Opinion
Case No. 02-C-1055.
March 24, 2005
MEMORANDUM AND ORDER
Presently before the court are the parties' cross-motions for partial summary judgment. These motions ask the court to determine whether defendant Network Health Plan of Wisconsin properly denied, pursuant to Exclusion KK of its Health Services Policy, coverage for certain medical expenses incurred by plaintiff Hilaria Rivera. For the following reasons, Rivera's motion will be granted and NHP's motion will be denied.
FACTS
On June 4, 2001, Rivera suffered injuries when a car driven by Matthew T. Bever hit a car driven by Tyler Buchholz. (Pl.'s PFOF ¶¶ 1-2, 4-5; Def.'s Resp. ¶¶ 1-2, 4-5.) Rivera was a passenger in Buchholz's car, which was insured by the State Farm Insurance Companies. (Pl.'s PFOF ¶ 6; Def.'s Resp. ¶ 6.) Bever's car was insured by the American Family Insurance Group. (Pl.'s PFOF ¶ 7; Def.'s Resp. ¶ 7.) At the time of the accident, Rivera was also a beneficiary under a Health Services Policy ("Policy") issued by NHP. (Pl.'s PFOF ¶ 3; Def.'s Resp. ¶ 3.)
Rivera received medical treatment following the accident from four different medical providers, including Maiman Chiropractic, an NHP network provider. (Pl.'s PFOF ¶¶ 10, 13, 22; Def.'s Resp. ¶¶ 10, 13, 22.) Buchholz's State Farm policy provided medical payments coverage with a $1,000 limit of liability. (Pl.'s PFOF ¶¶ 11-12; Def.'s Resp. ¶¶ 11-12.) State Farm paid certain of the Maiman Chiropractic charges, as well as other charges, up to its $1,000 limit of liability. This left $1,632.70 in charges unpaid. Rivera submitted these charges to NHP. (Pl.'s PFOF ¶¶ 14-15, 17; Def.'s Resp. ¶¶ 14-15, 17.) NHP refused to pay these charges because "the treatment [wa]s related to a Motor Vehicle Accident." (Pl.'s PFOF ¶ 18; Def.'s Resp. ¶ 18.)
On September 12, 2002, Rivera settled her tort claims against Bever for $7,000.20. (Pl.'s PFOF ¶ 19; Def.'s Resp. ¶ 19.) The settlement, which was funded by Bever's American Family policy, did not allocate this amount to medical expenses or to any other element of Rivera's damages. (Pl.'s PFOF ¶ 20; Def.'s Resp. ¶ 20.) Rivera's attorney, under protest, paid $1,632.70 to Maiman Chiropractic from the proceeds of the settlement. (Pl.'s PFOF ¶ 21; Def.'s Resp. ¶ 21.) Rivera subsequently brought this action under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., to recover the amount paid to Maiman Chiropractic.
Rivera's second amended complaint seeks equitable relief under 29 U.S.C. § 1132(a)(3). Rivera affirms in her reply brief that her claim under § 1132(a)(3) "is the only claim [she] has asserted." (Pl.'s Reply at 1.) It is uncertain whether Rivera can invoke § 1132(a)(3) in this case. See Buckley Dement, Inc. v. Travelers Plan Administrators of Illinois, 39 F.3d 784, 787-8 (7th Cir. 1994) (holding that plaintiff may not invoke § 1132(a)(3) when her claim is essentially one for denial of benefits that properly arises under § 1132(a)(1)). However, that question is beyond the scope of this motion for partial summary judgment.
The Policy's certificate of coverage contains the following "Exclusion KK," which provides that NHP shall not pay benefits for:
[h]ealth services for injury or sickness for which there is other non-group insurance providing medical payments or medical expense coverage, regardless of whether the coverage is primary, excess, or contingent to the Plan. If benefits subject to this provision are paid, [sic] shall exercise its Recovery Rights, as provided in Article V., Section II.
(Def.'s PFOF ¶ 5.) The parties have stipulated that their motions for partial summary judgment shall deal solely with the question of whether NHP properly denied coverage pursuant to Exclusion KK. (Stip. of July 14, 2004, Dkt. #79; Pl.'s Mot. for Partial Summ. J. on Liability; Def.'s Br. at 1.)
ANALYSIS
Summary judgment is proper 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 judgment as a matter of law. Wantz v. Experian Information Sys., 386 F.3d 829, 832 (7th Cir. 2004); Fed.R.Civ.P. 56. Summary judgment is particularly appropriate in ERISA cases in which no material facts are in dispute and the issues are of contract interpretation of the plan under federal common law rules. GCIU Employer Retirement Fund v. Chicago Tribune Co., 66 F.3d 862, 864 (7th Cir. 1995).
As an initial matter, the parties dispute whether review under 29 U.S.C. § 1132(a)(3) of NHP's decision to deny benefits is de novo or deferential. The default rule in ERISA actions is de novo review. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). However, the Policy provides that:
NHP shall have discretionary authority with respect to all decisions, determinations, interpretations and constructions made in a fiduciary capacity, specifically including, but not limited to determinations with respect to obtaining benefits, determinations of fact, benefit eligibility, coverage of benefits, benefit amount, any and all benefit claim related decisions and determinations. Health Services (HS) related determinations specifically including Medical Necessity and Appropriate Care determinations, and other decisions and determinations made under the HS program or the NHP Member Appeals process, and the interpretation and construction of Certificate terms in connection with same, all such decisions and determinations shall be made by NHP, as applicable, in its sole discretion, and shall be conclusive and binding on all parties.
(Def.'s PFOF ¶ 9.) This provision would entitle NHP to deferential review were this case brought under 29 U.S.C. § 1132(a)(1). Firestone, 489 U.S. at 115 ("[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.") Rivera and NHP disagree about the appropriate standard of review for claims under 29 U.S.C. § 1132(a)(3). See Lefler v. United Healthcare of Utah, Inc., 162 F. Supp.2d 1310, 1319 (D. Utah 2001) ("Because plaintiffs' allegations . . . implicate defendant's fiduciary responsibilities, a de novo standard of review is proper."); Jordan v. Federal Express Corp., 914 F. Supp. 1180, 1188 (W.D. Pa. 1996) ("[I]n reviewing an administrator's decision as to whether it breached its fiduciary duties to participants or beneficiaries . . . the administrator's decision is entitled to little or no deference, and plaintiff's claims are examined de novo."); Tolson v. Avondale Indus., Inc., 1997 WL 539919, at *4 (E.D. La. Aug. 29, 1997) ("Where, as here, the plan grants an administrator discretionary authority with respect to the determination of benefits . . . the Court evaluates de novo . . . claims with respect to the breach of fiduciary duty."); but see Varity Corp. v. Howe, 516 U.S. 489, 514 (1996) ("[C]haracterizing a denial of benefits as a breach of fiduciary duty does not necessarily change the standard a court would apply when reviewing the administrator's decision to deny benefits."). The court need not resolve the dispute at this juncture because it concludes that even under deferential review, NHP's interpretation of Exclusion KK cannot stand.
Deferential review requires the court to uphold NHP's denial of benefits unless that denial was arbitrary and capricious. Hightshue v. AIG Life Ins. Co., 135 F.3d 1144, 1147-49 (7th Cir. 1998). NHP's decision to deny benefits was arbitrary and capricious "if it was based on an unreasonable interpretation of plan documents or an unreasonable application of facts." Sova v. Wheaton Franciscan Services, Inc. Health and Welfare Ben. Trust, 40 F. Supp.2d 1031, 1039 (E.D. Wis. 1999). Here, the question is whether NHP properly interpreted the term "other non-group insurance providing medical payments or medical expense coverage" to include Bever's American Family policy.
The American Family policy clearly provides no "medical payments or medical expense coverage" for the health services necessitated by Rivera's accident. American Family's "Medical Expense Coverage" (Part II of the American Family policy) obligates American Family to pay "reasonable medical expenses for appropriate and necessary medical . . . services performed within one year of the accident because of an accident related bodily injury to an insured person." (Lewis Aff., Tab 1 at 3.) The AFP defines "insured person" as:
a. You or any relative while occupying, or when struck by, a highway vehicle or trailer. . . .
b. Any other person while occupying your insured car. This applies only if the car is being used by you, a relative, or another person who has reason to believe that the use is with your permission.
c. Any other person while occupying a car not owned by you if bodily injury results while it is operated by you or a relative. . . .
"You," as used in the American Family policy, means "the policyholder named in the declarations and spouse, if living in the same household." (Lewis Aff., Tab 1 at 1.) It appears that the policyholder for the American Family policy was Jana Bever, whose relationship to Matthew Bever the parties do not clarify.
(Lewis Aff., Tab 1 at 3.) Rivera is neither the policyholder nor a relative of the policyholder as per subsection (a). She was not "occupying [the policyholder's] insured car" as per subsection (b). Nor was she "occupying a car . . . operated by [the policyholder] or a relative" as per subsection (c). Rivera was therefore not an insured person eligible for American Family's medical expense coverage.
While the parties do not specify the provision under which American Family funded Bever's settlement with Rivera, it appears that it must have done so pursuant to its "Liability Coverage" (Part I of the American Family policy). American Family's liability coverage obligates it to pay "compensatory damages an insured person is legally liable for because of bodily injury . . . due to the use of a car. . . ." (Jordan Aff., Tab 1 at 2.) Rivera was not legally liable for any compensatory damages as a result of the accident. Nor was she an "insured person" as that term is defined in the liability coverage section. (Jordan Aff., Tab 1 at 2.) So even if the court's deferential review permitted NHP to read the terms "medical payments or medical expense" out of the phrase "medical payments or medical expense coverage," the court would still have to conclude that no "coverage" of any sort existed for Rivera under the American Family policy.
The cases cited by NHP do not support its interpretation of Exclusion KK. While the defendants in all four cases were ordered to reimburse the insurers for medical expenses paid by the insurers, the policy language at issue differed markedly from the language of Exclusion KK. The policy in Mid Atl. Med. Servs., Inc. v. Do, 294 F. Supp.2d 695 (D. Md. 2001), required the defendant to reimburse the insurer if she received "payment from a third party for medical expenses." Id. at 699. In Metropolitan Life Ins. Co. v. Ritz, 422 P.2d 780 (Wash. 1967), the defendants had agreed "to reimburse [the insurer] to the extent of any recovery of [medical] expenses as the result of legal action or settlement." Id. at 781. The policy in Unified Sch. Dist. No. 259 v. Sloan, 871 P.2d 861 (Kan.Ct.App. 1994), allowed the insurer to recover from the defendant when "the [defendant] recovered a judgment or settlement from the third-party for charges allowed by the Plan." Id. at 862. The policy in Health Cost Controls v. Rogers, 909 F. Supp. 537 (N.D. Ill. 1994), gave the insurer "the right to be reimbursed in the event of a recovery from the other parties." Id. at 540. By contrast, Exclusion KK makes no reference to any "recovery," "payment," judgment," or "settlement" received by Rivera. Rather, it refers to "other non-group insurance providing medical payments or medical expense coverage." No such insurance exists.
Mid Atl. Med. Servs., Inc. v. Do, 294 F. Supp.2d 695 (D. Md. 2001), illustrates the rule laid down by these cases. The defendant, Do, had coverage under a health plan administered by the plaintiff, MAMSI. The policy required Do to reimburse MAMSI if she received "payment from a third party for medical expenses." Id. at 699. Do was injured in an auto accident, and MAMSI paid $62,053 of the medical expenses she incurred as a result. Do later reached a $100,000 settlement with the driver of the vehicle that injured her. The settlement did not specifically allocate any portion of the $100,000 to Do's medical expenses. Nevertheless, MAMSI sought reimbursement for the $62,053 it had paid. The court held that "[w]here . . . an injured tort victim obtains a recovery in a manner that does not specify the nature of compensation, it may be presumed that [the] recovery is intended to cover medical expenses." Id. at 701.
CONCLUSION
The court concludes that NHP's interpretation of Exclusion KK to exclude coverage of Rivera's medical expenses was unreasonable. Denial of benefits pursuant to that interpretation was therefore arbitrary and capricious. Plaintiff's motion for summary judgment is hereby GRANTED, and defendant's motion for summary judgment is hereby DENIED.
SO ORDERED.