Court: District Court, D. Arizona; September 24, 2013; Federal District Court
Plaintiff Deana Tuttle's Motion Regarding Standard of Review is denied by the Court. The case involves a dispute over an employee welfare plan's denial of Tuttle's claim for medical reimbursement related to her breast cancer treatment at the Mayo Clinic in 2009. Tuttle, employed by Varían Medical Systems, Inc. and a participant in the company's Welfare Benefit Plan, argues for a non-deferential standard of review for the denial of her claim. The parties disagree on whether the insurer, United Healthcare Insurance Company (UHIC), has discretionary authority to make benefit determinations. Tuttle's surgeries were billed to the Plan, but there is a dispute over the payment percentages. After Tuttle's administrative appeal was denied, she submitted a Health Care Appeal Request Form for an independent review, but the Plan's acknowledgment and processing of this request are contested. Tuttle initially filed a lawsuit in August 2011, which was dismissed to allow the Arizona Department of Insurance to conduct an independent review; however, the Department declined since the appeal was only about the payment amount. Tuttle claims she has exhausted all administrative remedies and alleges that UHIC's structural conflict of interest affected the benefits determination, resulting in economic damages. She seeks Plan benefits and attorney’s fees under 29 U.S.C. § 1132.
The standard of review for a fiduciary's decision to deny benefits is generally de novo, as established by case law, including Abatie v. Alta Health, Life Ins. Co. and Kearney v. Standard Ins. Co. This approach is rooted in trust law principles, as ERISA aims to safeguard employee interests and mandates fiduciaries to act in beneficiaries' best interests. However, if a plan explicitly grants discretionary authority to the administrator, the review shifts to an abuse of discretion standard, even if the decision-maker also serves as the funding source. In such cases, any potential conflict of interest in the decision-making process must be considered.
To ascertain whether a plan provides discretionary authority, the court must first identify the relevant plan documents, as ERISA mandates that employee benefit plans be maintained via a written instrument. These documents should detail the plan's funding policy, operational procedures, amendment processes, and payment bases. A dispute arises regarding whether the administrative record includes the actual plan, with Ms. Tuttle asserting it does not, while defendants claim the Policy serves as the controlling document. The Policy issued by UHIC to Varían includes multiple components, such as the Group Policy and Certificate of Coverage, which collectively form the legal agreement governing benefits. The court affirms that an insurance policy can fulfill the role of a written instrument under ERISA, rejecting the argument that a de novo standard applies due to the absence of a separate "plan" document. The insurance policy is deemed the plan document in this case, and plans may incorporate additional documents like collective bargaining agreements or certificates of insurance.
Documents that collectively form an employee benefit plan do not need to be formally labeled as such, as established in Horn v. Berdon, Inc. Ms. Tuttle contends that the Policy is not a Plan document because it references other documents available from the Plan administrator. However, these references do not negate the Policy's status as an operative Plan document, as an ERISA employee benefit plan can consist of multiple documents. Ms. Tuttle also argues that the Policy is not a Plan document since the Plan existed prior to the Policy's effective date in 2009 and was defined before UHIC became the insurer. Nevertheless, the Policy covers claims incurred from January 1, 2009, onwards and explicitly replaces any previous agreements regarding benefits. The transition of UHIC to the role of insurer does not disqualify the Policy as a Plan document in assessing Ms. Tuttle’s benefits denial.
The Court concludes that the Policy sections discussed are the controlling Plan documents, including an "ERISA Statement" labeled as "Summary Plan Description." Plan administrators must provide summary plan descriptions that are accurate and comprehensible to participants, as per CIGNA Corp. v. Amara. The Supreme Court clarified that while these summary documents communicate essential information about the plan, they do not define the plan's terms. Defendants argue the Statement is not a required summary document under 29 U.S.C. 1022(a) but rather a "Rider" within the Policy. However, the Statement's designation and the Policy's language suggest it is not a Rider and contains required information, leading the Court to classify it as a Summary Plan Description, thus excluding it from being considered a Plan document.
Discretionary authority in an ERISA plan is determined by the language of the plan itself. The plan must clearly indicate that the administrator has the discretion to grant or deny benefits and interpret the terms of the plan, though specific "magic words" are not required. The Ninth Circuit emphasizes that clarity is essential; if an insurance company desires discretion in claims decisions, it must explicitly state this in the plan. The plan administrator's discretionary authority should be unambiguous to ensure understanding for both the plan purchaser and participants. The Policy includes a Certificate of Coverage that outlines UHIC’s responsibilities, stating that UHIC has the discretion to interpret benefits and make administrative decisions about coverage costs. Additionally, the Policy grants UHIC "sole and exclusive discretion" to interpret benefits, conditions, limitations, and exclusions, as well as to make factual determinations. This clear language provides UHIC with the authority to construe disputed terms and determine eligibility for benefits, aligning with the Ninth Circuit's precedent that similar plan wording confers discretion on the plan administrator.
The plan's terms assign the administrator the authority and obligation to interpret the plan, resolve ambiguities, and decide on employee eligibility, thereby granting UHIC discretion in benefits determinations. Ms. Tuttle contends that UHIC is not a fiduciary under ERISA despite having discretionary authority. The standard of review in ERISA cases hinges on whether the party exercising discretion is a fiduciary; if it’s not, de novo review applies. Fiduciary status under ERISA is broadly interpreted, focusing on functional control and authority rather than formal designation. Ms. Tuttle points to specific provisions in the Policy stating that UHIC will not be considered an employer, plan administrator, or fiduciary, and that all administrative responsibilities remain with Varían. However, these provisions do not entirely negate UHIC’s potential fiduciary role, as an entity can be a fiduciary without formal designation, particularly since the Policy grants UHIC discretionary authority to make benefits determinations.
Ms. Tuttle argues that Varian improperly delegated fiduciary responsibility and discretionary authority to UHIC under the Policy. Although the Policy grants UHIC discretionary authority as a fiduciary for benefits claims, Tuttle contends that Varian failed to establish procedures to formally confer this authority. However, ERISA allows for fiduciary responsibilities to be allocated both through explicit procedures and within the plan document itself, meaning the Policy correctly delegated these responsibilities to UHIC.
Tuttle cites a 2009 Benefits Guide, claiming it indicates Varian retained discretionary authority and did not delegate it to UHIC. She references case law suggesting that courts favor the more employee-friendly document in conflicts between ERISA plan documents. Nevertheless, defendants assert that the Guide is not an official Plan document, as it explicitly states it does not constitute a legal commitment to provide benefits and that official plan documents govern in case of discrepancies. The court agrees with the defendants, determining the Guide is not a Plan document and that any conflict with the Policy is irrelevant.
Additionally, Tuttle challenges the legality of the discretionary authority granted to UHIC based on the California Insurance Commissioner's withdrawal of approval for discretionary clauses in insurance policies. The Policy is regulated by the California Department of Insurance, and the 2004 Notice from the Commissioner indicated that discretionary clauses enabling insurers to determine eligibility and interpret policy terms were no longer approved.
The Commissioner concluded that certain clauses in insurance contracts could be deemed "fraudulent or unsound" under California Insurance Code § 10291.5 because they allow insurers to make benefit payments contingent upon their own discretion, potentially rendering the contract illusory. In ERISA-governed disability contracts, such discretionary clauses limit judicial review of benefit denials to an "abuse of discretion" standard, restricting California insureds' access to protections under state law. The court in *Firestone v. Acuson Corp.* determined that a notice regarding discretionary clauses did not apply to a specific group disability policy since it was not listed in the notice. It emphasized that once a policy is approved by the Commissioner, it cannot be reformed by the courts to provide benefits not initially agreed upon. The proper remedy for challenging a discretionary clause deemed offensive under § 10291.5 is to petition for the Commissioner to rescind the policy approval. The notice applicable to certain policies did not extend to the policy in question, and there was no evidence presented that the Commissioner had rescinded approval of the policy after its issuance. Consequently, the discretionary authority granted to the insurer, UHIC, remains lawful under California law. The court determined that the standard of review for the case is "abuse of discretion," rather than de novo, and denied the plaintiff's motion regarding the standard of review. The court also noted that the "ERISA Statement" is not a Plan document but reflects the intent to confer discretion on UHIC for benefit determinations.
UHIC is designated as the "Claims Fiduciary," responsible for administering the group health policy, which includes claims processing, payment, and appeals handling. The policy outlines that UHIC's administrative duties encompass determining coverage for healthcare services received by plan participants. The document confirms that UHIC retains fiduciary responsibilities towards plan participants, including Ms. Tuttle, regarding claims and benefit determinations. UHIC may delegate its discretionary authority for administering these services but must inform participants of any changes in service providers.
Ms. Tuttle contends that a 2007 policy only granted discretionary authority to Varían and did not allow for delegation. She argues that the defendants have not demonstrated that the Plan was amended to permit Varían to delegate authority to UHIC in 2009. The excerpt clarifies that the relevant governing document for authority in benefit disputes is the current Policy, not the 2007 handbook. The 2009 Benefits Guide states that Varían has the discretionary authority to manage benefit plans, with binding rules and the right to amend or terminate plans at its discretion.
Additionally, California Insurance Code 10110.6, enacted in 2012, voids certain discretionary authority clauses in insurance policies for California residents. However, the parties agree that this statute does not apply to the Policy issued in 2009.
