Summary
applying this method in the interpretation of a "General Release and Waiver Agreement"
Summary of this case from Luther v. Navistar Int'l Corp.Opinion
Case No. 97 C 6057
March 20, 2001
MEMORANDUM OPINION AND ORDER
This action arises under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. Plaintiff filed this action against Sears, Roebuck and Co.("Sears"), James B. Bronson ("Bronson"), and HealthCare Alliance ("HCA" or the "Plan") for wrongful denial of benefits, breach of fiduciary duty, and violations of 29 U.S.C. § 1133. This case is before the Court on Defendants' Motion for Summary Judgment. The parties have consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636 (c)(1).
On January 25, 1999, this Court issued a Memorandum Opinion and Order granting in part and denying in part Defendants' Motion to Dismiss. In that Order, the Court dismissed the claim for breach of fiduciary duty, dismissed Defendants Sears, Bronson, and Value Behavioral Health from Renaldi's claim for wrongful denial of benefits, and dismissed Mary Renaldi as a Plaintiff. On March 4, 1999, this Court dismissed Defendant Value Behavioral Health from the case entirely.
The Court is simultaneously issuing a Memorandum and Order resolving Defendants' Motion to Strike, filed on July 26, 2000.
For the reasons set forth below, Defendants' Motion for Summary Judgment is granted in its entirety.
I. FACTUAL BACKGROUND A. The Parties
The following facts are taken from the parties' Local Rule 56.1 (a)(3) (b)(3) Statements and accompanying exhibits and are undisputed unless indicated otherwise. The Court is simultaneously issuing its Memorandum Opinion and Order ruling on Defendants' July 26, 2000 Motion to Strike. As Defendants were successful in many of their arguments to strike whole portions of Renaldi's responses to its Rule 56.1(a)(3) Statement and Renaldi's own Rule 56.1(b)(3)(B) Statement, most of the facts referenced are from Defendants' Rule 56.1(a)(3) Statement.
Plaintiff Michael Renaldi (Renaldi) resides at 5935 Meadow Drive, Lisle, Illinois. (Defs.' Statement of Material Facts, ¶ 1.) Renaldi has a daughter known as Jane Doe, who was born on May 16, 1979. (Id., ¶ 9.) Plaintiff and Mary Ellen Renaldi were divorced in 1993. (Id., ¶ 11.) Jane Doe resides with her mother, Mary Ellen Renaldi, at 15201 Ginger Creek Lane in Orland Park, Illinois. (Id., ¶ 10.)
Doe is referred to by a pseudonym because Illinois law protects the identity of a minor receiving mental health treatment.
Defendant Sears Roebuck ("Sears") is a corporation, with its corporate headquarters in Hoffman Estates. (Defs.' Statement of Material Facts, ¶ 2.) Between February 1, 1995 and June 30, 1996, Michael Renaldi worked as a full-time employee for Sears. (Id., ¶ 17.) Defendant James B. Bronson ("Bronson") was employed as Vice President of Benefits for Sears from 1982 until his retirement on February 28, 1998. (Id., ¶ 3(a).) Bronson was also Plan Administrator for HCA from February 1995 though 1996. (Id., ¶ 3(c).) HCA is an ERISA plan. (Id., ¶ 4.)
B. Jane Doe
Michael and Mary Ellen Renaldi's daughter, Jane Doe, was born in 1979. In 1982, Jane Doe underwent surgery at Children's Memorial Hospital to remove a brain tumor. (Pl.'s Supplemental Facts and Documents, ¶ 6.) From February 1992 until June 1992, the Renaldis consulted with Dr. David Gottlieb, a clinical psychologist. (Id., ¶ 8.) From May 11, 1994 to June 6, 1994, Jane Doe was hospitalized at the Northwestern Hospital psychiatric unit. (Id., ¶ 10.) On June 16, 1994, Jane Doe was placed in the psychiatric unit of Palos Community Hospital, in Palos Heights, Illinois. (Id., ¶ 13.) In the summer of 1994, Renaldi believed it was necessary to place his daughter in a residential treatment center. (Id., ¶ 16.) CEDU Family of Services and Rocky Mountain Academy ("RMA") were recommended by the psychiatrist who treated Jane Doe in May, 1994 when she was hospitalized at Northwestern Memorial. (Defs.' Statement of Material Facts, ¶ 48(b).)
Defendants admit to this paragraph, while objecting to it on the basis of relevance. The Court finds this, and other information relating to Jane Doe's medical history, to be relevant, and overrules this and future objections based upon relevance to this type of information.
Jane Doe left to go to RMA on December 11, 1994. (Defs.' Statement of Material Facts, ¶ 48.) While at RMA, she received individual treatment from Dr. Phillips. (Id., ¶ 49.) While she was enrolled at RMA, both Michael and Mary Renaldi referred to Jane Doe's tips to visit them in Illinois as "home visits." (Id., ¶ 50(a).)
C. Renaldi's Employment at Sears
Renaldi worked as a contract attorney for Sears from December, 1992 until February, 1995. (Defs.' Statement of Material Facts, ¶ 14.) Beginning on February 1, 1995, and continuing to June 30, 1996 Renaldi's status changed from a non-employee contract attorney to an employee of Sears. (Id., ¶¶ 15, 17.) On January 20, 1996, Renaldi filled out a document entitled "Designation of Beneficiary the Savings and Profit Sharing Fund of Sears Employees." (Id., ¶ 16.) In that document, Renaldi listed his daughter as the beneficiary on the form, and listed her address as his own: 55 Meadow Drive, Lisle, Illinois. (Id.) His daughter was at RMA at the time the form was prepared. (Id.)
Renaldi left his employment with Sears, as a part of a downsizing reorganization, on June 30, 1996. (Defs.' Statement of Material Facts, ¶ 17.) At the time that he left Sears, Renaldi received a document entitled "General Release and Waver Agreement," which provided:
In consideration for the benefits that I will receive under the Sears Closed Unit/Reorganization Severance Allowance Plan as described in the attached benefit Notification Form, I and any person acting by, through, or under me hereby release, waive, and forever discharge Sears, Roebuck and Co., its agents, subsidiaries, affiliates, employees, officers, shareholders, successors, and assigns (Sears) from any and all liability, actions, charges, causes of action, demands, or claims for relief or remuneration of any kind whatsoever, whether known or unknown at this time, arising out of, or connected with, my employment with Sears and the termination of my employment, including, but not limited to, all matters in law, in equity, in contract, or in tort, or pursuant to statute, including any claim for age or other types of discrimination under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, or any other federal, state or local law or ordinance. This General Release and Waiver Agreement does not apply to any claims or rights that may arise under the Age Discrimination in Employment Act after the date that I signed this General Release and Waiver Agreement.
(Id., ¶ 18(a)(i).) Renaldi read and signed the general release. (Id., ¶ 18(a)(ii).)
D. Renaldi's Enrollment in HealthCare Alliance
At the time he began his full-time employment with Sears, in February 1995, Renaldi received a packet of materials which included information about enrollment for the medical plans available to him. (Defs.' Statement of Material Facts, ¶ 19.) Included in that packet of materials was information about HCA, to which Renaldi believes was attached a copy of the Summary Plan Description. (Id., ¶ 19(e), (f).) There were several plans available at Sears from which Renaldi selected HCA for his coverage. (Id., ¶ 20.)
Renaldi also enrolled his daughter as a dependent under the HCA Plan. (Defs.' Statement of Material Facts, ¶ 21.) At the time he enrolled her in the HCA Plan, she was receiving treatment at RMA, in Idaho, where she had been receiving treatment prior to the time Renaldi was eligible for any benefits through Sears. (Id., ¶ 21(a), (a)(i).) [(MA is a short term residential treatment facility operated by an entity called CEDU Family of Services. (Id., ¶ 21(a)(ii).) Jane Doe was enrolled in a high school equivalency program at RMA, and she also received treatment for behavioral and mental health issues. (Id., ¶ 21 (a)(iii)(1)-(2).) Renaldi's intent was to keep his daughter there through the time that she graduated from high school. (Id., ¶ 21 (a)(iii)(2).)
Renaldi enrolled his daughter as an out-of area dependent with the HCA Plan in February of 1995. (Defs.' Statement of Material Facts, ¶ 21 (b).) In doing so, Renaldi filled out a form entitled "Medical Coverage Enrollment Form." (Id., ¶ 23.) On that form, Renaldi initially wrote in his daughter's name in the "Enrollment Data" section, but then crossed it out and wrote her name in as an "eligible out-of-area dependent." (Id., ¶ 23(c).) The Eligible Out-of Area Dependent Plan is described in the Medical Coverage Enrollment Form as follows:
If you have dependents who live full-time and permanently out of the HealthCare Alliance Network location, please complete this section. A special medical plan has been developed to provide benefits for these dependents. Note: Eligible college students, whose permanent home is within the service area, are included in the HealthCare Alliance Plan, and should not be listed in this section. Please list them in the "Employee and Dependent Information" above.
(Id., ¶ 23(d)(i).) At the time Renaldi was enrolling in the Plan, he did not ask whether his daughter's stay at RMA would be covered under the Plan. (Id., ¶ 24.) Renaldi's intent was to keep his daughter at RMA regardless of whether it was covered under the Plan. (Id., ¶ 25.)
Renaldi did receive, prior to March 29, 1995, a letter titled "HealthCare Alliance Eligible Out of Area Dependent Plan." ((Defs.' Statement of Material Facts, ¶ 26.) The letter stated that "to ensure maximum coverage of mental health or substance abuse care, call (800)335-3356," however, Renaldi does not recall calling the number to determine if his daughter's expenses at RMA would be covered. (Id., ¶ 26(c)(i).) On March 29, 1995, Renaldi sent a copy of the medical plan identification card to RMA along with a letter requesting that it submit a claim for coverage of his daughter's expenses. (Id., ¶ 26 (d)(i).) Renaldi was not expecting coverage for the first year of his employment because of his belief that a pre-existing condition limitation on coverage would apply for one year. (Id., ¶ 26(d)(2).)
Plaintiff testified at his deposition that he has no reason to believe that he did not receive a document entitled: Sears 1996 Benefit Summary — HealthCare Alliance Chicago. (Defs.' Statement of Material Facts, ¶ 27.) Within that document is a section called "Medical Health/Substance Abuse Administered by Preferred Health Care (PHC)," which states that there are no Out-of-Network benefits for inpatient/residential, emergency room admission and partial hospitalization or intensive outpatient treatment. (Id., ¶ 27(a).)
E. The HealthCare Alliance Plan
The HCA Plan was first adopted in 1988. (Defs.' Statement of Material Facts, ¶ 30.) The Plan contains the following provisions:
Plan Administration
HealthCare Alliance is a self-funded plan. It is administered by a Plan Administrator who is appointed by Sears, Roebuck and Co. (Sears). The Plan Administrator has the authority to determine all questions arising under the provisions of the Plan, including the power to determine the rights and eligibility of participants or any other persons, and to remedy ambiguities, inconsistencies or omissions. The Plan Administrator shall have all duties and responsibilities imposed upon a Plan Administrator by ERISA. The Plan Administrator shall also have the responsibility of claim Fiduciary for the provision of full and fair review of claim denials pursuant to Section 503 of ERISA.
In carrying out their respective responsibilities under the Plan, the Plan Administrator and other Plan fiduciaries shall have discretionary authority to interpret the terms of the Plan and to determine eligibility for and entitlement to Plan benefits in accordance with the terms of the Plan. Any interpretation or determination made pursuant to such discretionary authority shall be given full force and effect, unless it can be shown that the interpretation or determination, was arbitrary and capricious
. . .
Plan Amendment and Termination
WHAT IF MY CLAIM IS DENIED?
Although Sears intends to continue the HealthCare Alliance Plan, Sears necessarily reserves the right to modify, amend, suspend, or terminate it at any time, or to change the contribution amount required from Plan Participants.First Level Review
If your claim is denied, in whole or in part, you will receive a written explanation of the reasons for the denial and which provisions of the plan apply. The explanation will also tell you about your rights to have a review of the decision and what you must do to request the review. You will then have 60 days in which to appeal your claim in writing. The appeal should be sent to your Third Party Administrator at the address that appears on your claim form, or you may also obtain the address by calling Member Services.
When requesting a review, please state the reason you believe the claim was improperly denied and submit any appropriate data or questions. The Third Party Administrator will review the claim and its denial under the Plan provisions. You will be informed of the decision in writing, in a timely manner.
If the Third Party Administrator continues to uphold the denial and you wish to appeal the decision further, you may request a review by the Plan Administrator.
Your request for review must
• be in writing (phone call requests are not acceptable)
• include copies of pertinent bills and rejection letters, including the letter upholding the original denial, and
• state the reasons why you believe the denial was not in keeping with the Plan's provisions
[Y]ou will be notified of the outcome of the review in a timely manner. No legal action regarding a claim can be initiated until:
• you have requested a final review and a final decision has been reached on that review; or
• 60 days have lapsed since your request for final review was received by the an Administrator.
Bronson was the Plan Administrator for the Plan from February 1, 1995 through 1996, with overall responsibility for the HCA Program. (Id., ¶ 32.)
F. Mental Health and Substance Abuse Benefits
Mental health and substance abuse are classified as a separate benefit plan with HCA. (Defs.' Statement of Material Facts, ¶ 33.) These benefits do not have to be accessed through a primary care physician. (Id., ¶ 34.) The mental health benefits available under the Plan were altered effective January 1, 1994. (Id., ¶ 35.) A document entitled "Sears Benefit Update" listed the changes affecting mental health and substance abuse coverage. (Id., ¶ 35(a)(i).) In the section of the Sears Benefit Update entitled "Mental Health and Substance Abuse Changes Announced" the new provisions were as follows:
If you participate in a Sears Group Medical or HealthCare Alliance Plan, you should be aware that effective January 1, 1994, you must follow new guidelines to access mental health or substance abuse care.
To access care you must call 1-800-335-3356 to speak to a mental health specialist at PHC. This specialist will assess the situation and make the appropriate referral.
Because the care will be more closely managed, we are able to offer you expanded mental health and substance abuse benefits. Please see the chart on the next page to see the level of coverage now available to HealthCare Alliance Plan Members.
There are some changes you should note. You must comply with PHC's guidelines to receive coverage for inpatient, residential, partial hospital or intensive outpatient programs. All of this care must be accessed through a provider authorized by PHC. No other benefit is available.
(Id., ¶ 35(a)(iv).) The following statements also appear on this document, in larger, bold print:
To access mental health or substance abuse coverage you must: Call PHC at 1-800-335-3356
A PHC specialist will assess the situation and made the appropriate referral This plan replaces the current mental health/substance abuse coverage under HealthCare Alliance. If there is an emergency admission, PHC must be contacted within 48 hours.
(Id., ¶ 35(a)(v).)
Even prior to the changes to the mental health and substance abuse coverage under the Plan which became effective in 1994, the Plan required preauthorization or pre-certification for inpatient mental health and substance abuse treatment for both in-network and out-of-network benefits. (Defs.' Statement of Material Facts, ¶ 35(a)(vi).) The previous HCA plan, for in-network benefits, provided:
Mental Health and Substance Abuse Disorder
If you are planning to receive inpatient or outpatient Mental Health and Substance Abuse treatment, you must obtain pre-authorization of your treatment plan. Refer to your Member handbook for details.
(Id., ¶ 35(a)(vi)(1)). For out-of network benefits, the HCA Plan specifically provided:
Mental Health and Substance Abuse Treatment Review Program Inpatient Treatment
Whenever a non-emergency hospitalization for a mental health or substance abuse disorder is recommended, you must contact or have your attending Physician contact, at the telephone number shown on your HealthCare Alliance I.D. card, the Review Organization prior to admission certification of the hospitalization. If there is an emergency admission, you must contact the Review Organization within 48 hours of the emergency admission, excluding Saturdays, Sundays and holidays. You must call the Review Organization even if you are discharged within the 48 hours period.
The Review organization will:
• determine if an inpatient Hospital admission is medically necessary; and
• certify the initial number of days of Hospital confinement that are medically necessary;
• if necessary, periodically contact the attending Physician to certify additional days of Hospital confinement if an extended stay is recommended by the attending Physician; or
• suggest alternative treatment that may provide more appropriate care for the condition.
(Id., ¶ 35(a)(vi)(2).)
G. The Out-of-Area Dependent Plan
The Plan contained a section entitled the Out-of Area Dependents Plan. (Defs.' Statement of Material Facts, ¶ 36.) The addendum for HealthCare Alliance Eligible Out-of Area Dependents plan provides:
An Eligible Out of Area Dependents Plan has been developed to provide benefits for those dependents who live full-time and permanently outside of the eligible zip code area in which the employee resides. This Plan is available to dependents whose permanent residence is other than that of the employee due to changes in family status such as divorce or legal separation.
The Plan is not available to dependents who reside outside of the eligible zip code area on a temporary basis or for educational purposes only.
All of the provisions described in the HealthCare Alliance Summary Plan Description, including any Addenda, apply to the Eligible Out of Area Dependents Plan except as noted below:
— All references to In-Network provisions, benefits, and claims, do not apply to the Eligible Out of Area Dependents Plan.
— All references to the Network Prescription Drug Program do not apply to the Eligible Out of Area Dependents Plan.
The following Schedule of Benefits replaces the Schedule of Benefits on Pages 12-19 in the Summary Plan Description.
(Id., ¶ 37.)
The Medical Coverage Enrollment Form which Renaldi filled out described the Eligible Out| of-Area Dependents Plan as follows:
If you have dependents who live full-time and permanently out of the HealthCare Alliance Network location, please complete this section. A special medical plan has been developed to provide benefits for these dependents. Note: Eligible college students, whose permanent home is within the service area, are included in the HealthCare Alliance Plan, and should not be listed in this section. Please list them in the "Employee and Dependent Information" above.
(Defs.' Statement of Material Facts, ¶ 38.) Bronson explained at his deposition that the Out-of-Area Dependent Plan:
was designed for former spouses. dependents who did not reside in a HealthCare Alliance area on a permanent basis. It was not intended for college students, as an example. It was not intended for children who were out of the household for a temporary period of time while in college, as an example, or while visiting a relative.
(Id., ¶ 39.)
H. Pre-Existing Condition Limitation
The Summary Plan Description for the Plan states that "no benefit will be paid for In-Network or Out-of-Network Expense incurred in connection with . . . [a] Pre-Existing Condition when benefit payments with respect to such condition exceed $1000." (Defs.' Statement of Material Facts, ¶ 41.) The term "pre-existing condition" is defined in the Plan as:
An Injury or Sickness for which you or your dependents received medical Advice or Treatment during the 6 month period immediately prior to your effective date of coverage. An Injury or Sickness will no longer be a Pre-Existing Condition after you or your dependents have been covered under the Plan for twelve consecutive months.
For the purpose of this Pre-Existing Condition definition, "Medical Advice or Treatment" means:
• medical treatment or consultation;
• medical care or services; or
• taking prescribed drugs or medicines.
(Id., ¶ 42.)
I. Value Behavioral Health
Value Behavioral Health ("VBH") was responsible for administering the mental health and substance abuse benefits under the HCA Plan. (Defs.' Statement of Material Facts, ¶ 43.) Prior to VBH, Preferred Health Care (PHC) administered the mental health program under the Plan. (Id., ¶ 43(a).) PHC and VBH were in charge of the overall review and determination of appropriate mental health/substance abuse care under the Plan. (Id., ¶ 43(b).) VBH had a nationwide list of network healthcare providers with whom it had contracts. (Id., ¶ 43(c).)
Paul Benson was a clinical care manager and clinical supervisor for VBH from May 1, 1991 through October 1, 1999. (Defs.' Statement of Material Facts, ¶ 43(d).) His job duties included answering requests from parents, patients, or providers for access to mental health or substance abuse benefits, recording their information, providing referrals to in-network providers, furnishing benefit information, and answering questions. (Id., ¶ 43(d)(i)-(ii).) Benson made notes in the computer at VBH when he spoke with an employee, family member, or treating therapist. (Id., ¶ 45.) Benson was also involved in the pre-certification process. (Id., ¶ 43(d)(iii).) Sears was a corporate client of VBH, and Benson was familiar with the benefits available to Sears employees through the Plan. (Id., ¶ 43(g)(i).)
VBH and PHC contracted with various mental health and substance abuse providers. (Defs.' Statement of Material Facts, ¶ 44.) The contracted providers varied depending on the corporate client. (Id., ¶ 44(a).) Between 1995 and 1997, VBH had contracted providers in the Chicago metropolitan area for residential treatment. (Id., ¶ 44(a)-(b).)
A clinical appeal occurs when there is a non-certification finding at VBH by a peer advisor, who is either a clinical psychologist or psychiatrist. (Defs.' Statement of Material Facts, ¶ 46(a).) The peer advisors make this finding when a case is brought to them by a care manager when a question of medical necessity arises. (Id., ¶ 46 (a)(i).) After the clinical appeal, the next stage of review was handled by a mental health substance reviewer outside of VBH. (Id., ¶ 46 (b).) Benson became a part of the appeals process when the appeal was being handled by the outside reviewer. (Id., ¶ 46(b)(i).) Bronson became involved in the appeals process when the employee appealed the third party administrator's decision to the Plan Administrator. (Id., ¶ 47.) This appeal could only occur once the employee had exhausted the grievance procedure as to the third party administrator. (Id., ¶ 47(a).)
J. Renaldi's Appeal for Benefits for Jane Doe's Inpatient Treatment at RMA
Renaldi submitted his claims for benefits for his daughter's treatment at RMA and her outpatient therapy with Dr. Phillips to RMA, which, in turn, offered them to VBH. (Defs.' Statement of Material Facts, ¶ 52.) On July 25, 1995, Renaldi received a document from VBH which informed him that his claim for benefits for treatment at RMA from February 1, 1995 through May 15, 1995 had been denied. (Id., ¶ 53.) The document stated the reason for his ineligibility as: "Services not authorized are ineligible." (Id., ¶ 53(c).) Renaldi filed an appeal to VBH regarding this denial on September 8, 1995. (Id., ¶ 53(f).) On August 21, 1995, Renaldi received a second document from VBH informing him that his request for benefits for his daughter's treatment at RMA from May 16, 1995 through June 28, 1995 was denied, again because "services not authorized are ineligible." (Id., ¶ 54.) Renaldi filed another appeal letter with VBH regarding this denial of benefits, also on September 8, 1995. (Id., ¶ 54(f).)
Renaldi received a letter from Rosemary Karner at VBH on September 29, 1995, responding to his letter appealing VBH's decision. (Defs.' Statement of Material Facts, ¶ 55.) The letter related to Renaldi's appeal of the second denial of benefits for the treatment from May 16, 1995 through June 28, 1995. This letter advised Renaldi that he was not entitled to benefits due to a lack of pre-certification, and that there was no pre-certification on file for treatment on those dates. (Id., ¶ 55(b), (c).) Included with this letter were instructions on how to appeal VBH's decision, which informed Renaldi that he needed to submit an appeal to the Plan Administrator within a certain time period. (Id., ¶ 55(e).)
On October 24, 1995, Renaldi received a letter from VBH. The letter stated:
We have requested medical records from CEDU Family of Services for your daughter's admission to the Rocky Mountain Academy on February 1 through July 28, 1995. Upon receipt these records will be reviewed for medical necessity by our clinical staff, but only at the direction of the Sears Company Plan Administrator. Therefore, it is recommended that you follow the enclosed instructions to request an administrative review of our denial decision.
Please complete the enclosed Authorization to Release Information form and forward this to CEDU Family of Services in the enclosed envelope.
issue of the date was the subject of one of Defendants' motions to strike. Based upon other exhibits (see, e.g., Renaldi Dep., Ex. 15), it appears to the Court that the actual date was June 28, and that "July 28" was a typographical error.
(Defs.' Statement of Material Facts, ¶ 57(b).) On November 10, 1995, Renaldi submitted an appeal to the Plan Administrator for both claims, relating just to the inpatient benefits at RMA from February 1, 1995 through June 28, 1995. (Id., ¶ 56.)
James Bronson received Renaldi's November 10, 1995 letter, and contacted VBH for more information and reviewed the Plan documents. (Defs.' Statement of Material Facts, ¶ 58.) On January 16, 1996, Bronson denied the appeal because: 1) there was no record that any of the treatment for which the claims were filed were pre-certified, which is a condition of the HCA Plan and 2) there were no out-of network benefits available for inpatient mental health or substance abuse treatment, and neither CEDU Family of Services nor RMA were VBH contracted providers. (Id., ¶¶ 59-60.) Bronson also mentioned the issues of medical necessity and pre-existing condition in the letter because it was his understanding that Jane Doe had already been in treatment when Renaldi's coverage became effective. (Id., ¶ 59.) The letter from Bronson also stated that he strongly encouraged Renaldi to work with VBH to obtain referrals to authorized providers and facilities. (Id., ¶ 60(e).)
Renaldi responded to Bronson's letter on January 30, 1996, explaining that he was unable to follow Bronson's suggestion to work with VBH to obtain referrals to authorized providers because it would not be in his daughter's best interest to send her to another facility. (Defs.' Statement of Material Facts, ¶ 61.) He did not indicate in this letter that he had been trying to get information from VBH with respect to authorized providers, or that he was unable to obtain this information. (Id., ¶ 61(b), (c).) Bronson responded to this letter by a letter dated February 7, 1996, in which he again suggested that Renaldi should consider exploring options with VBH regarding his daughter's treatment. (Id., ¶ 62(b).) Bronson also indicated that, if VBH had paid benefits to CEDU at any time under another employer's plan, each employer's plan contracted with different network providers. (Id., ¶ 62(c).)
On February 27, 1996, Renaldi received a letter, dated February 21, 1996, from Paul Benson at VBH, which indicated it was a follow-up to a conversation he had with Renaldi on February 20, 1996. (Defs.' Statement of Material Facts, ¶ 65.) Benson advised him that he could provide referrals to in-program facilities that could provide the medically necessary treatment Jane Doe required. (Id., ¶ 65(b).) The letter also stated that Benson needed information regarding Jane Doe's treatment needs, and that he would either need to speak with her psychiatrist or primary therapist or to review her records at RMA. (Id., ¶ 65(c).) Benson's records reflect that, on March 5, 1996, he spoke to Dr. Phillips, a clinical psychiatrist who was providing treatment to Jane Doe. (Id., ¶ 66.) Benson also received from CEDU Family of Services, on March 5, 1996, a copy of Jane Doe's July 18, 1995 evaluation. (Id., ¶ 67.) Based on this, Benson wrote Renaldi a letter on June 6, 1996 which informed him that "from the clinical information . . . obtained thus far, the most current from a telephonic review with Dr. Phillips, it would appear that medical necessity does not exist for residential treatment." (Id., ¶ 68.) The letter went on to state that they had a number of contracted facilities which could provide partial hospitalization or individual and family therapists. (Id., ¶ 68(b).) The letter finally requested complete medical records from RMA and a list of communities Renaldi preferred for treatment referral options. (Id., ¶ 68(c).) Benson followed up this letter with another one dated August 15, 1996 in which he again advised Renaldi that he needed complete records from RMA. (Id., ¶ 69(c).) Benson received the medical records around September 25, 1996. (Id., ¶ 71.)
On October 9, 1996, Benson and Robert Polsky, a peer advisor at VBH, wrote a letter to Renaldi. (Defs.' Statement of Material Facts, ¶ 72.) The letter stated that VBH could not certify Jane Doe's treatment. (Id., ¶ 72(a).) The letter explained that based upon the clinical information available to Dr. Polsky, Jane Doe's symptoms did not require residential treatment, but that VBH could certify medically-necessary treatment with pre-certification in an in-network partial hospitalization program. (Id., ¶ 72(b), (c).) The letter provided a list of facilities at which Jane Doe could receive such treatment. (Id., ¶ 72(c)(i).) The letter concluded by informing Renaldi that if he wished to have the decision reconsidered, he needed to follow the enclosed instructions within thirty days. (Id., ¶ 72(d).) Attached to the October 9, 1996 letter was a document entitled Reconsideration Request Instructions, which contained instructions for the first level of appeal. (Id., ¶ 72(d)(iii).)
On October 11, 1996, Renaldi submitted a reconsideration request with VBH. (Defs.' Statement of Material Facts, ¶ 72(e).) In that request, Renaldi stated that he believed he was entitled to health care benefits for his daughter's residential care at RMA. (Id., ¶ 72 (e)(i).) Benson responded to Renaldi's letter on October 16, 1996, stating that the October 9, 1996 non-certification was based upon level of care, and not related to whether Jane Doe's treatment at RMA would be eligible, however, the letter did advise Renaldi that RMA is not a VBH facility and is not covered under Renaldi's plan. (Id., ¶ 72 (e)(ii)(1), (2).)
Shortly after October 21, 1996, Renaldi received a letter from Benson advising him that the prior non-certification determination was affirmed and that his daughter's treatment level of care could not be certified under the Plan. (Defs.' Statement of Material Facts, ¶ 73.) The letter also advised Renaldi that he could appeal the non-certification. (Id., ¶ 73(a).) On October 29, 1996, through counsel, Renaldi filed an appeal related to the non-certification, requesting VBH to reconsider the denial of benefits for RMA. (Id., ¶ 73(b).) On November 27, 1996, Peggy Gremley at VBH wrote to Mr. Renaldi's attorney, and advised that RMA was an out-of-network provider and not reimbursable regardless of whether medical necessity existed. (Id., ¶ 73(b)(i).) The letter told Renaldi that he could make a final appeal with respect to medical necessity for residential treatment level of care, but that the treatment would have to occur at an in-network facility, and requested that Renaldi advise VBH of his willingness to transfer his daughter to another facility. (Id., ¶ 73(b)(ii)(1), (2).) Renaldi did not file a final appeal with VBH as to the medical necessity issue. (Id., ¶¶ 73(c), 74.)
K. Claims for Jane Doe's Treatment with Dr. Phillips
Renaldi's claims for benefits relating to his daughter's treatment with Dr. Phillips in September and October, 1995 were denied because of his failure to pre-certify. (Defs.' Statement of Material Facts, ¶ 76.) Renaldi sent two letters to VBH on January 3, 1996 relating to his claims for benefits from Dr. Phillip's treatment, and then another letter to Bronson on February 13, 1996 advising that he had not received a response to his January 3rd letter. (Id., ¶ 76(c), (d).) Renaldi received a letter from Diane Durkin at VBH around February 12, 1996 stating that these claims were denied in error, and the VBH was recognizing a portion of the charges. (Id., ¶ 76(e)(i).) Renaldi was satisfied with the outcome of this dispute. (Id., ¶ 76(f).)
L. Evidence of a Conflict of Interest
Renaldi believes that the basis for his claim of conflict of interest is that it is in VBH's financial interest to deny claims. (Defs.' Statement of Material Facts, ¶ 79.) Renaldi is unaware of any specific conflict of interest relating to the agreement between VBH and Sears, the way VBH hires its contract care providers, or the way that VBH's performance is evaluated by Sears and the Plan. (Id., ¶¶ 80, 82, 83.)
II. DISCUSSION
Federal Rule of Civil Procedure 56 mandates the entry of summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of material fact exists for trial when, in viewing the record and all reasonable inferences drawn from it in a light most favorable to the non-moving party, a reasonable jury could return a verdict for the non-movant. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986). "A party opposing a properly supported motion for summary judgment may not rest upon mere allegation or denials of his pleading, but must set forth specific facts showing there is a genuine issue for trial." Id. at 256.
Renaldi has two claims which remain after this Court's January 25, 1999 Memorandum Opinion and Order ruling on Defendants' Motion to Dismiss: A) a claim for wrongful denial of benefits against HCA, and B) a claim for violations of notice requirements in 29 U.S.C. § 1133 against HCA, Sears, and Bronson. The Court will address each claim in turn.
A. Wrongful Denial of Benefits
Plaintiff contends that the benefits for his daughter's treatment at RMA from February 1, 1995 through June 28, 1995 were wrongfully denied by the Plan Administrator. Defendant HCA argues that there were numerous independent reasons for the denial of Renaldi's benefits: 1) Renaldi failed to pre-certify his daughter's treatment; 2) a one-year pre-existing condition limitations period applied; 3) Renaldi did not demonstrate medical necessity for in-patient treatment; and, if medical necessity did exist, the treatment had to occur at a VBH network provider, and 4) Renaldi's daughter did not qualify for the Eligible Out-of-Area Dependent Addendum. HCA also argues that Renaldi failed to exhaust his claims as to the medical necessity issue.
The threshold question the Court must address is which of two standards of review govern the case. In Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101 (1989), the Supreme Court established the standard for reviewing a plan administrator's decision. Firestone, 489 U.S. at 115. The Court held that a plan administrator's decisions are not reviewed de novo if "the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.'" Id. at 115. If the plan gives the administrator or fiduciary that type of authority, the Court is limited to determining whether the decision was arbitrary and capricious. Russo v. Health, Welfare Pension Fund, 984 F.2d 762, 765-66 (7th Cir. 1993).
In this case, the Summary Plan Description provides the Plan Administrator and other Plan fiduciaries with "[d]iscretionary authority to interpret the terms of the Plan and to determine eligibility for and entitlement to Plan benefits in accordance with the terms of the Plan." Such language satisfies the conditions for deferential review under Firestone. Accordingly, the Court must review the Committee's decision on reimbursement under the "arbitrary and capricious" standard.
Under the arbitrary and capricious standard, the Court must resolve questions of judgment in favor of the Plan. Patterson v. Caterpillar Inc., 70 F.3d 503, 505 (7th Cir. 1995). Before holding the Plan's decision arbitrary and capricious, the Court must be very confident the Plan Administrator overlooked something important or seriously erred in its interpretation and application of the provisions. Id. To convince the Court the decision was arbitrary and capricious, Renaldi must show that the Plan Administrator not only wrongly interpreted and applied the Plan's provisions, but that his interpretation and application were "downright unreasonable." Chojnacki v. Georgia-Pacific Corp., 108 F.3d 810, 816 (7th Cir. 1997). The Court's review of the Plan Administrator's decision is limited to the materials and evidence before him when he reached his decision. Trombetta v. Cragin Federal Bank For Savings Employee Stock Ownership Plan, 102 F.3d 1435, 1438 n. 1 (7th Cir. 1996).
The first factor the Court must consider in determining whether the Plan Administrator acted arbitrarily and capriciously in denying benefits to Renaldi is whether he operated under a conflict of interest. Firestone, 489 U.S. at 115. While a conflict of interest does not change the standard of review a court applies to an administrator's decision, "it will cause [the Court] to give the arbitrary and capricious standard more bite." Chojnacki, 108 F.3d at 814 (citing Donato v. Metropolitan Life Ins. Co., 19 F.3d 375, 380 n. 3 (7th Cir. 1994)). The more serious the conflict of interest, the less deference the Plan Administrator receives. Id.
Having asserted a conflict of interest in his Complaint, Renaldi's argument on this point in his Response to summary judgment is very brief, and supplies no factual basis for the existence of any conflict. Renaldi simply states that "[t]he Plan has not demonstrated a lack of conflict of interest." (Pl.'s Mem. Law Opposition to Defs.' Mot. Summ. J. at 27.) It is Renaldi's burden to establish a conflict of interest; the Plan has no affirmative burden to demonstrate a lack of one. As there is no evidence of a conflict of interest, the Court finds that none exists, and that Defendant is entitled to the full benefit of the arbitrary and capricious standard.
(1) Failure to Pre-Certify
HCA first argues that the Plan denied Renaldi's claim because there was no record that he had obtained pre-certification for the treatment as required by the Plan. Both the Summary Plan Description and the January 1994 amendments to the mental health and substance abuse coverage required that treatment be pre-certified by the Third Party Administrator. Renaldi has not provided the Court with any evidence that he pre-certified, or attempted to pre-certify, his daughter's treatment at RMA.
The Court agrees that the Plan explicitly required pre-certification. The November, 1993 Sears Benefit Update, which became effective in January of 1994, explicitly stated under the section dealing with Mental Health and Substance Abuse changes that "[t]o access care [the Plan participant) must call 1-800-335-3356 to speak to a mental health specialist at PCH." Furthennore, Renaldi admits receiving a letter titled "HealthCare Alliance Eligible Out of Area Dependent Plan" which stated that "to ensure maximum coverage of mental health or substance abuse care, call (800)335-3356," however, Renaldi does not recall calling the number. Renaldi's arguments in his Opposition Brief, (Pl.'s Mem. Law Opposition Defs.' Mot. Summ. J. at 7), that the Plan was ambiguous as to the pre-certification requirement or that it was unclear how to go about obtaining pre-certification are unavailing. The Sears Benefit Update and the letter sent to Renaldi both stated in clear terms that no mental health benefits would be available unless the beneficiary called the "1-800" number provided. The Court finds that the Plan's denial of benefits on this basis was not arbitrary and capricious.
(2) Pre-Existing Condition Limitation
A "Pre-Existing Condition" is defined under the Plan as: "An Injury or Sickness for which you or your dependents received Medical Advice or Treatment during the 6 month period prior to your effective date of coverage. An Injury or Sickness will no longer be a Pre-Existing Condition after you or your dependents have been covered under the Plan for 12 consecutive months." At the time Renaldi became a full-time employee of Sears in February, 1995 and joined the Plan, his daughter was already receiving care at RMA, and was clearly subject to the one-year pre-existing condition limitation. Therefore, his daughter's care from February 1, 1995 through June 28, 1995 could not have been covered even if Renaldi had been otherwise eligible for benefits. The Court finds that the Plan Administrator's use of this basis for denying Renaldi's claim for benefits was not arbitrary and capricious.
(3) Inpatient Residential Treatment Requires a Finding of Medical Necessity and Must Be Received from a VBH Provider
HCA argues as a third basis for denying Renaldi's claims for benefits that there was no medical necessity for inpatient, residential treatment. Even if medical necessity was established, Defendant maintains that there was no coverage for inpatient, residential treatment from an out-of network provider. On June 6, 1996, Benson wrote Renaldi a letter which informed him that, based upon the clinical information available to him, including a telephonic review with Dr. Phillips, no medical necessity existed for residential treatment of his daughter. Benson suggested in the letter that there were a number of contracted facilities which could provide partial hospitalization or individual and family therapists. The letter requested complete medical records from RMA, which Benson received on September 25, 1996. On October 9, 1996 Benson and Dr. Robert Polsky wrote a letter to Renaldi again conveying their finding that Jane Doe's symptoms did not require residential treatment, but that VBH would be able to certify medically necessary treatment at an in-network partial hospitalization program.
Renaldi argues that the list of authorized providers was kept a secret, depriving him of a description of what is covered under the Plan. There is simply no evidence that the list of providers was kept a secret from Plan participants, and Renaldi's deposition testimony provides support only for the statement that he was never given a list of providers, not that he was denied access to the list. Moreover, Renaldi indicated repeatedly in his letters to Bronson that he was unwilling to move his daughter from RMA to an in-network facility (see, e.g. Renaldi's January 30, 1996 letter), and admitted that his intention when joining the Plan was to keep his daughter at RMA regardless of whether it was covered under the Plan. Renaldi was eventually given the names of several in-network facilities which could provide partial hospitalization treatment for his daughter on October 9, 1996.
Very little admissible evidence exists upon which to evaluate VBH's determination that no medical necessity existed for residential treatment. Defendant simply submits evidence that the determination was made after examination of Jane Doe's medical records. Renaldi submitted numerous medical documents, however, this Court has previously ruled that the majority of these documents are inadmissible based upon Renaldi's failure to authenticate them. Dr. Gottlieb's September 20, 1994 letter, which was properly authenticated, states that Jane Doe would benefit from a "structured school setting" and "long term therapy." It is not apparent from this description that residential treatment would be the only option, or that VBH's suggestion that a partial hospitalization program would not also provide the same benefits. Moreover, the medical necessity determination made by VBH was undoubtedly based upon other medical documents which likely provided more insight into Jane Doe's medical situation.
Furthermore, even if VBH had found inpatient, residential treatment to be medically necessary, the Plan required that such treatment occur at an in-network facility. The November, 1993 Sears Benefit Update is clear that all inpatient, residential, partial hospitalization or intensive outpatient programs "must be accessed through a provider authorized by PCH." The Update states that: " No other benefit is available." Renaldi was urged repeatedly, by both Bronson and Benson, to work with VBH to obtain referrals to authorized providers and facilities, and he was provided with a list of VBH facilities which could provide the care needed by his daughter. Therefore, based upon this clear Plan language, the Court does not believe that this determination by the Plan regarding medical necessity and in-network mental health treatment was arbitrary and capricious.
(4) Eligible Out-of-Area Dependent Addendum
Renaldi asserts that his daughter's treatment at RMA was covered under the Out-of-Area Dependent Addendum, which "was developed to provide benefits for those dependents who live full-time and permanently outside of the eligible zip code area in which the employee resides." The Plan is meant for dependants of Plan members "whose permanent residence is other than that of the employee due to changes in family status such as divorce or legal separation." The language in the addendum is clear that it is "not available to dependents who reside outside of the eligible zip code area on a temporary basis or for educational purposes only." Renaldi argues that Jane Doe should have been eligible for this Plan since she was living out of the area at RMA.
Renaldi refers to this Court's January 25, 1999 Memorandum and Order for the proposition that the terms "temporary basis" and "full time and permanently" are ambiguous and should, therefore, be construed against the Plan. Renaldi also cites to Meredith v. Allsteel. Inc., 11 F.3d 1354. 1358 (7th Cir. 1993), in support of this theory, however, in Meredith, the court was reviewing the decision of the Plan Administrator de nova, rather than under the arbitrary and capricious standard. Because in this case, the Plan Administrator at HCA had discretionary authority to construe the Plan, this Court's review is deferential, and the Court should "accept any reasonable interpretation which [the Plan Administrator] gives a plan term." Hightshue v. AIG Life Insurance Co., 135 F.3d 1144, 1149 (7th Cir. 1998). Furthermore, this Court's January 25, 1999 Memorandum and Order simply held that it was unwilling to conclude on a motion to dismiss that the terms "temporary basis" nor "full time and permanently" are unambiguous as a matter of law, not that they were ambiguous or that the Plan Administrator did not have the discretion to interpret them.
In this case, VBH determined that Jane Doe did not qualify for the Out-of-Area Dependent Addendum. The Plan states that is it is available to dependents who live out of the area due to familial changes such as divorce or separation, which is undisputedly not the reason why Jane Doe lived in Idaho. Both Mr. and Mrs. Renaldi live within the area, and the only reason Jane Doe lived out of state was to attend RMA. Defendant argues that her residence outside of the state was temporary and that the purpose of her living out-of-state was educational, in that her parents intended her to stay there until she completed her high school education. Defendant asserts that Renaldi admitted that RMA was a short-term facility, that his daughter's visits to Illinois while she was attending RMA were "home visits," and that he listed his daughter's residence in January of 1996 as his own address in Lisle, Illinois.
The Court does not find this interpretation of the Plan to be unreasonable. In fact, if interpreted in the manner Renaldi urges, the requirement of the Out-of-Area Dependents Plan that the dependent permanently live out of the area would be easily circumvented. All the Plan participant would have to do to receive benefits for an out-of-area facility is to send his dependent to the desired out-of-network facility, and then list the facility's address as the dependent's permanent address in his request for benefits. The requirement of permanent out-of-area residence would then become a nullity. The Court finds that the Plan's determination that Jane Doe did not qualify for the Out-of-Area Dependent Addendum was not arbitrary and capricious.
5. Exhaustion of Administrative Remedies
Defendants also request that summary judgment be granted for failure to exhaust administrative remedies. Although ERISA is silent on the question of exhaustion, the Seventh Circuit has held that a district court may require a plaintiff to exhaust his administrative remedies prior to filing an ERISA claim. Robyns v. Reliance Standard Life Ins. Co., 130 F.3d 1231, 1235 (7th Cir. 1997). The decision of whether to require that the administrative remedies be exhausted prior to filing suit is solely within the discretion of the trial court. Powell v. A.T. T. Communications, Inc., 938 F.2d 823, 825 (7th Cir. 1991). "[I]mplementing the exhaustion requirement enhances the ability of plan fiduciaries to expertly and efficiently manage their plans by preventing premature judicial intervention and because fully considered actions by plan fiduciaries may assist the courts when they must resolve controversies."Id. at 826 (citing Kross v. Western Elec. Co., 797 F.2d 458, 466 (7th Cir. 1986)). "In addition, Congress's apparent intent in mandating internal claims procedures found in ERISA . . . was to minimize the number of frivolous lawsuits; promote consistent treatment of claims; provide a nonadversarial dispute resolution process; and decrease the cost and time of claims settlement." Id. (citing Kross, 701 F.2d at 1244).
In this case, Defendant claims that Renaldi failed to exhaust the issue of medical necessity, based upon his failure to make a final appeal to the Plan Administrator on the issue. The HCA Summary Plan Description states that no legal action regarding a claim can be initiated until the beneficiary has requested a final review and a final decision has been reached or sixty days have lapsed since the request for final review was received by the Plan Administrator. On November 27, 1996, Renaldi received a letter from Peggy Gremley at VBH which informed him that his daughter's care at RMA was not reimbursable since it was an out-of network provider, and that Renaldi could make a final level of appeal with respect to medical necessity for residential treatment level of care. Renaldi did not file this final appeal.
Renaldi replies to this argument by asserting that RCA's responses to his appeals violated 29 U.S.C. § 1133, and future appeals would therefore have been futile. Renaldi appears to be arguing that because medical necessity was not immediately raised in the denial notices sent to him, he was misled as to the basis for the denials which resulted in his failure to exhaust his appeals on this issue. However, the November 27, 1996 letter written to Renaldi by Peggy Gremley makes it perfectly clear that he had one more level of appeal as to the issue of medical necessity.
While the Court does believe that Renaldi had clear information that one more level of appeal was required on the issue of medical necessity, it will not grant summary judgment on this issue as an alternative basis for its ruling on wrongful denial of benefits claim. Based upon the following analysis regarding Renaldi's 29 U.S.C. § 1133 claim, the Court finds there to be some confusion in the administrative record over the progress of the appeal of the medical necessity determination. For that reason, the Court finds that Renaldi did exhaust his appeal as to medical necessity.
B. Renaldi's Claim for Failure to Provide Adequate Notice of the Reasons for Denial under 29 U.S.C. § 1133
Renaldi contends that he did not receive adequate notice of the bases for the denial of his claims against the Plan, in violation of 29 U.S.C. § 1133. In defense of this, and all claims relating to Renaldi's employment at Sears, Defendants Sears and Bronson contend that Renaldi's signing of a release and waiver now bars his bringing this action against them. HCA responds to this claim by arguing that it substantially complied with the requirements of 29 U.S.C. § 1133.
1. The Effect of the "General Release and Waiver Agreement" on Renaldi's Claims Against Sears and Bronson
Defendants Sears and Bronson claim that Renaldi's claims are barred by the release he signed when he left Sears' employ. The plain language of the "General Release and Waiver Agreement" signed by Renaldi provides:
In consideration for the benefits that I will receive under the Sears Closed Unit/Reorganization Severance Allowance Plan . . ., [I] and any person acting by, through, or under me hereby release, waive, and forever discharge Sears, Roebuck and Co., its agents, . . . [e]mployees, officers, shareholders, successors, and assigns (Sears) from any and all liability, actions, charges, causes of action, demands, damages, or claims for relief or remuneration of any kind whatsoever, whether known or unknown at this time, arising out of, or connected with, my employment with Sears and the termination of my employment, including, but not limited to, all matters in law, in equity, in contract, or in tort, or pursuant to statute, including any claim for age or other types of discrimination under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, or any other federal, state or local law or ordinance. This General Release and Waiver Agreement does not apply to any claims or rights that may arise under the Age Discrimination in Employment Act after the date that I signed this General Release and Waiver Agreement.
(Defs.' Statement of Material Facts, ¶ 18.) Sears and Bronson claim that "[a]s a matter of law, plaintiffs claim(s) for benefits under a Health Care Plan provided to Sears employees are `arising out of, or connected with plaintiffs employment with Sears.'" (Defs.' Mem. Law Supp. Mot. Summ. J. at 3.) Therefore, Defendants argue, Renaldi's claims fall under the waiver agreement, and Defendants Sears and Bronson are entitled to summary judgment on this basis alone.
Renaldi responds with several arguments. He first contends that the cases cited by Defendants, Smart v. Gillette Co., Long Term Disability Plan, 70 F.3d 173, 181 (1st Cir. 1995), and Rodriquez-Abreu v. Chase Manhattan Bank, 986 F.2d 580, 587-88 (1st Cir. 1993), are distinguishable because they each deal with releases which contain different language than the one Renaldi signed. He next maintains that because he was given leave of absence status after signing the "General Release and Waiver Agreement" and continued to work for Sears after signing the release, a new "bundle of rights and obligations" was created between Renaldi and Sears. He finally argues that Sears waived this argument by its own conduct, since it did not assert the waiver argument throughout the claims process and Renaldi's appeals. Renaldi is correct that the two cases from the First Circuit cited by Defendants are not squarely on point with the issues in the instant case, however, that has no bearing on the issue of whether this General Release and Waiver Agreement is enforceable to prevent Renaldi from bringing these claims against Sears and Bronson. Furthermore, both of Renaldi's second two arguments fail. Renaldi cites to no authority for his assertions that Renaldi's continued employment at Sears after signing the severance agreement created a new "bundle of rights," and, as Defendants pointed out in their Reply, they could not have asserted this waiver argument during the claims process since the waiver had not yet been signed at that point. Therefore, general principles of contract interpretation govern whether the General Release and Waiver Agreement is enforceable.
Both cases involve the waiver of the right to apply for ERISA benefits in conjunction with a severance agreement, rather than a waiver of the right to pursue any claim against the employer.
When interpreting a written contract, the court must initially determine whether the terms of the contract are ambiguous. Hickey v. A.E. Staley Manufacturing, 995 F.2d 1385, 1389 (7th Cir. 1993). A term is ambiguous if it is subject to more than one reasonable interpretation.Id. "Summary judgment should be entered only if the pertinent provisions of the contractual documents are unambiguous; it is the lack of ambiguity within the express terms of the contract that forecloses any genuine issues of material fact." Id. (citing Ryan v. Chromalloy American Corp., 877 F.2d 598, 602 (7th Cir. 1989)). The Court finds the terms at issue in the General Release and Waiver Agreement to be unambiguous. The Agreement clearly releases Sears and its employees from all liability, claims for relief, and causes of action arising from or connected with Renaldi's employment at Sears. Renaldi's participation in the Plan is clearly connected with his employment at Sears. Furthermore, the Agreement specifically forecloses the possibility of a claim under any federal law.
There is no indication that Renaldi did not make a knowing waiver of all claims against Sears in exchange for the benefits he received under the severance agreement. Renaldi is himself an attorney, and therefore, more sophisticated than the average person in his ability to understand the consequences of his signing the waiver. Furthermore, at the time Renaldi signed the agreement, he was already embroiled in his dispute with the Plan regarding his daughter's benefits. He obviously was aware at the time he signed the General Release and Waiver Agreement that his dispute with the Plan could lead to a lawsuit, and that awareness should have accentuated what he was giving up by signing the Agreement. Renaldi has made no argument that the terms of this Agreement do not apply to this ERISA suit or that the Agreement is otherwise invalid. He attempts, indirectly, to argue that the language is ambiguous, but does not point to where the ambiguity lies, and this Court finds the terms of the Agreement to be quite clear.
The Court finds that the language of the "General Release and Waiver Agreement" is unambiguous, and holds that, by that Agreement, Renaldi has waived his right to bring this claim against Sears and Bronson. The Court, therefore, GRANTS Sears' and Bronson's motion for summary judgment.
2. HCA's Substantial Compliance with 29 U.S.C. § 1133
Title 29 of the United States Code, Section 1133 states that every employee benefit plan shall "provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant." The statute additionally requires that every benefit plan shall "afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim." 29 C.F.R. § 2560.503-1 states that a plan administrator and an appropriate named fiduciary must provide certain information when initially denying a benefit claim and when reviewing a denial of benefits. In the Seventh Circuit, procedural violations of ERISA do not justify monetary relief absent "exceptional circumstances" such as a showing of bad faith, active concealment, or detrimental reliance. See Kreutzer v. A.O. Smith Corp., 951 F.2d 739, 743 (7th Cir. 1991). The Seventh Circuit has explained that "normally, in an action for an inadequate denial letter, the remedy is to remand the case to the administrator for a full and fair hearing of the claim . . . ." Schleibaum v. Kmart art 153 F.3d 496, 503 (7th Cir. 1998) (cert. denied, 525 U.S. 1105 (1999)). Judge Posner has explained that:
The remedy when a court or agency fails to make adequate findings or to explain its grounds adequately is to send the case back to the tribunal for further findings or explanation. This is the appropriate remedy in an ERISA case just as in a conventional appeal, unless the case is so clear cut that it would be unreasonable for the plan administrator to deny the application for benefits on any ground.Gallo v. Amoco, 102 F.3d 918, 923 (7th Cir. 1996) (cert. denied, 521 U.S. 1129 (1997)).
The regulations established under the statute require that the initial notice contain:
1) The specific reason or reasons for the denial;
2) Specific reference to pertinent plan provisions on which the denial is based;
3) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
4) Appropriate information as to the steps to be taken if the participant or beneficiary wishes to submit his or her claim for review.29 C.F.R. § 2560.503-1 (f). "These requirements insure that when a claimant appeals a denial to the plan administrator, he will be able to address the determinative issues and have a fair chance to present his case." Donato, 19 F.3d at 381 (quoting Halpin v. W.W. Grainger. Inc., 962 F.2d 685, 689 (7th Cir. 1992)).
The initial denial notices Renaldi received on July 25, 1995 and August 21, 1995 did not meet the standards set forth in the regulations. The only explanation provided for the initial denials was "services not authorized are ineligible." This does not comport with the requirement that a specific reason for the denial, including specific reference to the pertinent plan provision, be provided. These notices did, however, supply Renaldi with appropriate information on how to submit his claim for review. The letter Renaldi received from Rosemary Karner on September 25, 1995 in response to his appeal provided more information. It stated that he was not entitled to benefits due to a lack of pre-certification, however, it still did not comply with the requirements of 29 U.S.C. § 1133 by referencing the applicable Plan provision. On January 16, 1996, Renaldi received a letter from Bronson which offered more of the information required by the regulations, in that it recited the specific grounds for the denial and cited to the applicable sections in the Plan. However, the letter made no mention of the grounds of medical necessity which Renaldi was apparently pursuing simultaneously through a series of letters between himself and VBH. It also did not contain information on how to appeal this denial. However, Renaldi did file a subsequent appeal and received a final decision as to all issues excepting the medical necessity question.
The record demonstrates that there was frequent correspondence between Renaldi and VBH administrators regarding the medical necessity issue, including: Diane Durkin's letter of October 24, 1995, Durkin's letter of October 27, 1995, Renaldi's response to Durkin on November 15, 1995, Paul Benson's letter on February 21, 1996, Benson's letter on June 6, 1996, Renaldi's response to Benson on August 12, 1996, Benson's letter of August 15, 1996, Polsky and Benson's letter on October 9, 1996, Renaldi's final October 11, 1996 request for reconsideration, and Benson's final denial letter on October 21, 1996. It appears from this correspondence that the medical necessity issue was fully explored and evaluated, and that Renaldi had ample opportunity to supplement his daughter's medical record.
While this Court finds that none of these individual notices strictly complies with the requirements of § 1133, "[n]ot all procedural effects . . . will upset a fiduciary's decision." Donato, 19 F.3d at 382. Substantial compliance with the statute may be sufficient. Halpin, 962 F.2d at 689. "When the employee had all the information necessary to take hill advantage of [his] opportunity for review, and the issue is only whether the information was included in the notice itself, the notice's substantial compliance with the regulations will be acceptable."Rowell v. Life Insurance Company of North America, 1998 WL 708805, at *8 (ND. Ill. 1998). In this case, the Court believes that Renaldi received all of the necessary information, albeit in a piecemeal fashion, to successfully navigate the appeals process.
Renaldi also argues in his Response brief that the Plan did not substantially comply with the requirements of the regulations, and that he did not receive comprehensive information about the reason for the denial (in the January 16, 1996 letter) until it was too late to perfect his claim. (Pl.'s Mem. Opposition Defs.' Mot. Summ. J. at 19.) Renaldi appears to be arguing that because the one year pre-existing condition exclusion would have ended February 1, 1996, he was prejudiced by the Plan's initial failure to clearly inform him of the reasons for the denial of his claim. Renaldi contends that had he received more comprehensive information earlier, he may have been able to obtain pre-certification and establish that medical necessity existed for his daughter's residential treatment prior to February 1st. Renaldi is correct that the Plan is required to provide adequate information regarding the reason for the denial while there is still time for the claimant to perfect his claim see Schleibaum, 153 F.3d at 499, however, Renaldi misconstrues the meaning of "perfecting his claim." The phrase relates to providing sufficient information for the claimant to address the reasons for the denial in the appeals process, such that the claimant has a "realistic opportunity for review. Halpin, 962 F.2d at 693-94. Therefore, the conclusion of the one-year pre-existing condition period has no bearing on whether Defendants complied with § 1133.
Furthermore, Renaldi has not indicated what additional relevant information he would have provided to VBH which he did not have the opportunity to gather because of the Plan's initial noncompliance with the regulations. Even though Renaldi received the information from the Plan in a gradual fashion, he was eventually apprised of all of the reasons for the denial of his claim. None of the grounds for the denial, with the exception of medical necessity, required Renaldi to submit additional information. The process of evaluating medical necessity required Renaldi to provide his daughter's medical records, which he did. There is simply no indication that, but for the late notice of the grounds for denial, Renaldi would have provided information which could have changed the result of the appeals process.
Renaldi cites to the Seventh Circuit case Wolfe v. J.C. Penney Co., Inc., 710 F.2d 388 (7th Cir. 1983), in support of his assertion that an earlier explanation of the denial would have aided him in providing additional evidence in support of his claim, and the failure to provide an early explanation requires that the Plan's decision be set aside.Wolfe's holding that district court is required to remand a case to the plan administrator if new facts need to be considered was abrogated inCasey v. Uddeholm Corp., 32 F.3d 1094 (7th Cir. 1994).
The Court does not believe the Plan's technical violations of § 1133 were severe, and finds that Defendant substantially complied with the requirements of the regulations. Renaldi had sufficient information to take advantage of his opportunity for review, and was not prejudiced in his ability to present information and arguments in the appeals process. The Court GRANTS summary judgment as to Renaldi's 29 U.S.C. § 1133 claim.
III. CONCLUSION
For the reasons listed above, Defendants' Motion for Summary Judgment is GRANTED as to both Renaldi's wrongful denial of benefits claim and his 29 U.S.C. § 1133 claim.