G. MURRAY SNOW, District Judge.
Pending before the Court is Plaintiff Deana Tuttle's Motion Regarding Standard of Review, (Doc. 23). For the reasons discussed below, the Motion is denied.
At issue in this case is an employee welfare plan's denial of an employee's claim for the reimbursement of medical payments. The crux of this Motion is to request the Court to apply a non-deferential standard to its review of that denial.
Plaintiff Deana Tuttle is employed by Defendant Varian Medical Systems, Inc. ("Varian") as a Medical Physicist. (Doc. 1 (Compl.) ¶ 8.) As an employee, Ms. Tuttle is a participant in Varian's Welfare Benefit Plan (the "Plan") which is a health and medical reimbursement insurance plan. (Id. ¶ 4; Doc. 15 (Ans.) ¶ 4.) Varian is the Plan Sponsor and Defendant United Healthcare Insurance Company ("UHIC") is the insurer of the Plan as well as the claims administrator. (Doc. 1 ¶¶ 5-6; Doc. 15 ¶¶ 5-6.) The Parties dispute whether the Plan delegates to UHIC the discretionary authority to make benefits determinations. (Doc. 1 ¶ 7; Doc. 15 ¶ 7.)
In July 2009, Ms. Tuttle was diagnosed with breast cancer by the Mayo Clinic of Scottsdale, Arizona (the "Clinic"). (Doc. 1 ¶ 13; Doc. 15 ¶ 13.) She underwent multiple breast cancer surgical procedures at the Clinic on August 4 and 12, 2009. (Doc. 1 ¶ 14; Doc. 15 ¶ 14.)
After the surgeries, Ms. Tuttle's providers at the Clinic billed the Plan for payment of medical expenses related to her treatment from August 4 to 12. (Doc. 1 ¶ 28; Doc. 15 ¶ 28.) Although the Parties agree that the Plan, acting through UHIC, paid expenses, they dispute the percentage of expenses that the Plan paid and what percentage it advised Ms. Tuttle that she must pay. (Doc. 1 ¶ 29-30; Doc. 15 ¶ 29-30.) Ms. Tuttle filed an administrative appeal of the Plan's benefits determination pursuant to the procedure set out in the Plan. (Doc. 1 ¶ 31; Doc. 15 ¶ 31.) The Plan's benefits determination was upheld on appeal on January 12, 2010. (Doc. 1
Based on the Plan's instructions, Ms. Tuttle sent a completed "Health Care Appeal Request Form" to the Plan on February 16, 2010. (Doc. 1 ¶ 35; Doc. 15 ¶ 35.) The Parties dispute whether the Plan acknowledged receipt of the Form and processed it for independent review. (Doc. 1 ¶ 36-37; Doc. 15 ¶¶ 36-37.)
Ms. Tuttle filed an action against Varian in this Court on August 23, 2011. (Doc. 1 ¶ 38; Doc. 15 ¶ 38.) The Parties stipulated to dismiss the action without prejudice to allow the Arizona Department of Insurance (the "Department") to perform an external independent review of Ms. Tuttle's claim; the action was dismissed on November 21. (Doc. 1 ¶ 39; Doc. 15 ¶ 39.) The Department, however, declined to review the matter because the appeal was about the amount of coverage and not whether services were covered under the Plan. (Doc. 1 ¶ 43; Doc. 15 ¶ 43.) As a result of her appeals, Ms. Tuttle has fully exhausted administrative remedies required by the Plan. (Doc. 1 ¶ 44; Doc. 15 ¶ 44.)
During the period in question, the Plan and UHIC acted at least under a structural conflict of interest because UHIC was the insurer and made benefits determinations. (Doc. 1 ¶ 45; Doc. 15 ¶ 45.) That conflict of interest allegedly influenced the Plan's benefits determination regarding Ms. Tuttle's medical expenses. (Doc. 1 ¶ 46.) Ms. Tuttle alleges that she suffered economic damage as a result of Defendants' processing of her claim and that the Plan, acting through UHIC, violated the terms and conditions of the Plan, failed to act on her appeal until she filed suit, and denied her a full and fair review of her claim. (Id. ¶¶ 48-52.) She requests Plan benefits pursuant to 29 U.S.C. § 1132(a)(1)(B) and attorney's fees and costs pursuant to id. § 1132(g)(1). (Id. ¶ 52.) She now moves the Court to determine that a de novo standard of review should apply to its review of the Plan's benefits determination.
The presumptive standard of review of a fiduciary's decision to deny benefits is de novo. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006) (en banc); see also Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089 (9th Cir.1999). "In adopting the de novo standard, the Supreme Court was guided by principles of trust law because ERISA was enacted to protect employees and the plan administrators have a fiduciary duty to the beneficiaries." Gonzales v. Unum Life Ins. Co. of Am., 861 F.Supp.2d 1099, 1106 (S.D.Cal.2012) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)). But "[t]rust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers." Firestone, 489 U.S. at 111, 109 S.Ct. 948. Therefore, if a plan "unambiguously provide[s] discretion to the administrator," a denial of benefits is reviewed for abuse of discretion. Abatie, 458 F.3d at 963.
If a plan confers such discretionary authority, an abuse of discretion standard applies even if the decisionmaker was also the funding source. Abatie, 458 F.3d at 967. Judicial review in that case, however, is "informed by the nature, extent, and effect on the decision-making process of any conflict of interest that may appear in the record." Id. The plan administrator
To determine whether the Plan grants discretionary authority, the Court first must determine which documents constitute the Plan. ERISA requires that "[e]very employee benefit plan shall be established and maintained pursuant to a written instrument," 29 U.S.C. § 1102(a)(1), and an administrator must act "in accordance with the documents and instruments governing the plan" insofar as they accord with the statute, id. § 1104(a)(1)(D). "Each such plan must (1) provide a policy and a method for funding the plan, (2) describe a procedure for plan operation and administration, (3) provide a procedure for amending the plan, and (4) specify a basis for payments to and from the plan." Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1441-42 (9th Cir.1995) (internal quotation marks and citation omitted); 29 U.S.C. § 1102(b).
Ms. Tuttle contends that the administrative record before this Court does not contain the Plan. Defendants dispute that contention and assert that the Plan document is the Policy in the record; it constitutes the written instrument that should control the review of the benefits determination. Ms. Tuttle does not dispute that the Plan is sponsored by Varian and insured by UHIC. The Policy issued by UHIC to Varian and its employees under the Plan consists of the following: (1) the Group Policy; (2) the Schedule of Benefits; (3) the Certificate of Coverage; (4) the Enrolling Group's Application; (5) Riders; and (6) Amendments. (Doc. 22-1 (Admin. Record) at 124.) The Certificate of Coverage states that the Policy "is a legal document between [UHIC] and [Varian] to provide Benefits to Covered Persons, subject to the terms, conditions, exclusions and limitations of the Policy." (Id. at 54.) Further, the Policy is defined therein as the "entire agreement" between UHIC and Varian under the Plan. (Id. at 124.)
"[I]t is clear that an insurance policy may constitute the "written instrument" of an ERISA plan...." Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1441 (9th Cir.1995) (internal citations omitted); See Sterio v. HM Life, 369 Fed.Appx. 801, 803 (9th Cir.2010) ("We reject [the plaintiff's] contention that the district court should have applied a de novo standard because there is no `plan' document, only an insurance policy. The insurance policy is the plan document in this case."); Gonzales, 861 F.Supp.2d at 1108 (finding that the ERISA plan at issue was contained, in part, in the group insurance policy). Further, "[a] plan may incorporate other formal or informal documents, such as a collective bargaining agreement or a certificate of insurance." Gonzales, 861 F.Supp.2d 1099, 1107-08 (citing Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 982, 983 (9th Cir.1997)). "[T]here is no requirement that documents claimed to collectively form the employee benefit plan be formally labeled as such." Horn v. Berdon, Inc. Defined Benefit Pension Plan, 938 F.2d 125, 127 (9th Cir.1991).
Ms. Tuttle argues that the Policy is not a Plan document because the Policy refers to other Plan documents that may be obtained from the Plan administrator. For example, the Policy states that a Plan participant may contact the administrator for "assistance in obtaining documents" or "to obtain, ... copies of documents governing the operation of the plan, including insurance contracts and collective bargaining agreements, and copies of the latest annual report ... and update Summary
Ms. Tuttle also suggests that the Policy is not a Plan document because the Plan existed before the Policy became effective in 2009 and the terms of the Plan were defined before UHIC became the insurer that year. Ms. Tuttle incurred the medical expenses at issue in 2009. The Policy covers any claims for expenses incurred on after January 1, 2009. (Doc. 22-1 at 14.) Further, the Policy states that it "replaces and overrules any previous agreements relating to Benefits for Covered Health Services between [Varian] and [UHIC]." (Id. at 5.) The fact that UHIC became the insurer of the Plan in 2009, (see Doc. 23-2 (2009 Benefits Guide) at 3), does not indicate that the Policy is not a Plan document for purposes of reviewing the denial of Ms. Tuttle's benefits. The Plan is subject to change in any given year and benefits determinations are governed by the terms and conditions in effect during the applicable time period. Based on the administrative record before it, the Court determines that the various sections of the Policy described above are the controlling Plan documents.
The Policy also includes a section entitled "ERISA Statement" with a subheading of "Summary Plan Description." Plan administrators are required to provide Plan participants with summary plan descriptions and with summaries of material modifications "written in a manner calculated to be understood by the average plan participant" that are "sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." CIGNA Corp. v. Amara, ___ U.S. ___, 131 S.Ct. 1866, 1874-75, 179 L.Ed.2d 843 (2011); 29 U.S.C. §§ 1022(a), 1024(b). The Supreme Court has held that "the summary documents, important as they are, provide communication with beneficiaries about the plan, but that their statements do not themselves constitute the terms of the plan...." CIGNA, 131 S.Ct. at 1878 (emphasis in original).
Defendants argue that the Statement is not the summary document they are required to furnish to Plan participants under 29 U.S.C. § 1022(a). Instead, they characterize the Statement as a "Rider" to the Policy and as belonging to the set of Plan documents. But the Statement's language and the Policy's terminology indicate otherwise. The Statement is contained within a section of the Policy entitled "Amendments, Riders and Notices (As Applicable)." (Doc. 22-1 at 28.) Only some of the subsections' titles therein include the terms "amendment", "rider", or "notice". The Statement is not one of them; it is not designated as a Rider anywhere in the Policy. Further, the Statement's subheading is "Summary Plan Description" and includes much, but not all, of the information listed in 29 U.S.C. § 1022(b) as required for the mandated summary plan description. The Court finds that the Statement is a Summary Plan Description and is therefore not a Plan document.
The language of the written instrument determines whether discretionary authority was conferred to the plan administrator or fiduciary. Firestone, 489 U.S. at 111-12, 109 S.Ct. 948. Therefore,
Although there are no "magic words" that a plan must include to confer discretion, it must nevertheless clearly indicate that the decision-maker has discretion to grant or deny benefits, or to interpret the plan's terms. See Feibusch v. Integrated Device Tech., Inc. Emp. Benefit Plan, 463 F.3d 880, 884 (9th Cir.2006); Abatie, 458 F.3d at 964. The Ninth Circuit has described the level of clarity with which discretion must be conferred in the plan:
Ingram v. Martin Marietta Long Term Disability Income Plan for Salaried Emps. of Transferred GE Operations, 244 F.3d 1109, 1113-14 (9th Cir.2001) (internal quotation marks and citations omitted).
The Policy includes a Certificate of Coverage. In the Certificate is a section entitled "Our Responsibilities" in reference to UHIC's responsibilities under the Plan. It provides the following:
(Doc. 22-1 at 58). Further, a section entitled "General Legal Provisions" in the Policy states
(Id. at 112) (emphasis added).
The Policy's language "unambiguously" grants UHIC discretion "to construe disputed or doubtful terms" in the Plan and determine eligibility for benefits. See Firestone, 489 U.S. at 111, 115, 109 S.Ct. 948; Abatie, 458 F.3d at 963. Further, the Ninth Circuit has "repeatedly held that similar plan wording — granting the power to interpret plan terms and to make final benefits determinations — confers discretion on the plan administrator." Abatie, 458 F.3d at 963-64; see, e.g., id. at 963 (plan provided that "[t]he responsibility for full and final determinations of eligibility for benefits; interpretation of terms; determinations of claims; and appeals of claims denied in whole or in part under the [policy] rests exclusively with [the insurer]") Bergt v. Ret. Plan for Pilots Employed by MarkAir, Inc., 293 F.3d 1139, 1142 (9th Cir.2002) (plan's terms granted the administrator the "power" and "duty" to "interpret the plan and to resolve ambiguities, inconsistencies and omissions" and to "decide on questions concerning the plan and the eligibility of any Employee"); Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1159 (9th Cir.2001) (plan provided that the administrator "has the full, final, conclusive and binding power to construe and interpret the policy under the plan ... [and] to make claims determinations" grants discretion). Therefore, the Plan confers discretion on UHIC to make benefits determinations.
Ms. Tuttle argues that even if the Policy granted discretionary authority to UHIC, the insurer, it is not a fiduciary under the Plan. The applicable standard of review in an ERISA case is determined based on general trust principles. Abatie, 458 F.3d at 963. Therefore, an abuse of discretion standard only applies when a fiduciary to plan participants is the party exercising discretion to make claims decisions. Id. If an unauthorized body that does not have fiduciary discretion denies benefits, de novo review applies. Jebian v. Hewlett-Packard Co. Employee Benefits Org. Income Prot. Plan, 349 F.3d 1098, 1105 (9th Cir.2003) (internal citation omitted).
"Fiduciary status under ERISA is to be construed liberally, consistent with ERISA's policies and objectives." Ariz. State Carpenters Pension Trust Fund v. Citibank (Ariz.), 125 F.3d 715, 720 (9th Cir.1997) (internal citation omitted). ERISA "defines `fiduciary' not in terms of formal trusteeship, but in functional terms of control and authority over the plan." Mertens v. Hewitt Assocs., 508 U.S. 248, 262, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) (emphasis in original and internal citation omitted). Thus, ERISA fiduciaries "include not only those specifically named in the employee benefit plan, 29 U.S.C. § 1102(a), but also any individual who `exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets,' [id.] § 1002(21)(A)(i)." Johnson v. Couturier, 572 F.3d 1067, 1076 (9th Cir.2009).
In support of her argument that UHIC is not a fiduciary, Ms. Tuttle refers to the following provisions in the Policy. (Doc. 23 at 4.) In its introduction letter, the Policy states
(Doc. 22-1 at 5.) Under the "General Provisions" section, a subsection entitled "ERISA" provides
(Id. at 10.) Finally, in sections relating to "continuation coverage," the Policy provides
(Id. at 10, 93.) Although these provisions state that UHIC is not to be deemed an employer, plan administrator, plan sponsor, or named fiduciary, the Policy does not reject UHIC's role as a fiduciary in all circumstances. An entity may be a fiduciary without formal designation as such. UHIC had the functional role of a fiduciary under the Plan because, as discussed above, the Policy grants UHIC the discretionary authority to grant or deny benefits claims to Plan participants.
Ms. Tuttle contends that Varian did not properly delegate to UHIC the fiduciary responsibility and consequently, the discretionary authority set out in the Policy.
As discussed above, the Policy unambiguously grants discretionary authority to UHIC, as a fiduciary, to make factual and other determinations related to benefits claims. (See id. at 58, 112.) Nevertheless, Ms. Tuttle argues that Varian did not set out procedures in the Policy to confer discretionary authority to an entity and then
Ms. Tuttle contends that pursuant to a 2009 Benefits Guide based on the Plan, Varian retained discretionary authority and did not confer it on UHIC.
(Doc. 22-3 (2009 Benefits Guide) at 14.) The Guide gave clear notice to Plan participants that it was not a Plan document. The Court finds that it is not. Therefore, any apparent conflict between the Policy and the Guide is of no consequence in this matter.
Ms. Tuttle asserts that the grant of discretionary authority to UHIC in the Policy is unlawful because of the California Insurance Commissioner's withdrawal of approval of discretionary clauses in other policies. The Policy states, and Defendants do not dispute, that the Policy is regulated by the California Department of Insurance. (Doc. 22-1 at 3.)
In 2004, the Commissioner published a Notice stating that it was withdrawing its prior approval of policies listed in the Notice because they contained discretionary clauses "that purport to confer on the insurer discretionary authority to determine eligibility for benefits and to interpret the terms and provisions of the policy. Included in this definition are sole discretion clauses, allocation of authority provisions, interpretation of plan provisions and other similar terms." Cal. Dept. of Ins., Notice to Withdraw Approval 1 (Feb. 27, 2004). The Commissioner reasoned that such clauses render insurance contracts "`fraudulent or unsound insurance' within the meaning of [California] Insurance Code § 10291.5" because they make an insurer's promise to pay benefits "contingent on the unfettered discretion of the insurer, thereby nullifying the promise to pay and rendering the contract potentially illusory." Id. He also stated that "[i]n the case of ... disability contracts that are governed by ERISA, the presence of a discretionary clause has the effect of limiting judicial review of a denial of benefits to a review for abuse of discretion" which "deprives California insureds of access to the protections in the Insurance Code and in California law." Id. at 2.
The court in Firestone v. Acuson Corp. Long Term Disability Plan, 326 F.Supp.2d 1040 (N.D.Cal.2004), considered the impact of the Notice on a group disability insurance policy with a discretionary clause that was not listed in the Notice. The court held that the Notice did not apply to the policy even as persuasive authority. Id. at 1049-51. It reasoned that when the terms of an insurance policy had been approved by the Commissioner, Section 10291.5 (cited in the Notice) did not provide an insured with the right to "reform the nature of his policy and obtain benefits for which he never bargained by engaging courts to second-guess the Commissioner's approval of the policy." Id. at 1050 (quoting Peterson v. American Life and Health Ins. Co., 48 F.3d 404, 410 (9th Cir.), cert. denied, 516 U.S. 942, 116 S.Ct. 377, 133 L.Ed.2d 301 (1995)). "Once the Commissioner has approved a plan, `an otherwise valid policy is a binding contract and governs the obligations of the parties until the Commissioner revokes his approval.'" Id. at 1050 (quoting Peterson, 48 F.3d at 410). The court explained that the appropriate remedy to challenge a discretionary clause in a policy that is offensive under Section 10291.5(b) is to "petition a court for a writ of mandamus requiring
The Notice is similarly not applicable to the Policy here. The Policy was not listed in the Notice which was published five years earlier. Although Ms. Tuttle seems to contend that the Notice is applicable to policies issued between 2004 and 2012, that is not the case.
The determination of the applicable standard of review in this case depends on whether the Plan granted discretionary authority to the decisionmaker, UHIC, to make benefits decisions. Defendants have shown that the Plan documents, consisting of various sections of the Policy, unambiguously granted such authority to UHIC. They have also shown that the Plan properly delegated that authority to UHIC. Further, Ms. Tuttle has not shown that the discretionary clauses in the Plan were unlawful under California law. Accordingly, the appropriate standard of review is abuse of discretion and not de novo.
(Id.) The Policy states elsewhere that "administrative" services include determinations of "whether this Benefit plan will pay for any portion of the cost of a health care service [Plan participants] intend to receive or have received." (Id. at 58.) Thus, the Statement that purports to summarize the Plan is consistent with the finding that under the Plan, UHIC retained fiduciary responsibilities to Plan participants including Ms. Tuttle in matters of claims processing and payment, and related determinations of benefits.
Even assuming the Handbook is a valid Plan document, Ms. Tuttle again conflates the two methods for conferring authority on fiduciaries: following procedures set out in the written instrument(s) or conferring it in the written instrument itself. Further, the 2007 policy is not relevant in this matter. When reviewing a denial of benefits, the language of the governing written instrument determines which entity retained authority to interpret the disputed terms of the plan and the power to exercise discretion. Gonzales, 861 F.Supp.2d at 1106 (citing Firestone, 489 U.S. at 111-12, 109 S.Ct. 948). In this case, it is the Policy.
(Doc. 22-3 (2009 Benefits Guide) at 14.)
