon here is not even indisputable. Yet, Blue Cross ascribes "illegal" to the circumstances under which LeCates was driving his motorcycle without any definitive facts or evidence that would comport with Idaho law, or with the types of other, corroborating evidence considered by the plan administrators in Sisters, Folks, Tourdot, and SGI/Argis. In other words, Blue Cross must have more before it ascribes the moniker "illegal" to its insured's conduct and denies benefits on that basis.
In this respect, it is worth noting that Blue Cross appears not to have followed its own review process. The review process indicates that, after receipt of the written appeal, "all facts, including those originally used in making the initial decision and any additional information that is sent or that is otherwise relevant, will be reviewed...." (emphasis added.) Yet Blue Cross failed to request the police report, which undoubtedly would have been relevant. Instead, Blue Cross seized solely upon the serum blood test performed as a matter of course upon LeCates's admission to the emergency room. Even in other cases where the insured was clearly intoxicated, the plan administrator requested outside information, such as court pleadings and police reports.
The evidence Blue Cross had before it is not the type of substantial, reliable evidence indicating LeCates was engaged in an illegal act under Idaho law at the time he suffered his injuries. Instead, the evidence in the administrative record here is in contrast to the overwhelmingly strong evidence of illegal intoxication in Tourdot and SGI/Argis, as well as in the other cases cited by Blue Cross. Accordingly, the Court finds Blue Cross's determination does not rest upon sufficient facts to support the inference it made, and therefore constitutes an abuse of discretion. Based upon the evidence of record as a whole, the Court is left with the firm conviction that a mistake was committed in this case.
Having considered all of the circumstances of this case and the evidence in the administrative record, the Court concludes Blue Cross abused its discretion in denying LeCates's claim for medical benefits. Blue Cross's denial of benefits relied solely upon a blood test administered at the hospital which would not have supported a finding of illegal intoxication absent other, more compelling indicators of LeCates's level of intoxication at the time of the accident. Further, Blue Cross failed to obtain a copy of the police report, and did not consider other evidence in the record in LeCates's favor, which included the physicians' reports of LeCates's demeanor upon admission to the hospital. The appropriate remedy is for the Plan to provide LeCates with medical benefits.
