In February 2006, Susan Killian learned that she had lung cancer, which had spread to her brain. After physicians at Delnor Community Hospital determined that they could not operate, she sought a second opinion from a physician at Rush University Medical Center ("Rush") and soon afterward was admitted for emergency brain surgery. Although the surgery successfully removed the most serious tumor, her cancer treatment was ultimately unsuccessful, and she died a few months later.
At the time of her diagnosis, Mrs. Killian was an employee of Royal Management Corporation ("Royal Management") and participated in its group health insurance, which was provided by Concert Health Plan Insurance Company ("Concert"). Concert paid for part of Mrs. Killian's cancer treatment, but denied coverage, or paid only a small percentage, of services received at Rush. Mr. Killian, the administrator of her estate, brought this action against Concert, Concert Health Plan,
The district court granted summary judgment for the defendants on the denial of benefits and breach of fiduciary duty claims and awarded statutory penalties against Royal Management. A panel of this court affirmed the decision of the district court on the first two claims,
Concert began providing insurance to Royal Management's employees in July 2005. The agreement between Royal Management and Concert provided that Royal Management would be the plan administrator and that Concert would be the "administrator for claims determinations" and the "ERISA [Employee Retirement Income Security Act] claims review fiduciary" with "full and exclusive discretionary authority to: 1) interpret Policy or Group Plan provisions; 2) make decisions regarding eligibility for coverage and benefits; and 3) resolve factual questions relating
While employed with Royal Management, Mrs. Killian enrolled in the Royal Plan and selected coverage under the "SO35 Open Access" option. The Master Group Policy and accompanying Certificate of Insurance applicable to her SO35 plan described the terms, exclusions, conditions and benefits available under the Royal Plan. Participants were cautioned to seek services from network providers whenever possible and told that "[t]o confirm that Your ... provider is a CURRENT participant ... You must call the number listed on the back of Your medical identification card."
The front of Mrs. Killian's insurance card listed toll-free numbers under four different headings. The second and most prominently listed number was for "Customer Service," which was the same toll-free number for "Utilization review." The back of her card listed toll-free numbers under three different headings, but used the same toll-free number for "UTILIZATION REVIEW" and medical claims.
In late February 2006, Mrs. Killian sought treatment from her primary care physician, Dr. Bradshaw, for a severe cold and persistent headaches. A CT scan revealed the presence of three brain tumors, and she was diagnosed with lung cancer, which had metastasized to her brain. Mrs. Killian then went to Delnor Community Hospital; she stayed for five days, but her physicians concluded that they could not operate on the tumors. Seeking a second opinion, the Killians scheduled an appointment with Dr. Philip Bonomi, a physician at Rush who had treated Mrs. Killian's daughter before she died of cancer in 2001. The Killians met with Dr. Bonomi and Dr. Louis Barnes, a neurosurgeon, on April 7, 2006. Dr. Barnes reviewed Mrs. Killian's medical records, including the CT scan, and determined that Mrs. Killian would be dead in five days unless the largest tumor was removed immediately.
The Killians did not contact Concert before meeting with Dr. Bonomi because their plan to see Dr. Bonomi for a second opinion did not depend on whether he was in Mrs. Killian's network. However, when they learned that Mrs. Killian had only a few days to live unless the largest tumor was removed and that physicians at Rush could perform the necessary surgery, Mr. Killian called Concert about the developing situation. He first called the "provider participation" number listed on the front of Mrs. Killian's insurance card. Mr. Killian informed the Concert representative that he and Mrs. Killian were at St. Luke's
Mr. Killian called back later the same day, April 7, but this time he called the number listed under the prominent "Customer Service" heading on the front of Mrs. Killian's insurance card, which is the same number under the heading "Utilization review" on the front and back of the card and is also listed as the number for medical claims. The representative who took the second call seemed to be aware of Mr. Killian's earlier call and confusion about the name of the hospital because when he mentioned Rush she said, perhaps in jest, "Oh, you mean St. Luke's."
Mrs. Killian underwent surgery at Rush two days later, April 9, and was released on April 12, 2006. The record is silent as to whether the Killians would have gone to a different hospital or sought emergency admission at Rush
During the months between Mrs. Killian's surgery and death, Mr. Killian received notices from Concert stating that Concert would not cover services at Rush because the hospital was not in Mrs. Killian's network. In response to a letter from Mr. Killian disputing the denial and requesting immediate review, Concert reiterated that the claims were out of network and that the Killians were responsible for the maximum allowable fee. When Mr. Killian appealed, Concert agreed to consider Mrs. Killian's treatment for pneumonia as an emergency and to process the claim for that treatment at the in-network level. The remaining claims total approximately $80,000.
Mr. Killian filed this action in his capacity as administrator of Mrs. Killian's estate, and discovery ensued. The proceedings
On the denial of benefits claim, Mr. Killian argued that Concert's decision to deny benefits should not be sustained because Concert did not comply with ERISA's notification requirements and because there was no evidence supporting Concert's determination that Rush and Dr. Bonomi were not in Mrs. Killian's network. Section 1133(1) of Title 29 requires that when a benefits claim is denied, the plan must give notice to the beneficiary by "setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant." Failure to comply substantially with § 1133 may be grounds for reversing an administrator's decision. See Love v. Nat'l City Corp. Welfare Benefits Plan, 574 F.3d 392, 396 (7th Cir.2009). The district court determined that the notifications sent by Concert did not comply with all of the technical requirements set forth in 29 C.F.R. § 2560.503-1(j).
On the breach of fiduciary duty claim, Mr. Killian argued that Concert and Royal Management failed to provide Mrs. Killian with an adequate summary plan description. The district court granted summary judgment for the defendants because Mr. Killian had failed to show bad faith, purposeful concealment or detrimental reliance.
A new district judge took over the case after summary judgment on the denial of benefits and breach of fiduciary duty claims. That judge addressed the separate claim for statutory penalties for failure to provide plan documents and ordered Royal Management to pay Mr. Killian $5,880.
After a final judgment was entered in the district court, Mr. Killian timely appealed. A panel of this court affirmed summary judgement for the Royal Plan and Concert on the denial of benefits claim, but required the parties to submit a stipulation as to whether Rush, Dr. Bonomi and Dr. Barnes were in Mrs. Killian's network. The panel also affirmed summary judgment for Royal Management and Concert on the fiduciary duty claim. On the statutory damages claim, the panel reversed and remanded because the district court used the wrong dates in calculating the penalty and failed to address one of Mr. Killian's arguments.
As noted earlier, we affirm the panel's decision on the denial of benefits and statutory penalties claims; we therefore limit our discussion here to the one claim upon which we chart a course different from that set out in the panel opinion: the breach of fiduciary duties. Mr. Killian submits that Royal Management and Concert breached their fiduciary duties in two ways: first, by failing to provide Mrs. Killian with a summary plan description and, second, by failing to inform him that Mrs. Killian's providers were out of network during telephone conversations on April 7, 2006.
A beneficiary is entitled to relief for a breach of fiduciary duty if he proves "(1) that the defendant is a plan fiduciary; (2) that the defendant breached its fiduciary duty; and (3) that the breach resulted in harm to the plaintiff." Kenseth, 610 F.3d at 464. It is not disputed here that Royal Management and Concert are both fiduciaries under ERISA. Accordingly, with respect to each of Mr. Killian's theories
On the first theory, related to the failure to provide a summary plan description, the panel determined that Royal Management and Concert breached their fiduciary duty. It nevertheless affirmed summary judgment in favor of the defendants because Mr. Killian could not show that the lack of a summary plan description caused his harm. We agree with this result because Mr. Killian knew that he could determine a provider's network status by calling a number on Mrs. Killian's insurance card, and we adopt the panel's decision on this matter.
A review of Mr. Killian's second theory of breach of fiduciary duty is more difficult to resolve, and it is with respect to this specific theory that we depart from the conclusions of the panel decision.
We pause at this point to set forth, for the convenience of the reader, the path of our discussion. First, we examine whether there is sufficient evidence of a controversy between the parties to exercise jurisdiction over this claim. We conclude that, although the full nature and extent of the harm is a merits question, it is clear that, as this case comes to us today, there is a live dispute between the parties about the merits of the claim that justifies the exercise of our jurisdiction.
Having resolved this threshold issue, we shall then turn to the merits. On this point, we agree with Mr. Killian that, because the plan documents provided to Mrs. Killian were incomplete in themselves, we must evaluate in some depth whether that deficiency was cured in the telephone calls Mr. Killian made to Concert on April 7, 2006. For the reasons set forth in more detail below, we conclude that the summary judgment record does not permit us to resolve this issue of breach in favor of the defendants. Assuming that the question of breach is resolved in favor of Mr. Killian the summary judgment record similarly raises a genuine issue of triable fact on the question of harm.
We now turn to a plenary discussion of the issues we have just outlined.
In September 2012, following the panel decision in this case, Mr. Killian notified the court that Mrs. Killian's estate had been closed in August 2011. At the time, the only asset held by the estate was its claim against the defendants, which was distributed to Mr. Killian. Mr. Killian moved to substitute himself as plaintiff in his individual capacity, rather than as administrator of Mrs. Killian's estate. We granted his motion. We were concerned, however, about whether this change affected our jurisdiction under the case or controversy requirement of Article III of the Constitution of the United States. This concern obligated us to consider the matter further. See North Carolina v. Rice, 404 U.S. 244, 245-46, 92 S.Ct. 402, 30 L.Ed.2d 413 (1971) (per curiam). Accordingly, following reargument en banc, we ordered additional briefing to assist us in determining whether, in light of the closing of the estate, "Mr. Killian retains any interest in obtaining relief and whether the relief sought by Mr. Killian will make a difference to his legal interests." The parties responded. In his submission, Mr. Killian notified the court that he had reopened Mrs. Killian's estate and again sought to pursue the claim on behalf of the estate. Having reviewed the submissions, we now conclude that there is a live controversy
Under Article III, the federal courts "may only adjudicate actual, ongoing controversies." Honig v. Doe, 484 U.S. 305, 317, 108 S.Ct. 592, 98 L.Ed.2d 686 (1988). When a case becomes moot, this constitutional requirement is lacking. United States v. Segal, 432 F.3d 767, 773 (7th Cir.2005) (noting that a case is moot if the controversy between the parties has been resolved). The Supreme Court recently has reiterated, simply and directly, the governing principle in any mootness inquiry:
Chafin v. Chafin, ___ U.S. ___, 133 S.Ct. 1017, 1023, 185 L.Ed.2d 1 (2013) (emphasis added) (citations omitted) (internal quotation marks omitted). That is, although "federal courts are without power to decide questions that cannot affect the rights of litigants in the case before them," Rice, 404 U.S. at 246, 92 S.Ct. 402, "[a]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot," Knox v. Serv. Emps. Int'l Union, Local 1000, ___ U.S. ___, 132 S.Ct. 2277, 2287, 183 L.Ed.2d 281 (2012) (internal quotation marks omitted). Consequently, "[t]he burden of demonstrating mootness is a heavy one," Los Angeles Cnty. v. Davis, 440 U.S. 625, 631, 99 S.Ct. 1379, 59 L.Ed.2d 642 (1979) (internal quotation marks omitted), borne by the party seeking to have the case declared moot, see, e.g., Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561, 569-70, 104 S.Ct. 2576, 81 L.Ed.2d 483 (1984).
Notably, the Court also has counseled that we must be careful not to "`confuse[] mootness with whether [the plaintiff] has established a right to recover ..., a question which it is inappropriate to treat at this stage of the litigation.'" Chafin, 133 S.Ct. at 1024 (second and third alterations in original) (quoting Powell v. McCormack, 395 U.S. 486, 500, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969)). In the present case, to succeed on the merits of the fiduciary duty claim (the claim that was in the possession of Mrs. Killian's estate before it was closed), Mr. Killian must present evidence from which a factfinder can conclude that the estate suffered a harm from a breach on the part of the defendants. But that is a burden that he must carry on the merits. At this stage, by contrast, as we consider our basic subject matter jurisdiction, Mr. Killian must assert such a cognizable injury and demonstrate that it is possible for the court, were it to agree with Mr. Killian's arguments on liability, "to `fashion some form of meaningful relief,'" Flynn v. Sandahl, 58 F.3d 283, 287 (7th Cir.1995) (emphasis in original) (quoting Church of Scientology v. United States, 506 U.S. 9, 12, 113 S.Ct. 447, 121 L.Ed.2d 313 (1992)). As we noted in Dixon v. ATI Ladish LLC, 667 F.3d 891, 894 (7th Cir.2012), "a good defense to liability is a reason why defendants prevail on the merits rather than a reason why the litigation should be dismissed without prejudice — which is the consequence of mootness." See also Chafin, 133 S.Ct. at 1025 (noting that uncertainty as to whether an order will be followed or enforced does not render a case moot); Segal, 432 F.3d at 773 (noting that the advisability of a particular remedy "is not relevant to the mootness inquiry"); cf. Harzewski v. Guidant Corp., 489 F.3d 799, 804 (7th Cir. 2007) (reversing a district court's dismissal
The closing and reopening of the estate is an odd circumstance, but one that unnecessarily, in our view, complicates the jurisdictional inquiry. Regardless of whether the estate is opened or closed, there is no question that the parties have a current, live dispute with both immediate and potential future consequences. Mrs. Killian incurred significant medical bills preceding her death. See generally R.77-4, 77-5 (medical bills and explanations of benefits). The record reflects that she (or Mr. Killian after her death) paid several of those bills. See, e.g., R.77-5 at 18 ($65.77 paid to "Rush University Medical Center" for services dated 04/08/2006); id. at 19 ($11.87 paid to "Rush University Medical Center" for services dated 04/07/2006); id. at 40 ($10 paid to "Rush University Medical Center" for services dated 04/07/2006). Those debts incurred — and bills actually paid — would not necessarily have been the same had the defendants covered her care to the extent required had the providers been in-network. Indeed, the record suggests that co-pay, coinsurance, and annual deductible amounts differ depending on whether a service is obtained from an in-network or out-of-network provider. See R.77-3 at 65-69 (setting forth the applicable costs under the SO35 Open Access plan, the plan in which Mrs. Killian was enrolled). The estate, therefore, already has suffered this concrete and redressable injury, and this fact alone is sufficient to secure our jurisdiction.
Although these amounts in themselves are sufficient to prevent us from declaring the case moot, it would be wrong to suggest that the only consequence of resolving this dispute would be to settle debts on these amounts already paid. Since Mrs. Killian's death, the dispute in this case always has been one between Mr. Killian and the defendants over his wife's coverage and their family's resulting liability on third-party medical debts. Initially, he pursued this dispute through the vehicle of a probate estate, with the entire corpus of the estate being the claims against the defendants. Tied up in the same dispute, however, are the debts that Mrs. Killian died owing, which we understand could have been collected by her medical creditors either through claims against her estate or directly against Mr. Killian under the Illinois Family Expense Act, 750 ILCS 65/15. For practical purposes, as far as Mr. Killian was concerned, the vehicle the creditors pursued was of little consequence. In the end, the responsibility for payment rested with him, either as administrator of the estate or because of his direct and personal liability. Unsurprisingly, the creditors appear to have pursued the path of least resistance and billed Mr. Killian directly.
The foregoing discussion reveals the direct financial interests at stake in the amounts already paid, and the sufficiently real possibility that the additional debts may come Mr. Killian's way. In light of the reopening of the estate, the contention in Judge Manion's dissent (hereinafter dissent) that there is no possibility of recovery of the medical bills from the estate, and therefore no apparent harm to the estate, is not demonstrably correct. Whether that contention was correct while the estate was closed is a somewhat complicated question. In Illinois, the fact that an estate is closed may, but does not necessarily, preclude creditors from bringing claims against it. In Schloegl v. Nardi (In re Estate of Perrine), 92 Ill.App.2d 302, 234 N.E.2d 558, 561 (1968), the Illinois Court of Appeals held that an estate that had been duly administered and closed could be reopened when a plaintiff brought a personal injury claim against the decedent. Subsequent cases have distinguished Schloegl, but have not rejected its conclusion that a claim may be brought against an estate if the time for bringing such claims has not expired. See McCue v. Colantoni, 80 Ill.App.3d 731, 36 Ill.Dec. 263, 400 N.E.2d 683, 687 (1980) (rejecting a personal injury claim against an estate because, unlike the claim in Schloegl, the claim was brought after the limitations period for personal injury claims had expired); Dichtl v. Foster McGaw Hosp. (In re Estate of Garawany), 80 Ill.App.3d 401,
Any claim against Mr. Killian or Mrs. Killian's estate would likely be brought to enforce the agreement between Mrs. Killian and the Rush providers or against Mr. Killian for payment under the Illinois Family Expense Act, 750 ILCS 65/15. The limitations period for actions on written contracts or written evidence of indebtedness is ten years. 735 ILCS 5/13-206. A five-year limitations period applies to "actions on unwritten contracts, expressed or implied," 735 ILCS 5/13-205, and claims for family expenses under the Family Expense Act, id.; Juechter v. Grace, 55 Ill.App.3d 606, 13 Ill.Dec. 484, 371 N.E.2d 179, 181 (1977). These limitations periods may be tolled if the party to be charged makes a partial payment, St. Francis Med. Ctr. v. Vernon, 217 Ill.App.3d 287, 160 Ill.Dec. 276, 576 N.E.2d 1230, 1231 (1991), or new written promise to pay, Chase v. Bramhall, 343 Ill.App. 171, 98 N.E.2d 529, 531 (1951). The record suggests that Mrs. Killian agreed to be responsible for the charges, see, e.g., R.77-5 at 36 (bill from Rush listing Mrs. Killian as "Guarantor"), and makes clear that at least some payments were made. There is no evidence as to whether the Killians, or Mr. Killian on behalf of the estate, also agreed in writing to pay all or portions of the remaining bills as counsel informs us he has done verbally throughout the course of these proceedings.
In any event, as we have noted, the estate has been reopened and, in light of the proceedings in this case, claims for payment that were being sent to Mr. Killian might be pursued now against the estate. This reality is also certainly sufficient to support our exercise of jurisdiction.
The dissent makes much of its assessment that, as against the estate or Mr. Killian personally, all relevant limitations periods have run, and therefore Mr. Killian has no reasonably foreseeable injury on the horizon. It ignores, however, that the debt to the providers already incurred is not contested in this action and persists as a matter of state law regardless of the running of any limitations period. La Pine Scientific Co. v. Lenckos, 95 Ill.App.3d 955, 51 Ill.Dec. 241, 420 N.E.2d 655, 658 (1981) (noting that statutes of limitation "bar the right to sue for recovery but do not extinguish the debt which remains as before"); Cook v. Britt, 8 Ill.App.3d 674, 290 N.E.2d 908, 909 (1972) ("[A] statute of limitations is an act limiting the time within which legal action shall be brought and affects the remedy only and not a substantive right."). In any event, we simply do not know the scope of Mr. Killian's legal liability on that debt, nor do we know the extent of his exposure to the detrimental consequences of having significant unpaid bills. In short, whether Mr. Killian or the estate would have valid legal defenses, including applicable statutes of limitation, to any separate legal action to enforce the debt is simply not a dispositive inquiry for present purposes.
One more point bears noting. The parties seem to have focused their jurisdictional arguments on whether there is a stated right to damages, and the above discussion therefore concentrates on that approach. However, Mr. Killian's prayer for relief in the operative complaint and,
On the issue of mootness, "[t]he question is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Super Tire Eng'g Co. v. McCorkle, 416 U.S. 115, 122, 94 S.Ct. 1694, 40 L.Ed.2d 1 (1974) (internal quotation marks omitted). The record before us makes clear that this jurisdictional threshold is satisfied. Mr. Killian's financial affairs are burdened with real uncertainty as a result of his wife's last illness, and a district court could award declaratory relief that would alter significantly that burden.
On remand, the district court must deal with the questions of liability and, if it reaches the question, remedy. This latter issue will require the district court to resolve many factual and legal matters on which the present record now permits only speculation. For the present moment, it is sufficient to say that the record fails to establish definitively that the Killians incurred no harm as a result of the alleged breach. Nor is it clear that declaratory relief would be unavailable to Mr. Killian.
In light of the fact of losses already supported by the record and persisting uncertainties concerning the future liability of the estate and its beneficiary, we cannot say that "there is nothing for us to remedy, even if we were disposed to do so." Spencer v. Kemna, 523 U.S. 1, 18, 118 S.Ct. 978, 140 L.Ed.2d 43 (1998). The case is not moot, and we must proceed to the merits.
In determining whether a fiduciary duty has been breached, our inquiry is guided by the plain wording of the statute and by established case law. As fiduciaries, Royal Management and Concert, in fulfilling their duties to Mrs. Killian and other plan participants, must
29 U.S.C. § 1104(a)(1)(B). These duties are analogous to those of loyalty and care that are imposed upon a trustee under the
Our decision in Kenseth sets forth, with great precision, how the command of the statute ought to be applied in a situation such as the one before us. There, we recognized that
Id. at 466 (emphasis in original) (alteration omitted) (quoting Gregg v. Transp. Workers of America Int'l, 343 F.3d 833, 845-46 (6th Cir.2003)). "Regardless of the precision of his questions, once a beneficiary makes known his predicament, the fiduciary `is under a duty to communicate ... all material facts in connection with the transaction which the trustee knows or should know.'" Id. at 467 (alteration in original) (quoting Restatement (Second) of Trusts § 173, cmt.d (1959)).
If "the plan documents are clear and the fiduciary has exercised appropriate oversight over what its agents advise plan participants and beneficiaries as to their rights under those documents, the fiduciary will not be held liable simply because a ministerial, non-fiduciary agent has given incomplete or mistaken advice to an insured." Id. at 472. Nevertheless, if a fiduciary "suppl[ies] participants and beneficiaries with plan documents that are silent or ambiguous on a recurring topic, the fiduciary exposes itself to liability for the mistakes that plan representatives might make in answering questions on that subject." Id.
In the present case, we cannot say that the pertinent plan documents were clear and complete as to which service providers were in Mrs. Killian's network. The Killians never have received a summary plan description, which must contain "the composition of the provider network," 29 C.F.R. § 2520.102-3(j)(3),
Because the instructions given in the provided plan documents were deficient, we must examine the substance of the telephone calls between Mr. Killian and Concert. In our view, a reasonable trier of fact certainly could conclude that Concert was aware (or, at the very least, that it should have been aware) that Mr. Killian was attempting to determine whether Rush and the physicians who were about to perform surgery on Mrs. Killian were within Mrs. Killian's network.
The front of Mrs. Killian's insurance card provides telephone numbers under four different headings. The first number is for "determin[ing] Provider participation."
Mr. Killian called this number on April 7, 2006. After providing Mrs. Killian's name and card number, he said, "we are here for a second opinion and she is going — they want to admit her because we already determined the tumor has to come off." R.253 at 72; see also id. at 125 ("I said she was being admitted to the hospital and they were going to do the surgery."). Mr. Killian referred to Rush as "St. Luke's," the name that he always had used for this hospital. The Concert representative said that she was unable to find a listing under that name and instructed Mr. Killian to "[g]ive [her] a call back."
The fact that Mr. Killian made a second call does not necessarily negate his claim of reliance on the instruction to "go ahead." Mr. Killian testified that, in making the second telephone call, he was calling "for preadmission," as he was instructed to do by Mrs. Killian's insurance card.
When Mr. Killian made the second telephone call, he dialed the second, and most prominent, number on the front of Mrs. Killian's insurance card, which was for customer service, as well as for utilization review. As noted earlier, this was the same number listed on the back of the card for utilization review and medical claims. There is evidence that Concert had encouraged beneficiaries to use this number for determining provider participation as well. Specifically, in the Master Group Policy, Concert instructed beneficiaries that they "must call the number listed on the back of [their] medical identification card" in order "[t]o confirm that ... [a] provider is a CURRENT participant in
Moreover, the second number that Mr. Killian called was the correct, and apparently the only, number that he could call to obtain the required certification review with respect to the particular surgical procedure that his wife was about to undergo. Given his earlier telephone conversation, a reasonable trier of fact certainly could conclude that any further information as to whether the providers were in Mrs. Killian's network would have been provided in the course of this conversation regarding the authorization of the particular procedure.
Indeed, under these circumstances, Concert had an affirmative obligation to inform Mr. Killian that the providers Mrs. Killian was about to see were out of network. See Kenseth, 610 F.3d at 466 ("[T]he trustee is under a duty to communicate to the beneficiary material facts affecting the interest of the beneficiary which he knows the beneficiary does not know and which the beneficiary needs to know for his protection in dealing with a third person." (internal quotation marks omitted)). On this record, a rational trier of fact could conclude that this second representative was aware that Mr. Killian's telephone calls were an effort to confirm two points: (1) that the health care providers treating his wife were within the Plan's network; and (2) that the particular procedures contemplated for her care were authorized by the Plan. In this second call, Mr. Killian stated: "I'm trying to get confirmation that we are going to be — my wife is going to be admitted to Rush."
It is true that when Mr. Killian called Concert, provided Mrs. Killian's policy number, told Concert where they were and said that Mrs. Killian needed immediate brain surgery, he did not also ask the specific question, "Is Rush an in-network provider?" However, neither the Master Group Policy nor our holding in Kenseth requires beneficiaries to ask such a specific
Nor does the summary judgment record establish that the Killians suffered no harm. It is undisputed that the Killians would have made an appointment with Dr. Bonomi for a second opinion regardless of
ERISA does not require a fiduciary to set out on a quest to uncover some kind of harm that might befall a beneficiary. But this case requires no such expedition. It simply requires an application of the rule, articulated in Kenseth, that an insurance company cannot defeat a breach of fiduciary duty claim by asserting that it was unaware that an insured was seeking certain material plan information when the insured called two different numbers that the insurance company itself established to provide the sort of information in question. This is particularly true when the representatives tell an insured to "go ahead with whatever ha[s] to be done"
On the denial of benefits claim, we affirm the district court's grant of summary judgment, but remand with directions for counsel for both sides to submit a joint stipulation concerning whether Rush University Hospital, Dr. Barnes and Dr. Bonomi were within Mrs. Killian's provider network. If counsel are not able to agree on a conclusive stipulation, the district court should resolve this issue on remand.
On the breach of fiduciary duty claim, we affirm in part and reverse in part the judgment of the district court. We affirm the district court's grant of summary judgment in favor of Royal Management and Concert with respect to their failure to provide Mrs. Killian with a summary plan description. Consonant with this opinion, we reverse the grant of summary judgment on the breach of fiduciary duty claim with respect to Mr. Killian's telephone call inquiries and remand to permit the trier of fact to determine: (1) whether the telephone calls put Concert on adequate notice, thus giving rise to a duty to disclose material information related to the Killians' situation, (2) whether Concert breached this duty and (3) whether the breach harmed Mr. Killian.
On the statutory damages issue, we remand the matter to the district court to permit a recalculation of the award as outlined in the panel's opinion.
We grant Mr. Killian's motion to proceed as administrator of his wife's estate as well as in his individual capacity.
IT IS SO ORDERED.
I agree with the outcome, and with much of the analysis in the majority opinion. But I disagree that the obligation at issue in the appeal derives from a fiduciary duty. This is really a breach of contract case, and treating it as such not only is the correct approach but simplifies analysis wonderfully.
But before discussing the merits, I want to say a few words about mootness, the subject of a protracted debate between Judges Ripple and Manion. Both quote the standard formula, repeatedly endlessly in cases, that a case is moot if a judgment on the merits in favor of the plaintiff would not give the plaintiff money or anything else of tangible value. In other words, if something happens in the course of the case that, had it happened before the case was brought, would have required dismissal for lack of standing, the case must be dismissed as moot; the plaintiff has lost standing. But that isn't the actual doctrine. See generally Matthew I. Hall, "The Partially Prudential Doctrine of Mootness," 77 Geo. Wash. L.Rev. 562 (2009). A case is not moot, for example, if the defendant voluntarily discontinues the practice that the plaintiff sought to enjoin, but maybe plans to resume it if the suit is dismissed as moot. United States v. W.T. Grant Co., 345 U.S. 629, 632-33, 73 S.Ct. 894, 97 L.Ed. 1303 (1953). Or if the plaintiff can never get relief if mootness is a bar, as in a suit to establish a woman's right to an abortion because the suit can't be completed in the nine months between her becoming pregnant and giving birth. Roe v. Wade, 410 U.S. 113, 125, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973). (For the general principle that excepts from the doctrine of mootness orders capable of repetition but evading review, see, e.g., Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 514-16, 31 S.Ct. 279, 55 L.Ed. 310 (1911).) Nor does a class action suit become moot (after the class is certified), because the named plaintiff has settled with the defendant and so no longer has anything to gain from a judgment. Genesis Healthcare Corp. v. Symczyk, ___ U.S. ___, 133 S.Ct. 1523, 1529-30, 185 L.Ed.2d 636 (2013); County of Riverside v. McLaughlin, 500 U.S. 44, 51-52, 111 S.Ct. 1661, 114 L.Ed.2d 49 (1991).
The reason that mootness is a less strict doctrine than standing is that a case that becomes moot, unlike a case in which there never was standing, is a case that originally was properly before the court, and the court may have made, as it was entitled to make, substantive rulings in the case. "[B]y the time mootness is an issue, the case has been brought and litigated, often (as here) for years. To abandon the case at an advanced stage may prove more wasteful than frugal. This argument from sunk costs does not license courts to retain jurisdiction over cases in which one or both of the parties plainly lack a continuing interest, as when the parties have settled or a plaintiff pursuing a nonsurviving claim has died.... But the argument surely highlights an important difference between the two doctrines." Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 191-92, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) (footnote omitted).
When want of standing is detected at the outset of suit, there is no wasted court motion. But mootness by definition is detected later, and there can be a great deal of wasted motion if mootness is equated to an absence of standing and in consequence everything the court has done to date in the case is wiped out. The present case was filed seven years ago. The passage of time has witnessed changes that arguably moot the issue in the case. I think one
So on to the merits. The administrator of an employee welfare benefits plan (the type of plan at issue in this case) has a fiduciary duty to the plan's participants "to the extent" that "he has any discretionary authority or discretionary responsibility in the administration of [the] plan." 29 U.S.C. § 1002(21)(A)(iii); see Pegram v. Herdrich, 530 U.S. 211, 223-26, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000); Baker v. Kingsley, 387 F.3d 649, 660 (7th Cir.2004); Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1188 (7th Cir.1994); In re Citigroup ERISA Litigation, 662 F.3d 128, 135 (2d Cir.2011). (Other subsections of ERISA concerning fiduciary obligation, unrelated to this case, focus on financial issues in plan administration. See 29 U.S.C. §§ 1002(21)(A)(i), (ii).)
To call authority "discretionary" is to say that the persons affected by its exercise, such as the plaintiff in this case, have no crisply defined right to limits on that exercise. The plan administrator has been given discretion by the plan to decide for example how much to spend on training his employees, including telephone receptionists who answer participants' questions about coverage. Such decisions, being entrusted to the administrator, are not to be picked apart by appeal to the wisdom of hindsight. The participants' protection from the plan administrator's abusing his discretion lies in the rule that a fiduciary must discharge his responsibilities with the same prudence — trading off costs and benefits with the same care — that he would employ were he a recipient rather than a provider of such services: he must treat the participants as well as he would treat himself.
There is no evidence of abuse of discretion in this case and thus of a violation of a fiduciary obligation. There was a breach of contract, but not every such breach is a violation of a fiduciary obligation. Liability for breach of contract is strict. The plan administrator may discharge his fiduciary obligations scrupulously, yet if an employee, acting within the scope of his employment, makes a mistake that gives rise to a breach of contract, the mistake and hence the breach will be imputed to the plan administrator by the doctrine of respondeat superior — but without any implication that the administrator committed a breach of trust.
No matter. ERISA authorizes a plan participant to bring a suit "to recover benefits due to him under the terms of his plan," 29 U.S.C. § 1132(a)(1)(B) — benefits in other words that the plan promised. Such a suit treats the plan as a contract. Herzberger v. Standard Ins. Co., 205 F.3d 327, 330 (7th Cir.2000); Harlick v. Blue Shield of California, 686 F.3d 699, 708-09 (9th Cir.2012). The plaintiff in this case is complaining about a breach of the plan by the claims administrator, an insurance company hired by (and for purposes of appeal indistinguishable from) the plan administrator. The plaintiff seeks "a contract remedy under the terms of the plan." Ponsetti v. GE Pension Plan, 614 F.3d 684, 695 (7th Cir.2010). As that is all he seeks, there is no need, or occasion, to decide whether the plan administrator violated a fiduciary duty.
ERISA preempts breach of contract suits based on state law. 29 U.S.C.
It's true that in suits to enforce federal government contracts the Supreme Court has told us "to adopt the ready made body of state law as the federal rule of decision until Congress strikes a different accommodation." Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 691-92, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006), quoting United States v. Kimbell Foods, Inc., 440 U.S. 715, 740, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979). But that approach isn't possible in this case because ERISA preempts state law in order "to ensure that plans and plan sponsors would be subject to a uniform body of benefits law" and thus "minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990).
To treat the present case as charging breach of a fiduciary obligation creates uncertainty as to remedy — uncertainty we don't need. ERISA provides only equitable relief to a participant complaining of a violation of such an obligation, 29 U.S.C. § 1132(a)(3)(B); Mertens v. Hewitt Associates, 508 U.S. 248, 255-58, 266, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993); Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 482 (7th Cir.2010), whereas all that the plaintiff in this case seeks is simple damages. Monetary relief is sometimes permissible in equitable cases, but why enter that briar patch?
Casting this as a case of fiduciary obligation also creates uncertainty concerning the scope of a plan administrator's duty. How expansive is the fiduciary obligation to inform a plan participant of the differences in the plan's reimbursement for charges by alternative providers of medical treatment? What body of fiduciary law supplies an answer to that question?
And notice that the fiduciary approach arbitrarily and paradoxically bestows greater rights on participants in and beneficiaries of ERISA plans than on beneficiaries of functionally identical insurance plans not governed by ERISA, and even Medicare Advantage plans. What sense does that make?
Analysis of the case as a suit for breach of contract is straightforward. The plan creates a "provider network" of hospitals and other health care providers. A plan participant who obtains treatment within the network is entitled to reimbursement of a much larger fraction of his expenses than if he's treated by an out-of-network provider. The difference in this case, in
The provider's contractual duty is to furnish requested information in a "timely" manner, lest delay, caused for example by refusing to provide the information orally, prevent the participant from receiving the information in time to act on it. The plaintiff claims that when he told the receptionist that his wife was receiving treatment at "St. Luke's" (Rush-Presbyterian-St. Luke's Medical Center) the receptionist told him to "go ahead with whatever had to be done." She did not tell him that the hospital was not in the provider network. Nor did she tell him where he could find the list of Chicago hospitals that are in the network — indeed, the plaintiff alleges that the list had not been made publicly available.
A contract consists not only of explicit terms but of implicit ones needed to make the explicit terms effective. Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662, 130 S.Ct. 1758, 1775, 176 L.Ed.2d 605 (2010); Bidlack v. Wheelabrator Corp., 993 F.2d 603, 607 (7th Cir.1993) (en banc), Wood v. Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917) (Cardozo, J.); Restatement (Second) of Contracts § 204 (1981). This is true of ERISA plans in their capacity as contracts. Singer v. Black & Decker Corp., 964 F.2d 1449, 1452-53 (4th Cir.1992). Such implicit terms are read into written as well as oral contracts and thus coexist with the requirement that ERISA plans be "established and maintained pursuant to a written instrument," 29 U.S.C. § 1102(a)(1), a requirement that we have called "a long way toward a statute of frauds." Frahm v. Equitable Life Assurance Society, 137 F.3d 955, 958 (7th Cir.1998).
One of the implicit terms in every contract is the duty of good-faith performance. Denil v. DeBoer, Inc., 650 F.3d 635, 639 (7th Cir.2011); Market Street Associates Ltd. Partnership v. Frey, 941 F.2d 588, 593-96 (7th Cir.1991). It requires the performing party, in this case the plan administrator, to avoid "tak[ing] deliberate advantage of an oversight by your contract partner concerning his rights under the contract." Id. at 594. A closely related principle is that "you cannot prevent the other party to the contract from fulfilling a condition precedent to your own performance, and then use that failure to justify your nonperformance." Ethyl Corp. v. United Steelworkers of America, AFL-CIO-CLC, 768 F.2d 180, 185 (7th Cir.1985). The plan in this case saved itself a considerable sum of money because the plaintiff obtained surgery for his wife at a hospital that wasn't in the provider network. The contractual duties that I have just described required the plan administrator to inform the plaintiff of his options if he inquired about them — and he claims he did. If so informed the plaintiff might have decided to move his wife to a hospital in the network. There was time, and it appears that there was at least one hospital in range of Rush competent to perform
The Supreme Court's decision in Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), does not rule conventional principles of contract interpretation out of ERISA and so deny the duty of good faith performance of obligations created by an ERISA plan. It holds only that extracontractual damages can't be obtained in a suit for breach of a plan's obligation, whether fiduciary or contractual, explicit or implicit, to process claims in good faith.
Concurring in the Singer case cited above, Judge Wilkinson expressed concern that allowing plan participants or beneficiaries to enforce implicit terms in ERISA plans would increase cost and uncertainty. 964 F.2d at 1453. I doubt that. The common law of contracts, a law that enforces implicit contractual terms, is a stable, largely uniform, and generally quite satisfactory body of law. One hears plenty of complaints about the costs and uncertainty entailed by the litigation of other claims, but few about the costs and uncertainty entailed in enforcing claims of breach of contract. Judge Wilkinson cites no evidence in support of his fear that allowing general common law principles to inform litigation over alleged breaches of the terms of ERISA plans will cause "actuarial chaos." Id. at 1454. Following his advice would just create pressure for an expansive interpretation of fiduciary obligation, as in the majority opinion in this case — and how is uncertainty reduced by substituting the equitable doctrine of fiduciary obligation for the common law of contracts?
EASTERBROOK, Circuit Judge, concurring in part and dissenting in part.
I agree with the court's unanimous disposition of the statutory-damages issue and with Part II.A, which concludes that the controversy is live. I also join Part II.C of Judge Manion's opinion, which demonstrates that the suit fails on the merits. I offer two additional thoughts.
First, I agree with Judge Posner that it would be best to apply contract principles. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court started with fiduciary principles drawn from trust law because the claims asserted there involved discretionary decisions by plans' fiduciaries. ERISA says that "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). The claims in this litigation do not entail discretion in management or implementation; to the contrary, plaintiff asserts and the majority holds that Concert Health lacked discretion. Applying the principles of contract law, perhaps informed by any specific doctrines developed in the law of health insurance contracts, would promote certainty and comparability between health care provided as a fringe benefit of employment and other medical coverage.
Second, an approach such as the majority's can make participants worse off. They value the opportunity to obtain prompt oral advice about eligibility for benefits. Some participants will lack ready (or any) access to online databases of providers or description of a plan's benefits. Conditions of coverage may be hard to understand. See, e.g., Kenseth v. Dean Health Plan, Inc., 722 F.3d 869 (7th Cir.
Yet oral exchanges often are imprecise. The representative must answer off the cuff, often with inadequate information. The participant may misunderstand, misremember, or dissemble about the content of the conversation when, years later, a question arises about who said what. Litigation will be one-sided. James Killian asserts that particular things were said; the representatives at the other end of the phone, even if they could be identified, would not recall the conversations.
Problems of memory and veracity could be addressed by recording everything and keeping the recordings for however long the statute of limitations lasts, though it might be hard to find a particular call in many thousand hours of oral exchanges. But the fact that immediate answers to vague questions will be imprecise, and occasionally inaccurate, cannot be fixed by better record-keeping. Under the majority's approach, any inaccuracy — and any failure to be helpful by answering questions the participants should have asked, but didn't — imposes liability on the plan, even if the question is so vague that the telephone representative does not get its gist.
That legal rule will induce some, perhaps many, healthcare plans to take steps for self-protection. One possibility would be to stop giving oral advice. Since that advice can be valuable, and usually is accurate, participants would be worse off. A second possibility would be to give oral advice, pay up when errors occur, and cover that cost by reducing the benefits provided by the plan. Participants might not welcome that approach either. Still another possibility would be to alert participants that no oral advice could be relied on. A plan might say something like: "Our web site has a database of in-network providers and details about which medical procedures are covered. If the online resource is insufficient, or if you need advance permission for a procedure, you may send us a letter or email; we will answer in writing, and you can rely on that response. We also offer telephonic advice and information but do not warrant its accuracy, and you use it at your own risk." Would this approach help participants? I doubt it. Perhaps my colleagues would hold that ERISA disallows telling participants that they can't rely on oral advice. That would induce plans to close their telephonic hotlines, a step sure to injure participants. Today's decision will push employers and their plans' administrators in that regrettable direction.
MANION, Circuit Judge, with whom SYKES, Circuit Judge, joins, concurring in part, dissenting in part.
Susan and James Killian were understandably distraught when they learned in early April 2006 that Susan had lung cancer, that it had spread to her brain, and that the brain tumors were inoperable. It is also only natural that their thoughts were focused on Susan's health and finding a doctor able to operate and remove the tumors, and not on the terms of Susan's health insurance plan. And so the Killians did not inquire in advance whether her doctors or Rush University Medical Center were within her health care network; because it turned out that they were not, Susan incurred liability of approximately $80,000 in medical expenses. James believed Concert Health Plan Insurance Company ("Concert") and Royal Management, her employer and the plan administrator, should be liable for those expenses because when he called to inform Concert that Susan was being admitted for brain
Over the course of the last six years, the parties, the district court, and this court have expended significant resources exploring the scope of ERISA's fiduciary obligations and the network status of the Rush providers. During that time, the administration of Susan's estate was completed and the estate was closed and James inherited Susan's rights in this litigation. The court was belatedly notified of this development and the parties did not consider its import, leaving the court to direct the parties to file supplemental briefing on the question of whether the closing of Susan's estate mooted this appeal. In response, James reopened the estate but "solely for the purpose of probating the ERISA clam and prosecuting the claim in the District Court and 7th Circuit Court of Appeals." R.58-2. The issue, though, was never whether James could continue to prosecute Susan's ERISA claims which he inherited in his individual capacity. He clearly could — if the relief sought would make a difference to the legal interests of the parties. But it won't, at least for the denial of benefits and breach of fiduciary duty claims. Both those claims sought as relief payment of the outstanding medical bills. However, neither Susan nor her estate ever paid those bills. Now that her estate is closed for all purposes except prosecution of this case and the statutory time period for recovering from a decedent (and James for that matter) has passed, there is no longer any liability to the Rush providers. Thus, while an order to pay those bills would benefit third-party non-litigants who no longer have a claim against the estate, i.e., the Rush providers, such relief would not make a difference to the legal interests of Susan's estate, since there is no longer any liability for those medical bills. What we have then is an advisory opinion on the merits of the denial of benefits and breach of fiduciary duty claims because the asserted harm no longer exists. If those claims were not moot, I would agree that remand would be appropriate on the denial of benefits claim, but that, for several reasons, Susan's breach of fiduciary duty claim cannot succeed. The statutory damages claim, though, remains a live controversy because Susan's entitlement to those damages now resides with James, her beneficiary, and remand on that claim is appropriate. Accordingly, I CONCUR IN PART AND DISSENT IN PART.
The en Banc court recounts the sad facts in this case. In brief, in February 2006, Susan Killian saw her primary care physician because she was suffering from persistent headaches and a severe cold. Her doctor ordered a CT scan, which revealed that Susan had lung cancer that had spread to her brain. She was admitted to Delnor Community Hospital for five days, but was told that her brain tumors were inoperable and she was discharged. Susan and her husband James decided that she should seek a second opinion and they turned to Dr. Bonomi. Dr. Bonomi had previously treated Susan's daughter as well as Susan's fiancé, both of whom unfortunately died of cancer. R. 115-3 at 28, 31.
On April 7, 2006, Susan met with Dr. Barnes and he told her that one of her tumors needed to be removed immediately or she would be dead within five days. Based on Dr. Barnes' prognosis, Susan decided to have the tumor removed. While she was being admitted to Rush Hospital, James telephoned Concert. Although the en Banc court states that James "first called the `provider participation' number listed on the front of Mrs. Killian's insurance card," Opinion at 655, as discussed in more detail below, the record does not support that conclusion; rather, the record shows that James placed two telephone calls to Concert's customer service/utilization review number. See infra at 690-94. And when asked why he called Concert on April 7, James said twice in his deposition that he called Concert to tell them Susan "was going to be admitted to a hospital." R.115-3 at 71-73.
Doctors removed the brain tumor on April 10 and Susan was released from the hospital on April 12, 2006. R.77-5 at 55-56. She received additional outpatient services from Dr. Bonomi and attempted chemotherapy, but could not tolerate it. In June 2006, Susan was admitted to Rush for nine days to be treated for pneumonia. She died two months later.
After Susan's surgery and prior to her death, Susan began receiving bills from the various Rush providers for outstanding balances related to the brain surgery
Susan could have avoided these high out-of-pocket expenses had she opted for better coverage through a different Concert health care plan offered by her employer, namely one which used the PHCS-PPO network. The Rush providers were in-network for the PHCS-PPO network. R.115-3 at 250. But the Concert plan which used the PHCS-PPO network of physicians was more expensive and would have cost Susan approximately 50% more in premiums. R.251 at 51; R.259-3 at 80. Obviously, when she selected the less expensive policy Susan did not know she would soon be diagnosed with late-stage cancer and that her preferred doctors would be out-of-network.
At the time Susan enrolled in the Concert Health Care Plan and selected coverage under the SO35 Open Access option, which used the PHCS Open Access network of providers, she was informed of these reimbursement provisions. Specifically, Susan received an enrollment packet which included, among other things, a Certificate of Insurance, a reminder page, a "frequently asked questions" page, a document summarizing her employment benefits, and her health insurance card (a copy of which is appended to the en Banc court's opinion). R.259-2-5. The Certificate of Insurance detailed Susan's coverage and, relevant to this appeal, explained in straightforward terms the difference in coverage for in-network and out-of-network providers and that insureds were responsible for any charges above the maximum allowable fee, while stressing that "the choice of provider is Yours." R.77-3 at 5, 11-12. It also explained that insureds could determine the network status of providers by calling Concert or by checking on-line. R.77-3 at 5. Additionally, it stressed the requirement that insureds notify Concert of any hospital admissions for "pre-certification" or "utilization" review, or incur a $1,000 penalty. R.77-3 at 11. And finally, it explained that pre-certification review was a determination of whether a medical service was medically necessary and that "[p]recertification of medical necessity is subject to the limitations, exclusions, and provisions of this certificate...." R.77-3 at 23.
While the Certificate of Insurance was a comprehensive document, spanning fifty-one pages, the enrollment packet included much more simplified highlights for insureds, including a two-page "Employee Benefit Summary" of the Concert Health Plan. R.259-5 at 2, 3. This summary specified that the SO35 Open Access network was the "PHCS Open Access" network. Id. It then summarized the reimbursement rates for various services, both in-network and out-of-network, and informed insureds that: "Non-Network services are subject to Maximum Allowable Fee limitations. The Patient will be responsible for any
R.259-5 at 8. Insureds were also directed "to confirm with the network that the provider is still participating at the location you have chosen" by calling PHCS at 800-242-6679. Id.
James, as administrator of Susan's estate, eventually sued Concert, and later, in an amended complaint, added Susan's former employer, Royal Management. The amended complaint alleged three ERISA claims: (1) denial of benefits, (2) breach of fiduciary duty, and (3) statutory damages. The district court granted summary judgment to the defendants on all three claims and James, as administrator of Susan's estate, appealed.
During the pendency of the appeal, Susan's estate was closed and James inherited Susan's lawsuit. James was then substituted in as the plaintiff. R.48-2. This court directed the parties to file supplemental briefing on the question of whether the closing of Susan's estate mooted this litigation. In response, James reopened Susan's estate "solely for the purpose of probating the ERISA claim and prosecuting the claim in the District Court and 7th Circuit Court of Appeals." R.58-2. He then requested that the court substitute the estate back into the case. R.64-1 at 2.
The en Banc court, sua sponte, deemed James's motion to substitute himself in his capacity as administrator of the estate as a motion to add himself in that capacity, in order to allow James to continue to pursue this litigation both in his individual capacity and as administrator of Susan's estate. Opinion 662 at n. 26; Opinion at 671. But whether James is now prosecuting this case in his individual capacity — having inherited the lawsuit — or in his capacity as administrator of Susan's estate, is irrelevant because the underlying claims remain Susan's breach of fiduciary duty, denial of benefits and statutory damages claims.
The court concludes that those ERISA claims are not moot, stating "there is no question that the parties have a current, live dispute with both immediate and potential future consequences." Opinion at 661. The court suggests four theories for why there remains a live controversy. First, the court reasons that the estate may have already suffered a concrete and redressable injury by having overpaid some medical bills. Opinion at 660-61. But as discussed below, James never argued such a harm. Opinion at 685-86. Second, the court asserts that since Susan's estate has been reopened, the Rush claims "might be pursued now against the estate." Opinion at 663. This reasoning is wrong for two reasons: (1) Susan's estate has not been reopened for purposes of allowing creditors to file additional claims against the estate, but solely for the purpose of prosecuting this ERISA action;
On the merits, after concluding that Susan's claims are not moot, the en Banc court adopts, in part, the panel decision in Killian v. Concert Health Plan (Killian I), 680 F.3d 749 (7th Cir.2012). In the panel decision in Killian I, the court affirmed the district court's grant of summary judgment for Royal Plan and Concert on the denial of benefits claim, but required the parties to stipulate concerning whether the Rush providers were in the PHCS Open Access network. Id. at 756 n. 5. The panel also affirmed summary judgment on the breach of fiduciary duty claim, but reversed and remanded the statutory damages claim because the district court erred in calculating the penalty and failed to address one of James's arguments. Id. at 762-64. The en Banc court "adopt[s] the panel's reasoning and conclusion related to the denial of benefits and statutory penalties issues." Opinion at 654. The en Banc court also agrees with the panel that Royal Plan and Concert were entitled to summary judgment on James's claim that the defendants breached their fiduciary duty by failing to provide Susan with a summary plan description, because James could not show that the lack of a summary plan description caused any harm. Opinion at 659. However, the en Banc court holds that reversal on the breach of fiduciary duty claim is appropriate because a rational finder of fact could conclude that Concert had a fiduciary duty to inform James that the Rush providers were out-of-network during the April 7, 2006 telephone conversations; that it breached that duty; and that that breach resulted in harm to James. Opinion at 671.
If Susan's breach of fiduciary duty claim was not moot, the defendants would nonetheless be entitled to summary judgment on the merits. A breach of fiduciary duty claim premised on the April 7, 2006, telephone calls fails, first because James waived any argument that the defendants breached their fiduciary duty by not informing him, when he called, that the providers were out-of-network. And the defendants did not waive this waiver. Second, even if this theory had not been waived, there was no breach of fiduciary duty because James did not put Concert on notice that he was inquiring on the
Article III, § 2 of the Constitution grants federal courts the authority to adjudicate only "actual ongoing controversies." St. John's United Church of Christ v. City of Chicago, 502 F.3d 616, 626 (7th Cir. 2007) (quoting Honig v. Doe, 484 U.S. 305, 317, 108 S.Ct. 592, 98 L.Ed.2d 686 (1988)). "For a case to be justiciable, a live controversy must continue to exist at all stages of review, not simply on the date the action was initiated." Brown v. Bartholomew Consol. School Corp., 442 F.3d 588, 596 (7th Cir.2006). Thus, "[i]t has been firmly established that an appeal should be dismissed as moot when, by virtue of an intervening event, a court of appeals cannot grant any effectual relief whatever in favor of the appellant." A.B. ex rel. Kehoe v. Hous. Auth. of South Bend, 683 F.3d 844, 845 (7th Cir.2012) (internal quotation omitted). Moreover, "[a]lthough neither party has urged that this case is moot, resolution of the question is essential if federal courts are to function within their constitutional sphere of authority." North Carolina v. Rice, 404 U.S. 244, 246, 92 S.Ct. 402, 30 L.Ed.2d 413 (1971). Accordingly, "mootness, like standing, is always a threshold jurisdictional question that we must address even when it is not raised by the parties." Wernsing v. Thompson, 423 F.3d 732, 745 (7th Cir.2005) (internal quotation omitted).
Under this framework, Susan's denial of benefits and breach of fiduciary duty claims are moot. At the time that James, as administrator of Susan's estate, filed suit, Susan's estate allegedly owed approximately $80,000 in medical bills to the Rush providers. Killian I, 680 F.3d at 758. Since then, Susan's estate had been closed. Actually, Susan's estate had been closed in August 2011 — prior to both the oral argument and the release of the panel's decision in Killian I — but the court was not informed of this development until September 2012, when James filed a motion to substitute himself as plaintiff. R.48-2. In that motion, James explained that the only asset of Susan's estate was the underlying ERISA claim, that Susan's estate had been closed, and that that asset had been transferred to him. Attached to that motion were the state court orders confirming these facts. Id. This court granted the motion and substituted James as the plaintiff.
Based on these developments, this court directed the parties to file supplemental briefing on the question of whether the closing of Susan's estate mooted this litigation. Specifically, the court directed the parties to discuss "with particularity whether Mr. Killian retains any interest in obtaining relief and whether the relief sought by Mr. Killian will make a difference to his legal interests." R.53. In response,
The court asserts James's reopening of the estate resolves the mootness question because the unpaid medical bills "might be pursued now against the estate." Opinion at 663. According to the court: "In light of the reopening of the estate, the contention in Judge Manion's dissent ... that there is no possibility of recovery of the medical bills from the estate, and therefore no apparent harm to the estate, is not demonstrably correct." Opinion at 662. But the estate was reopened "solely for the purpose of probating the ERISA clam and prosecuting the claim in the District Court and 7th Circuit Court of Appeals." R.58-2. Thus, the estate is not open for purposes of allowing third-party creditors, such as the Rush providers, to seek recovery from the estate for medical expenses.
Nor is there any possibility that the Rush providers could still reopen the estate and recover on the unpaid medical bills. As James stated in his Supplemental Reply Memorandum: "All claims against the estate are barred by the Illinois Probate Act's two-year limitation period, 755 ILCS 5/18-12(b) ... Thus, Rush University and Susan Killian's other providers cannot collect anything from her estate." R.64-1 at 1. James is correct. Section 18-12(b) provides that "[u]nless sooner barred under subsection (a) of this Section, all claims which could have been barred under this Section are, in any event, barred 2 years after decedent's death, whether or not letters of office are issued upon the estate of the decedent." 755 ILCS 5/18-12(b). "The filing of a claim within the period specified by section 18-12 is mandatory." In re Estate of Hoheiser, 97 Ill.App.3d 1077, 53 Ill.Dec. 612, 424 N.E.2d 25, 28 (1981). And the failure to file a claim within this statutory period is a bar to recovery, even if the executor had personal knowledge of the claim. Id. Further, "where a legal claim should have been, but was not, filed against an estate within the statutory period, relief will not be accorded by the application of equitable principles." In re Estate of Ito, 50 Ill.App.3d 817, 8 Ill.Dec. 847, 365 N.E.2d 1309, 1311 (1977). In short, "[n]o exception to the filing period may be engrafted by judicial decision." Id. In fact, "[a] probate court cannot authorize an administrator to pay a claim after the claim has been barred from payment under the statute. To authorize payment under these circumstances would in effect nullify the provision in the statute." Messenger v. Rutherford, 80 Ill.App.2d 25, 225 N.E.2d 94, 94 (1967) (internal citation omitted).
In this case, Susan died in August 2006 owing the Rush providers approximately $80,000 in unpaid medical bills. Susan, though, never paid those medical expenses and Illinois's two-year limitations period now bars any attempt by the Rush providers to reopen and collect on those unpaid bills
The court also reasons that this case is not moot because the estate has already suffered a concrete and redressable injury, namely that the Killians were injured by overpaying medical bills representing co-pay, coinsurance, and annual deductible amounts, which would have been lower had the services been obtained from an in-network provider. Opinion at 660-61. However, James has never claimed, including in his response to the court's request for supplemental briefing, that they overpaid any of the medical providers because of the defendants' purported ERISA violations. Rather, James has always maintained that the harm Susan's estate suffered as a result of the breach was that Susan incurred about $80,000 in unpaid medical bills.
The court's third rationale for why this appeal is not moot is that "Mr. Killian's financial affairs are burdened with real uncertainty...." Opinion at 664. Here, the court notes that there is a "sufficiently real possibility that the additional debts may come Mr. Killian's way," Opinion at 662, and finds "Mr. Killian's personal liabilities on Mrs. Killian's debts" relevant. Opinion at 664 n. 28. There are two problems with this reasoning.
First, Susan's estate brought this litigation to obtain relief on Susan's ERISA claims. The court acknowledges that the claim is "Mrs. Killian's claim," but adds that James "inherited it, and, in any event, the consequence of the resolution of the dispute, whatever it may be, falls to him alone." Opinion at 662. But James did not inherit Susan's obligation to pay Rush; Susan's estate never paid those bills; and those debts did not reduce the assets that James inherited — there were none. Thus, the alleged harm did not somehow flow to James as part of the probate process.
What the court is doing is conflating the legal interests of Susan's estate (which James inherited), and James's unrelated individual interests, reasoning that "the dispute in this case always has been one between Mr. Killian and the defendants over his wife's coverage and their family's resulting liability on third-party medical debts." Opinion at 661. While the dispute underlying this litigation may have always been one between James and the defendants,
What then are the harms an estate may litigate? The administrator of an estate may prosecute claims on behalf of a deceased plaintiff's estate which ultimately benefit "the heirs and any other claimants to the estate, such as his creditors." See Anderson v. Romero, 42 F.3d 1121, 1123 (7th Cir.1994). It is true that should the estate prevail on the denial of benefits and breach of fiduciary duty claims, James, who is the estate's beneficiary, will benefit. But he will not benefit as a beneficiary. This point is clear if one considers what would happen if James were not a beneficiary of Susan's estate. James's purported liability for the medical expenses due the Rush providers is based on the Illinois Family Expense Act. The Illinois Family Expense Act provides that spouses are jointly and severally liable for each other's medical expenses whether or not they are living together or separately. Mercy Ctr. for Health Care Serv. v. Lemke, 199 Ill.App.3d 958, 146 Ill.Dec. 1, 557 N.E.2d 943, 945-46 (1990). If James were not a beneficiary or heir of Susan's estate (maybe because of a divorce subsequent to the provision of medical expenses), James would still "benefit" by the estate obtaining an order to pay the Rush providers given that he would have joint liability under the Act. But the benefit to James would not be because of his status as a beneficiary of the estate. Thus, the court is wrong to rely on "persisting uncertainties concerning the future liability of the estate and its beneficiary" to find this case not moot, Opinion at 664, because there is no future liability of James qua beneficiary. And the court's other explanation for why the estate can seek a remedy for a direct and personal harm to James, namely that James stands before this court as "husband," is incorrect. Opinion at 662 n. 26. James may now stand before this court in his individual capacity, but the claims remain Susan's underlying breach of fiduciary duty and denial of benefits claims. Id.
The statutory penalty claim is a different matter. That claim allows for monetary damages. Consequently Susan's estate (and James individually) can continue to litigate that claim on behalf of James because as a beneficiary James is entitled to receive those statutory damages.
The entire premise that there is a "sufficiently real possibility that the additional debts may come Mr. Killian's way" is also wrong. In response to this court's request for supplemental briefing, James identified only one basis for personal liability — the Illinois Family Expense Act, 750 ILCS 65/15, which as noted above creates joint and several liability for spouses' medical expenses. Because the Illinois Family Expense Act does not have its own statute of limitations, the catch-all five-year limitation period applies. See 735 ILCS 5/13-205 (2010); Pope v. Kaleta, 90 Ill.App.2d 61, 234 N.E.2d 109, 114 (1967). Susan's brain surgery at Rush occurred in April 2006 and yet the Rush providers have not initiated litigation against James, so, now — 2013 — any claims by them against
James may well wish that the Rush doctors receive additional compensation for their services and may desire vindication for the wrong he perceives. But the test for mootness "is whether the relief sought would, if granted, make a difference to the legal interests of the parties (as distinct from their psyches, which might remain deeply engaged with the merits of the litigation)." Air Line Pilots Ass'n, Int'l v. UAL Corp., 897 F.2d 1394, 1396 (7th Cir.1990). And in this case, the relief sought, namely payment of the outstanding medical bills, no longer makes a difference to the legal interests of Susan's estate because the estate is not liable for the outstanding medical bills; the Rush creditors no longer have a right to payment from the estate; and James is no longer liable to the Rush providers.
Finally, the court reasons that this case is not moot because of "the possibility of meaningful declaratory relief...." Opinion at 683. The court, though, does not explain what such relief would be, other than suggest that it could be something that relieves James of his personal liabilities on Susan's claims. Opinion at 664 n. 28. But as discussed above, the estate cannot seek relief in favor of James for his direct and personal liability and in any event there is no such potential liability. Thus, there is no declaratory relief for the purported denial of benefits and breach of fiduciary duty claims that could affect the legal interests of Susan's estate, its creditors, or its beneficiary qua beneficiary.
In sum, Susan's estate sued the defendants alleging a denial of benefits and breach of fiduciary duty under ERISA, asserting as the harm unpaid medical bills totaling approximately $80,000. But now there is no remaining liability on those claims for Susan's estate, for creditors, for James qua beneficiary, or even for James individually. These facts moot Susan's estate's claim because "there is no possible relief which the court could order that would benefit the party seeking it." In re River West Plaza-Chicago, LLC, 664 F.3d 668, 671 (7th Cir.2011) (internal quotation omitted) (emphasis added). This court has held claims pending on appeal are moot in analogous situations. For instance, when a restitution order was paid by another party while the appeal was pending, this court held that the appeal was moot because "[w]e cannot relieve [a party] of an obligation that has already been extinguished by another party." United States v. Balint, 201 F.3d 928, 936 (7th Cir.2000). See also Wegscheid v. Local Union 2911, Int'l Union, United Auto., Aerospace & Agr. Implement Workers of Am., 117 F.3d 986, 990 (7th Cir.1997) ("[A] suit cannot be maintained in a court created under Article III of the Constitution, however egregious the defendant's conduct, unless the decision would affect the tangible interests of the suit. A decision of this appeal, given that the suitors have obtained all the
Before the district court, James argued that the defendants had breached their fiduciary duty to him by failing to provide a summary plan description. The district court granted the defendants summary judgment on this claim. James then filed a motion to reconsider, arguing for the first time that the defendants also breached their fiduciary duty by not informing him of the out-of-network status of the Rush providers during his April 7, telephone conversations with Concert. The district court denied James's motion to reconsider, holding that it was too late to raise an argument premised on the April 7 telephone conversations.
By not presenting a timely argument to the district court premised on the April 7 telephone calls, James waived any argument that the defendants breached their fiduciary duty based on those telephone calls. Publishers Res., Inc. v. Walker-Davis Publ'ns, Inc., 762 F.2d 557, 561 (7th Cir.1985) (holding that a litigant who fails to raise an argument in opposition to a properly raised motion for summary judgment will not be permitted to raise that same argument later, either in a motion for reconsideration or on appeal). The en banc court, though, holds that the defendants waived James's waiver by failing to assert waiver in this court
Moreover, while a party can waive a waiver by failing to raise it, the waiver doctrine is "designed for our own protection as much as that of an opposing party, and therefore need not be asserted by a party for us to invoke it." United States v. Hassebrock, 663 F.3d 906, 914 (7th Cir. 2011). This case presents such a circumstance — one where, even if the defendants are deemed to have not asserted waiver, the court should. James litigated this case for years before the district court and never developed a breach of fiduciary duty argument premised on the two telephone calls to Concert. Consequently, neither James nor Concert developed the record concerning those telephone calls. And not only did the parties not develop the record concerning those telephone calls, they did not identify for the court the relevant portions of the record related to those telephone
Even if Susan's breach of fiduciary duty claim were not moot, the claim fails on the merits. "A claim for breach of fiduciary duty under ERISA requires the plaintiff to prove: (1) that the defendant is a plan fiduciary; (2) that the defendant breached its fiduciary duty; and (3) that the breach resulted in harm to the plaintiff." Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 464 (7th Cir.2010). The en Banc court holds that a reasonable finder of fact
The en Banc court notes that to review Susan's breach of fiduciary duty claim the court must focus on the two April 7, 2006 telephone calls, Opinion at 666, so I begin there as well.
In discussing the first telephone call James made on April 7, 2006, the en Banc court states that James called the "provider participation" number listed on the front of Susan's insurance card.
Contrary to the panel decision and the en Banc court's conclusion today, the record does not support a reasonable inference that James called the PHCS dedicated provider participation number. In fact, in his Rule 56.1 Statement of Facts, James never claimed he called the PHCS dedicated provider line, but merely stated he "called one of the 800 numbers on the card" and that he "called another number on Susan's insurance card." R.266 at 2. Nor did James claim in his affidavit that he first called the dedicated provider line, stating instead: "I called one of the 800 numbers on the card." R.266-2 at 2. Then, in his deposition testimony, James first testified: "[t]here were two numbers on the medical card. I believe one was for — I believe one of them was for determination of eligibility of benefits and one was for admittance or a customer service number. So I believe I called the customer service number first and later on I called back...." R.115-3 at 71-72. As the deposition continued, though, when asked again about the telephone calls, and specifically which number he called first on April 7, James stated "I believe it was the top number," the [800-242]-6679 number
James's deposition testimony was thus contradictory concerning which number he initially called on April 7. This contradiction is not fatal to James's case, given that this is summary judgment and the record must be viewed in the light most favorable to the non-moving party. But it does show that James is unclear about what number he actually called on April 7, which is most likely why he did not assert in his Rule 56.1 Statement of Facts that he called the PHCS dedicated provider line. R. 266 at 2.
While James's uncertainty might not doom his case, his testimony about the telephone calls makes clear that it was impossible for him to have first called the PHCS dedicated provider-line number. Specifically, in explaining in his deposition what transpired on April 7, James stated that when he called back the second time, "I talked to a woman named Maria and I said something about, `I'm trying to get confirmation that we are going to be — my wife is going to be admitted to Rush.' Again, I said — she just said, like she knew who I was, she said, `Oh, you mean St. Luke's,' and she laughed and she sounded like she was talking to the person next to her. That there were two different phone
It is impossible for this scenario to have transpired as James recounted if he had called the PHCS dedicated provider line because, as the record establishes, Concert does not run the dedicated provider line. The PHCS network does. R.115-3 at 200. The only way for the second operator to quip to the coworker sitting next to her that it was the guy from "St. Luke's" would be if James had called the Concert number both times, and in the interim, the two Concert representatives were discussing James's first call. And the number for Concert was listed on Susan's insurance identification card three times, twice on the front of the card, once for customer service and once for utilization review, and once on the back of the card for utilization review. Thus, given James's own testimony, it was impossible for James to have first called the PHCS line dedicated to determining provider participation status. He must have instead called Concert both times.
Admittedly, the record is not well developed on this point and for a very simple reason: James never claimed that he called to determine Rush's network status and instead testified expressly and clearly in his deposition that he called to inform Concert that Susan was being admitted to the hospital
The en Banc court sidesteps the issue by stating that Concert has never disputed the fact that James's first call was to the dedicated provider line and the second call was to the Concert customer service line. Opinion at 656 n. 17. But Concert did. During oral argument, Concert's counsel stated that James did not call the dedicated provider line number. The en Banc court challenged the attorney on this point several times, and after realizing the en Banc court's confusion, Concert's attorney explained why, given James's testimony, it was impossible for James to have called the dedicated provider-line number: Concert and PHCS Network are two distinct entities, each with separate 800 numbers, separate physical locations, and different employees. Because this was never an issue before, Concert never raised it before. And because in his Rule 56.1 Statement of Facts James never asserted that he had called the dedicated provider line, there was nothing to dispute. R.266 at 2.
Our review of summary judgment orders requires us to view all reasonable inferences in the light most favorable to the non-moving party. But "if the factual context renders the claims asserted by the party opposing summary judgment implausible, the party must `come forward with more persuasive evidence to support their claim than would otherwise be necessary.'" McDonnell v. Cournia, 990 F.2d 963, 967 (7th Cir.1993) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). The factual context laid out above renders James's recollection of first calling the dedicated provider line impossible. Rather, given his testimony, James must have called the same Concert customer service/utilization number twice on April 7.
The court incorrectly assumes that James first called the PHCS dedicated provider line. And that assumption is the lynchpin to the en Banc court's conclusion that a reasonable finder of fact could find the defendants had a fiduciary duty to inform James that the Rush providers were out-of-network. See Opinion at 666 ("Because this line was dedicated to informing
The en Banc court concludes that a reasonable trier of fact could conclude that James called Concert to determined whether the Rush providers were in Susan's network, Opinion at 666-67, and that "Concert was aware (or, at the very least, that it should have been aware) that Mr. Killian was attempting to determine whether Rush and the physicians who were about to perform surgery on Mrs. Killian were within Mrs. Killian's network." Opinion at 666. I disagree.
First, the record does not support the conclusion that James called Concert to determine whether the Rush providers were in Susan's network. In fact, in his deposition James himself negates any such inference — twice. After summarizing the first telephone call, James stated: "So that was my reason of the phone call to tell them she was going to be admitted to the hospital. And we never determined anything. She said — I believe she said, `Give me a call back.'"
Significantly, James never stated in his deposition, or in the affidavit that he filed in this case, that he called Concert on April 7 to determine whether the Rush providers were in network. Had that been the purpose, or even a purpose of the call, James's attorney could (and would) have asked James whether he had called on April 7 to also determine the Rush providers' network status. But his attorney did not, even though in his complaint James specifically alleged that he "called Concert Health Plan Insurance Company to confirm that Rush University was a network provider under the Concert Health Plan (or Royal Management Corp. Health Insurance Plan)." R.119-2 at 10. Thus, even though James alleged in his complaint that he called to confirm the Rush providers' network status, when it came time to come forward with proof to support that allegation, James remained silent
"The purpose of summary judgment is to `pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). James presented no evidence that he called Concert on April 7, 2006, to determine the network status of the Rush providers and he easily could have made such a statement in his affidavit or deposition testimony. Because "[a] non-moving party cannot simply rest on its allegation without any significant probative evidence tending to support the complaint," id. at
Second, even if James subjectively intended to determine the network status of the Rush providers when he called Concert on April 7, the Concert representatives had no reason to know that that was a purpose of James's April 7 telephone calls. In discussing the April 7 exchanges, James explained that he told the representatives that "Susan is going to be admitted"; "I'm trying to get confirmation that we are going to be — my wife is going to be admitted to Rush"; "she is going — they want to admit her because we already determined the tumor had to come off"; "I said she was being admitted to the hospital and they were going to do the surgery.... Brain surgery." R.115-3 at 71-72, 124. Nothing James said during these conversations put the Concert representatives on notice that a purpose of his call was to learn the network status of the Rush providers. Rather, a reasonable representative would believe that James telephoned Concert because Concert required insureds to notify it of hospital admissions — since that was what James told the telephone representatives. As James said, in his own words: "I said she was being admitted to the hospital and they were going to do the surgery.... Brain surgery." Under these circumstances, it is not reasonable to expect the representative to have "instructed Mr. Killian that she was unable to locate an entry in her system for `St. Luke's' and that she could make no representations at that time as to whether the provider was in-network." Opinion at 667.
In Kenseth, the plaintiff had undergone a vertical banded gastroplasty ("VBG"), often colloquially referred to as a "stomach-stapling," in 1987. Id. at 457. Years later, as a complication of the VBG, Kenseth began to suffer from gastric stenosis, which in turn caused her "to experience a variety of aliments," including severe acid reflux, erosion of the esophagus, pneumonia, and severe hair loss. Id. To address these problems, Kenseth underwent an endoscopic procedure which initially resolved the problem. Id. at 458. But after it recurred, Kenseth saw a bariatric surgeon, Dr. Huepenbecker, who recommended that Kenseth "undergo a Roux-en-Y gastric bypass procedure as a longer-term solution to the complications." Id.
Prior to the surgery, Kenseth contacted her health insurance company, Dean Health Plan, to determine whether the surgery would be covered by insurance. Id. at 459. The Certificate of Insurance encourages participants to do so, stating: "If you are unsure if a service will be covered, please call the Customer Service Department ... prior to having the service performed." Id. at 458. Kenseth spoke with a customer service representative, Maureen Detmer, and "averred that she told Detmer she would be having `a reconstruction of a Roux-en-Y stenosis, [sic]' and when Detmer asked her to explain the nature of the surgery, Kenseth told her `it had to deal with the bottom of the esophagus because of all the acid reflux I was having.'" Id. at 459-60. After checking with her supervisor, Detmer advised Kenseth that the procedure would be covered by her insurance, subject to a $300 copayment. Id. at 460. Based on these assurances, Kenseth underwent the surgery on December 6, 2005. Id.
The day after the surgery, Dean (which under its policy was not bound by oral representations concerning coverage) denied coverage for Kenseth's surgery and all associated services based on two provisions in Kenseth's health insurance policy. First, the policy listed non-covered services as "[a]ny surgical treatment or hospitalization for the treatment of morbid obesity." And in the "General Exclusions and Limitations" provisions was an exclusion for "[s]ervices and/or supplies related to a non-covered benefit or service, denied referral or prior authorization, or denied admission." Id. at 457. Because complications from Kenseth's earlier VBG surgery necessitated Kenseth's Roux-en-Y surgery, Dean concluded that the 2005 surgery
Kenseth sued, alleging claims under state law and under ERISA for breach of fiduciary duty and equitable estoppel. The district court granted Dean summary judgment and on appeal this court reversed on the breach of fiduciary duty claim, stating:
As this summary of Kenseth makes clear, the Killians' situation now before us is nothing like Kenseth. In Kenseth, the insured called and asked whether there would be coverage for a specific surgical procedure. Here James called and informed Concert that Susan was being admitted to the hospital and made no inquiry about the Rush providers' network status or the reimbursement rates for the medical services. In Kenseth, the insurance agent, after checking with her supervisor, erroneously stated that the procedure the plaintiff asked about would be covered. But after the operation, the insurance company denied coverage. Here the insurance company did not make any representations to James concerning whether the Rush providers were in-network or out-of-network and did not deny coverage for Susan's brain surgery. In Kenseth, the certificate was ambiguous concerning whether the Roux-en-Y surgery was a covered procedure. With Susan, the certificate of insurance was clear concerning: (1) the reimbursement rates paid to in-network and out-of-network providers; (2) an insured's responsibility for any expenses above the maximum allowable fee for out-of-network providers; (3) the need to inquire on the network status of the providers either via telephone or on-line; (4) an insured's right to choose any provider they wished; and (5) an insured's obligation to notify Concert of any hospital admissions for pre-certification that the procedure was medically necessary. In Kenseth, this court held that the insurance company had a duty to disclose to callers that they could not rely on representations made by agents of the insurance company that a medical procedure was covered. That duty to disclose was directly related to the question Kenseth asked and which the insurance company answered, namely whether surgery to perform a Roux-en-Y was covered by the insurance policy. See Kenseth, 610 F.3d at 472 (the fiduciary exposes itself to liability for the mistakes that plan representatives might make in answering questions on that subject) (emphasis added). Here, the information that the Concert representatives provided
Notwithstanding these stark differences between Kenseth and the facts of this case, the en Banc court relies on several passages in Kenseth which summarize general breach of fiduciary duty principles to support its holding. But even those passages from Kenseth do not support a breach of fiduciary duty claim here. For instances, the en Banc court relies several times on passages from Kenseth discussing the fiduciary duty owed to insureds when the insured "request[s] information" or poses "questions" to the fiduciary. See, e.g., Opinion at 664-69.
But in this case, James did not request any information or pose any questions. Rather, during both telephone calls, James stated a fact — that Susan was being admitted for brain surgery
Likewise, "the only status and situation," Opinion at 664-65, 668-69 (quoting Kenseth, 610 F.3d at 466), "circumstance," Opinion at 664-65, 666 (quoting Kenseth, 610 F.3d at 466), or "predicament," Opinion 665 (quoting Kenseth, 610 F.3d at 467), of which Concert knew was that Susan had
The court again quotes Kenseth when reasoning that James "should not be penalized because he failed to comprehend the technical difference between ` [go ahead]' and `[the provider is in-network].'" Opinion at 667 (quoting Kenseth, 610 F.3d at 467)
Finally, the Certificate of Insurance and the enrollment packet
As explained above, Susan's denial of benefits claim is moot. However, if that claim were not moot, I remain comfortable with the panel's decision, namely directing the parties to submit a stipulation concerning the network status of the Rush providers on remand. Opinion at 654 n. 3, 657 n. 20. At this point, that solution seems the most expedient. However, should the parties be unable to agree to a stipulation, the district court can easily resolve the issue on remand on the basis of the current record. Specifically, the district court can rely on the deposition testimony of Johny Antony, the Vice President of Operations for Concert, R.115-3 at 250, 270, and correspondence between Concert and University Anesthesiologists, to confirm the network status of the Rush providers. R.77-7 at 7, 11.
James suffered a tragic loss, and finding out that Susan's health insurance did not cover about $80,000 in medical expenses only added to his grief. James deserves sympathy, but in the final analysis, the mistake was the Killians' and not the defendants'. Once they received Susan's dire and devastating diagnosis they did not consult with, or consider the terms of, Susan's health insurance plan. This is entirely understandable, but their mistake does not create liability for the defendants. And in creating such liability today, the court's decision has wide-spread ramifications. Health insurance is already expensive. And the court's holding will only further increase the cost of health insurance because insurance companies, to prevent being held liable for expenses not covered by their policies, will require their representatives to review the policy provisions with each caller. This is not a no-cost proposition: It costs insurance companies money to staff telephones and the
Health insurance is also complicated. It must be in order to address the multitude of potential health care scenarios. ERISA requires a Summary Plan Description ("SPD") for that very reason — to provide lay people a straightforward explanation of the terms of their health insurance coverage. And I agree with the court that the defendants did not provide an SPD which complied with ERISA and that statutory penalties are appropriate for that failure. But the failure to provide an SPD that complied with ERISA did not harm Susan because the defendants provided Susan with an enrollment packet that clearly explained all of the provisions relevant to Susan's situation. Specifically the enrollment packet explained the reduced reimbursement rates paid to out-of-network providers and how to determine if a provider was in the PHCS-Open Access Network. Yet there is no evidence that Susan or James inquired whether Rush was within her network. Unfortunately it was not, and as a result Susan was left with hefty medical bills, although in the end neither Susan, James, nor her now-closed (for purposes of creditors filing claims) estate paid these bills. And there is no longer any legal liability on those unpaid bills. In the final analysis that makes this case, for the most part, moot. Remanding to hold the defendants liable for statutory damages for their violations of ERISA is appropriate. But no more. I CONCUR IN PART and DISSENT IN PART.
In September 2012, Mr. Killian moved to substitute himself, in his individual capacity, as plaintiff, and we granted his motion. App. R.48. He subsequently has requested substitution again, this time to return himself as administrator of Mrs. Killian's estate. We address this request infra.
Killian v. Concert Health Plan Ins. Co., No. 07-cv-04755, 2010 WL 2681107, at *8 (N.D.Ill. July 6, 2010).
Accordingly, we deem Mr. Killian's most recent motion to substitute to be instead a motion to add himself in his capacity as administrator of the estate as a plaintiff to this action, and we grant the motion.
29 C.F.R. § 2520.102-3(j)(3).
First, this assumption, while plausible, is not a fact that we can assume in Concert's favor at summary judgment. Concert's vice president of operations testified that "the network" operates the 800 number for determining provider participation, R.115-3 at 200, but he did not testify as to whether Concert and "the network" share facilities or employees and any presumptions must be made in Mr. Killian's favor. Representations made by counsel at oral argument that Concert and PHCS do not share employees and that telephone calls to each line are directed to separate facilities may be true, but on summary judgment counsel's factual assertions at oral argument do not substitute for record evidence.
Second, if we could assume that Mr. Killian is mistaken about which numbers he called and that he did call the same number twice, whether both telephone calls were made to the customer service line or the provider participation line is a fact that must be construed in the light most favorable to Mr. Killian.
Finally, even if we could assume that Mr. Killian called the customer service line both times, a factfinder still could conclude that Concert was on notice of his need for provider network information because, as noted above, the Master Group Policy instructed beneficiaries "[t]o confirm that Your ... provider is a CURRENT participant ... You must call the number listed on the back of Your medical identification card." R.259-3 at 15 (emphasis added). The customer service/utilization review number was the only potentially applicable number on the back of Mrs. Killian's card. After directing beneficiaries seeking provider information to call "the" number on the back of the card, Concert cannot avoid its fiduciary duties by suggesting that Mr. Killian should have called a number on the front of the card.
The dissent also argues that Mr. Killian never called to determine provider network status and points to Mr. Killian's deposition where he testified that he told the representative that his wife was being admitted and that he called because he was supposed to call for preadmission. Dissent at 665-67. The dissent argues that because, in his deposition, Mr. Killian said "preadmission" rather than "provider network information," he could not have placed the fiduciary on notice of his need for provider network information.
This view suggests that, contrary to our holding in Kenseth v. Dean Health Plan, Inc., 610 F.3d 452 (7th Cir.2010), the beneficiary must use the exact terms as defined by the fiduciary before the fiduciary is required to provide information, but the issue is whether Mr. Killian's interaction with the representatives was sufficient to put them on notice of his need for provider network information. Although Mr. Killian used the word "preadmission" in his deposition when telling the attorneys the purpose of his call, he did not testify that he told the representatives that he was calling for preadmission. His interaction with the representatives included calling the designated number, informing the representative of his location and telling the representative of the needed surgery.
Concert deposed Mr. Killian, but never asked whether Mrs. Killian was well enough to travel to a different hospital.
