Opinion
Civil Action No. 04-1653 Section "C" (5).
January 4, 2005
ORDER AND REASONS
This matter is before the Court on Defendant Blue Cross/Blue Shield's ("Blue Cross") Motion for Summary Judgment to dismiss claims by Plaintiffs Jerry and Evelyn Savoie brought pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. After a thorough review of the law, the record, the Motion, and the memoranda filed in support thereof and in opposition thereto, the Court DENIES the Motion.
I. BACKGROUND
Jerry Savoie was employed by Wal-Mart, Inc. and covered under the Wal-Mart Inc. Associates' Health and Welfare Plan ("the Plan") at all relevant times during this litigation. It is undisputed that while the self-funded Plan provides medical, surgical and other benefits to its participants and beneficiaries, Blue Cross provides only administrative services. A Summary Plan Description ("SPD") is available, which contains generic procedures for appealing denial of claims. (Rec. Doc. 13, Ex. A). Under this appeals process, the claimant must request a review of the denied claim, submitted in writing to "the applicable department or committee listed under this Section within 180 calendar days of the denial." ( Id.) Furthermore, according to the SPD, the "department or committee" will conduct a review of the challenged denial and respond in writing within 60 days of the submitted request for review. ( Id.) While the SPD does not divulge more specifically which the "applicable department or committee" might accept one's request for review, it does direct the reader to a telephone number (800-248-2342) where a claimant may request review, apparently within Blue Cross.
This division is discussed in the affidavit by Jeffrey Sainsbury, custodian of records at Wal-Mart. (Rec. Doc. 13, Ex. A, ¶ 3). As is discussed below, however, Mr. Sainsbury's testimony sheds no light on what the "administrative services" offered by Blue Cross entail, the decision-making process for the payment or non-payment of claims or concrete steps a claimant should take in lodging an appeal of an adverse benefit determination.
When the undersigned called this number, she was greeted by the message "Welcome to Blue Cross Blue Shield of Alabama". It is unclear from the organization of the SPD whether this telephone number pertains to "Concurrent Claims" only (since the number appears in that subsection of the SPD), or whether it is also meant to serve Plan participants with "Post-Service Claims" since there is no separate number listed under that subsection. See SPD.
On August 22, 2002, the Doctor Same Day Surgery Center ("the Center") conducted a percutaneous discectomy on the plaintiff Jerry Savoie, for which the Center had received preapproval from Blue Cross. (Rec. Doc. 15, Ex. A). Nevertheless, on June 6, 2003, the Center billed the Savoies for the procedure, claiming that Blue Cross had rescinded the payment. This prompted the plaintiffs to challenge the nonpayment of this medical expense under the Plan.
Between October 15, 2003 and March 29, 2004, plaintiff's counsel contacted Blue Cross three times to solicit any additional internal guidelines and/or procedures for requesting review of Mr. Savoie's denied claim for payment. In correspondence on October 15 and November 25, 2003, plaintiff's counsel styled the written request as "an appeal of an adverse benefit determination." (Rec. Doc. 15, Ex. C, E). Blue Cross responded on November 12, 2003, stating that Blue Cross had "received" the request, with an explanation for the denial of benefits. (Rec. Doc. 15, Ex. D). Blue Cross responded similarly in its March 2004 correspondence, denying reconsideration of coverage. (Rec. Doc. 15, Ex. F). At no point did Blue Cross indicate that it was not the proper party with which to lodge an appeal.
As a basis for denial, Blue Cross stated that it did not cover "investigational" procedures. (Rec. Doc. 15, Ex. F).
The defendant Blue Cross now moves for summary judgment on the following grounds: (1) As a provider of administrative services only, and not medical benefits, Blue Cross alleges that it cannot be properly sued for payment of claims under 29 U.S.C. § 1132(a)(1)(B). (2) In the alternative, it is alleged that the plaintiffs should be precluded from asserting ERISA claims against the defendants because they failed to exhaust administrative remedies.
II. STANDARD OF REVIEW
A district court can grant a motion for summary judgment only when 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 that the moving party is entitled to a judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed.R.Civ.P. 56 (c)). When considering a motion for summary judgment, the district court "will review the facts drawing all inferences most favorable to the party opposing the motion." Reid v. State Farm Mut. Auto. Ins. Co., 784 F.2d 577, 578 (5th Cir. 1986). The court must find "[a] factual dispute . . . [to be] `genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party . . . [and a] fact . . . [to be] `material' if it might affect the outcome of the suit under the governing substantive law." Beck v. Somerset Techs., Inc., 882 F.2d 993, 996 (5th Cir. 1989) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the nonmoving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial." Engstrom v. First Nat'l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995) (internal citations omitted).
III. LAW AND ANALYSIS
A. Blue Cross as Proper Party
As a provider of administrative services only, and not medical benefits, Blue Cross argues that it cannot be properly sued for payment of claims under ERISA, which in pertinent part provides that "a civil action may be brought by a participant or beneficiary to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132 (a)(1)(B). The defendant relies on Ninth Circuit authority, that a money judgment against an employee welfare benefit plan may be enforceable only against the plan as an entity. (Rec. Doc. 17 at 2). The plaintiff responds that there are genuine issues of material fact regarding which party under the Plan is responsible for denying claims and processing appeals. The plaintiffs also assert that technical compliance with § 1132 (a)(1)(B) can be achieved through amending their Complaint to add Wal-Mart as a party, which sponsors the Plan.
See, e.g., Gibson v. Prudential Ins. Co. 915 F.2d 414, 417 (9th Cir. 1990) (holding that Congress intended ERISA to preempt claims that relate to an employee benefit plan even if the defendant is a nonfiduciary); Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324-25 (9th Cir. 1985) (finding ERISA permits suits to recover benefits only against the Plan as an entity under §§ 1132(a)(1)(B) and 1132(d), and suits for breach of fiduciary duty against a fiduciary under §§ 1109(a) and 1105(a)).
On November, 23, 2004, Wal-Mart was added as a party in the plaintiff's second Amended Complaint. (Rec. Doc. 22).
The Court finds that there are genuine issues of material fact regarding which entity is required to accept and review a claimant's administrative appeal. It is clear that plaintiff's counsel attempted to resolve the matter through Blue Cross, and that Blue Cross representative Nancy Lawrence informed the plaintiffs that she had "received [Mr. Savoie's] request for review" and "for reconsideration of coverage." (Rec. Doc. 15, Ex. D, F). Blue Cross was thus on notice by October 2003 that the plaintiffs were seeking in good faith to initiate an administrative appeal. Likewise, the Lawrence correspondence appears to indicate that Blue Cross treated the appeal substantively and provided an explanation of the denial of benefits. In asserting that Blue Cross was not responsible for the matter, the defendant offers the Sainsbury affidavit to explain the technical division of duties between Wal-Mart as provider of medical benefits through the Plan and Blue Cross as provider of "administrative services." (Rec. Doc. 13, Ex. A). But this division sheds no light on the actual decision-making process for the payment or non-payment of claims or for accepting appeals. Contrary to the defendant's position, in fact, the SPD appears to indicate, through the listed telephone number, that claimants should direct their requests for review to a department or committee within Blue Cross of Alabama. See Order and Reasons, supra, at 2 n. 2. Therefore, genuine issues of material fact remain with respect to the identity of the responsible entity — Wal-Mart or Blue Cross — for processing requests for review of claim denials.
In light of these facts, Blue Cross appears to play at minimum some fiduciary role in the processing of appeals under the ERISA definition. Any outstanding fact issues, as described above, thus also affect the extent to which Blue Cross may have breached it's fiduciary duties in its role as provider of "administrative services." ERISA permits suits against a fiduciary of an employee benefit plan. See Landry v. Air Line Pilots Ass'n Int'l, 901 F.2d 404, 417-418 (5th Cir. 1990) (following Gelardi, 761 F.2d at 1324-25). It thus may be implicated here as a fiduciary even if it is technically distinct from the "plan entity."
ERISA defines a fiduciary of a Plan as anyone who "exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets . . . [or] has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C. § 1002(21)(A).
In their First Amended Complaint, plaintiffs allege "all rights, claims, causes of action allowed by Federal law including but not limited to claims and causes of action [under] . . . ERISA." (Rec. Doc. 9). These omnibus allegations could include claims for benefits and fiduciary breach.
Accordingly, the Court cannot dismiss Blue Cross as a party to the action on summary judgment.
B. Plaintiff's Attempted Exhaustion of Administrative Remedies
The Fifth Circuit requires generally that an ERISA plaintiff first exhaust administrative remedies prior to filing suit in federal court. Chailland v. Brown Root, 45 F.3d 947, 950 (5th Cir. 1995). See also Denton v. First Nat'l Bank of Waco, 765 F.2d 1295, 1300 (5th Cir. 1985) (stating that policies behind the exhaustion requirement include safeguarding Congress's intent that ERISA trustees, and not the federal courts, be responsible for the actions of plan administrators). Courts also recognize, however, that this affirmative defense is viable only when attempts to exhaust administrative remedies would not be futile. See Hall v. National Gypsum Co., 105 F.3d 225, 232 (5th Cir. 1997). As a general rule, futility may be shown only when the plan administrator is hostile or biased against the claimant. See Bourgeois v. Pension Plan for the Emples. of Santa Fe Int'l Corps., 215 F.3d 475, 479 (5th Cir. 2000) (citing also the stricter standard requiring the claimant to show a "`certainty of an adverse decision'" to warrant futility exception) (quoting Communications Workers of America v. ATT, 40 F.3d 426, 433 (D.C. Cir. 1994)).
The factual scenarios of Fifth Circuit precedents provide the Court with guidance in considering the Savoies' futility argument here. In Denton, the Fifth Circuit rejected the claimant's futility argument where he contended that the benefits review committee was the same committee which initially denied his claim, without a showing of bias or hostility. Denton, 765 F.2d at 1300. In Meza v. General Battery Corp., 908 F.2d 1262, 1278 (5th Cir. 1990), the court was unpersuaded where the plaintiff argued that he should not be required to exhaust administrative remedies because the defendants never provided him with a copy of the plan description or other notice of available appeals procedures. In Bourgeois, a verbal indication that the defendant intended to deny benefits similarly did not rise to the level of adversity necessary to warrant a finding of futility. Bourgeois, 215 F.3d at 480.
Here, the Court finds that the plaintiff's claim of futility is distinguishable from the aforementioned cases. The facts taken in a light most favorable to the plaintiff indicate that between October 15, 2003 and March 29, 2004 plaintiff's counsel repeatedly sought clarification as to the procedures for challenging a denial of payment for the plaintiff's surgical procedure. The facts further indicate that the defendant failed to respond to these requests, accept to note on November 12, 2003 that Blue Cross "had received [the] request for review of the . . . treatment," (Rec. Doc. 15, Ex. D), and in March 2003 that it had received request for reconsideration of coverage. ( Id., Ex. F). As discussed above, the SPD appears to indicate that Blue Cross is the proper entity to contact when seeking review of a denied claim. While Blue Cross in its November 12th response might have corrected the plaintiffs and directed them to the "applicable department or committee" within Wal-Mart (as ultimate authority under the Plan), Blue Cross failed to clarify the process altogether. Even when notified a second and third time, no clarification was forthcoming. In fact, Blue Cross was not spurred into action until suit was filed.
It may be true that only Wal-Mart, as sponsor of the Plan, may be the entity to ultimately authorize the payment or non-payment of a medical benefit. However, the issue here concerns the appropriate place and manner for processing an administrative appeal, which, from all reasonable indicators, is Blue Cross.
Under the guidelines for "Post-Service Claims", the applicable "department or committee" must conduct a review of an adverse benefit determination and notify the claimant in writing within sixty days ( i.e. by December 15, 2004 in this case). See SPD. As discussed above, as far as plaintiff's could reasonably discern, Blue Cross was the proper entity to receive the request for review. Yet Blue Cross did not clarify the review process, but rather substantively denied Mr. Savoie's appeal after both an initial inquiry and later upon reconsideration. Unlike Denton, the plaintiff here took repeated affirmative action to seek administrative appeal. Moreover, unlike Meza, the plaintiff sought not merely a copy of the SPD with review procedures. Rather, the plaintiffs submitted a series of written appeals, over a 5-month period, with acknowledgment of receipt of the initial appeal in the November 12th Blue Cross letter. Therefore, the Court deems the plaintiffs' October 15, 2003 correspondence seeking review to have been made in good faith, reasonably designed to commence the appeals process. Absent a clarificatory response, Blue Cross is now estopped from denying that it is not the proper entity through which one might at least initiate the administrative appeals process.
To find otherwise would effectively deny the plaintiffs administrative review elsewhere under the Plan. Unlike in Bourgeois where the plaintiff had only a preliminary verbal indication of the defendant's intent to the deny claim on review, Blue Cross's stonewalling foreclosed any meaningful opportunity to lodge a more formal appeal within the requisite 180-day period (assuming Blue Cross was not the proper entity). The Center notified the plaintiffs on June 6, 2003 that Mr. Savoie's insurer (apparently Blue Cross) had rescinded payment of the surgery. (Rec. Doc. 15, Ex. B). With this notification, the plaintiffs had until approximately December 6, 2003 to seek an administrative remedy. Given this time frame, it is understandable that plaintiff's counsel was eager to obtain clarification in his October-November correspondence as to any "internal guidelines" for requesting review of the adverse benefit determination. Failure to timely file for administrative relief would result in waiver of plaintiffs' claims. See SPD. Therefore, if Blue Cross was indeed the wrong entity through which to seek administrative review, its dilatory conduct prevented the plaintiff from properly seeking review elsewhere.
The Court notes there remains some ambiguity which entity — Wal-Mart under the Plan or Blue Cross as provider of "administrative services" — is the "insurer" for these purposes.
In light of the estoppel effect of the November 12th acknowledgment of receipt, the failure to clarify the appeals process, the apparent denial of the appeal on the merits and again on reconsideration, and the effective denial of any meaningful opportunity to seek administrative review elsewhere due to Blue Cross's dilatory conduct, the Court holds that exhaustion of administrative remedies has been satisfied, and in the alternative, that a more formal appeals process would be futile.
IV. CONCLUSION
The Court holds that genuine issues of material fact remain with respect to the identity of the responsible entity for processing requests for review of claim denials under the Plan. Moreover, exhaustion of administrative remedies is either complete or would be futile in light of the estoppel effect of the November 12th acknowledgment of receipt and the failure to clarify the appeals process thereafter.
Accordingly, IT IS ORDERED that Defendant Blue Cross's Motion for Summary Judgment be DENIED.