Healthcare Providers' Right to Sue Under ERISA is Derivative, Limited in Scope, and Narrowly Construed
Under ERISA's civil enforcement provision, 29 U.S.C. § 1132(a)(1), only two categories of persons may sue directly to recover benefits due them under the terms of an ERISA-governed plan, or to enforce their rights under the plan, or to clarify their rights to future benefits under the plan. Those persons are plan participants and plan beneficiaries.
Healthcare providers seeking to recover benefits under an ERISA-governed plan generally do not claim to be plan participants. See, e.g., Penn. Chiropractic Ass'n v. Indep. Hosp. Indem. Plan, Inc., 802 F.3d 926, 928 (7th Cir. 2015) (chiropractors conceded they are not "participants"). Rather, they claim to be plan beneficiaries. Id.
A "beneficiary," as defined in ERISA, is "a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder." 29 U.S.C. § 1002(8).
The circuit courts have long rejected the argument that healthcare providers are plan beneficiaries and continue to do so, thereby precluding such providers from bringing direct actions to recover benefits under ERISA. Hobbs v. Blue Cross Blue Shield of Ala., 276 F.3d 1236, 1241 (11th Cir. 2001).
Healthcare providers are "not ‘beneficiaries' of an ERISA welfare plan by virtue of their in-network status," or their provider agreements. Rojas v. Cigna Health and Life Ins. Co., 793 F.3d 253, 259 (2d Cir. 2015); Penn. Chiropractic Ass'n, 802 F.3d at 929.
"The fact that [a healthcare provider] may be entitled to payment from [an insurer] as a result of her clients' participation in an employee plan does not make her a beneficiary for the purpose of ERISA standing." Brown v. BlueCross BlueShield of Tenn., Inc., 827 F.3d 543, 545-46 (6th Cir. 2016), citing Rojas, 793 F.3d at 257 (plan provision entitling healthcare providers to receive payments directly from the insurer "does not a beneficiary make"); Grasso Enter., LLC v. Express Scripts, Inc., 809 F.3d 1033, 1040 (8th Cir. 2016) (citing Rojas, but stating "[t]he issue … is not whether [the health care providers] have standing but whether their claim comes within the zone of interests regulated by [ERISA]").
Nonetheless, "a healthcare provider may acquire derivative standing to sue under ERISA by obtaining a written assignment from a ‘participant' or ‘beneficiary' of his right to payment of medical benefits." Conn. State Dental Ass'n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1347 (11th Cir. 2009); New Jersey Brain and Spine Ctr. v. Aetna, Inc., 801 F.3d 369, 373 (3d Cir. 2015); Spinedex Physical Therapy, USA, Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1289 (9th Cir. 2014), cert. denied, 136 S. Ct. 317 (2015).
"A healthcare provider-assignee ‘stands in the shoes of the beneficiary,' and can only assert claims that could have been brought by the patients themselves." Brown, 2016 WL 3606686, at *4; see also City of Hope Nat'l Med. Ctr. v. HealthPlus, 156 F.3d 223, 227-28 (1st Cir. 1998). Claims that implicate coverage and the right to recover benefits under a plan, often characterized as "right to payment" claims, are properly assignable to a healthcare provider. Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 325 (2d Cir. 2011); see, e.g., CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165 (3d Cir. 2014).
But plan participants and beneficiaries cannot assign "amount of payment" claims. For example, "claims regarding the computation of contract payments or the correct execution of such payments" cannot be assigned to a healthcare provider because those "are typically construed as independent contractual obligations between the provider and ... the benefit plan." Montefiore, 642 F.3d at 331. See, e.g., Brown, 543 F.3d at 548; Merrick v. United Health Group Inc., 127 F. Supp. 3d 138, 150 (S.D.N.Y. 2015) (same). Such claims are properly the subject of a breach of contract action, not an ERISA action. CardioNet, 751 F.3d at 177-78
Anti-assignment clauses in ERISA plans are valid and enforceable. Physicians Multispecialty Group v. Health Care Plan of Horton Homes, Inc., 371 F.3d 1291, 1295 (11th Cir.), cert. denied, 543 U.S. 1002 (2004).
If a valid and enforceable assignment of a claim for payment of benefits has been made, the court will assess the scope of the assignment by applying rules of contract construction. See, e.g., Griffin v. Suntrust Bank, Inc., 2016 WL 1657973, at *4 (11th Cir. Apr. 27, 2016) ("Nothing in an assignment of benefits transfers the patient's right to bring a cause of action for breach of fiduciary duty, to seek statutory penalties for failure to provide plan documents, or to seek equitable relief to redress a practice that violates ERISA or the terms of the Plan."); Rojas, 793 F.3d at 258-59 ("By expressly assigning only their right to payment, [the] patients did not also assign any other claims they have under ERISA," including an ERISA anti-retaliation claim); Montefiore Med. Ctr. v. Local 272 Welfare Fund, 2015 WL 7970026, at *3 (S.D.N.Y. Oct. 19, 2015) (assignment of patients' rights to "monies and/or benefits ... to cover the costs of care and treatment" did not include patients' rights to seek injunctive or other equitable relief under ERISA), order adopting report and recommendation of magistrate, 2015 WL 8073909 (S.D.N.Y. Dec. 4, 2015).
Penalty for Failure to Provide Plan Documents Cannot Be Claimed for First Time in Summary Judgment Brief
Juan v. Minnesota Life Ins. Co. | 2016 WL 1169576 (N.D. Ga. Mar. 25, 2016)
Ms. Juan's husband, a native of Guatemala, was employed in Georgia. He participated in an ERISA plan sponsored by his employer, Shaw Industries, a company associated with Berkshire Hathaway. The plan provided a basic life insurance benefit of $30,000 and a basic accidental death insurance benefit of $30,000 under a group insurance policy issued by Minnesota Life. The policy was delivered to Berkshire Hathaway, as group policyholder, in Nebraska.
Ms. Juan's husband was murdered in Guatemala while visiting his wife, who was a resident and citizen of Guatemala. Although her husband had not designated a beneficiary, Ms. Juan was the default beneficiary under the terms of the group policy.
Shaw Industries reported the death to Minnesota Life, which began an extended effort to obtain a certified death certificate and other documents. Minnesota Life repeatedly asked Ms. Juan's attorney to provide a completed Form W-8BEN, an Internal Revenue Form needed for the payment of benefits to a foreign national. Instead of providing the form, the attorney sued Minnesota Life, alleging breach of contract. In an amended complaint, Ms. Juan sought to recover a daily penalty from Shaw Industries under 29 U.S.C. § 1132(c)(1), alleging that the employer had failed to provide plan documents upon request.
A few weeks after the complaint was filed, Ms. Juan's attorney provided a signed Form W-8BEN. Minnesota Life paid the life insurance and accidental death insurance benefits, with interest computed at 6% per annum. The group policy provided that interest would be paid "at an annual rate determined by [Minnesota Life], but never less than 4% per year." Ms. Juan then contended that additional interest was owed under a Georgia statute.
Ms. Juan filed a motion for summary judgment, alleging for the first time that Minnesota Life was a de facto plan administrator, and that it also was liable for a penalty under 29 U.S.C. § 1132(c)(1) for failure to provide plan documents. Minnesota Life and Shaw Industries filed cross-motions for summary judgment. Their motions were granted, and Ms. Juan's motion was denied.
The court rejected as untimely Ms. Juan's claim to recover a penalty from Minnesota Life for the alleged failure to provide plan documents stating, "At the summary judgment stage, the proper procedure for plaintiff to assert a new claim is to amend the complaint in accordance with Federal Rule of Civil Procedure 15(a). Plaintiff has failed to properly assert any such new claim, and as a result, Minnesota Life is not liable for an ERISA penalty."
The court also held that Minnesota Life was the claims administrator, not the plan administrator, as defined by ERISA. "Because Minnesota Life was not the plan administrator ...," the court said, "it cannot be liable for the penalty, even if it had received a request for plan documents."
Finally, the court rejected Ms. Juan's claim that a Georgia interest statute applied and held that the right to recover interest on the death benefits was governed by the law of Nebraska, where the group policy was delivered. Because Nebraska law required interest at a rate less than the minimum rate of 4% required by the policy, Minnesota Life had already paid all interest that could be due under the policy, the court said.
Regarding the claim for a penalty against Shaw Industries, the court noted that when Ms. Juan's attorney requested information, a representative of Shaw Industries responded promptly, asking for an executed release from her husband's estate. However, Ms. Juan's attorney "did not respond with the requested information or in any way at all."
Because the obligation to provide plan documents is triggered "upon written request of any participant or beneficiary," 29 U.S.C. $ 1024(b)(4), the court held that a plan administrator is not required to provide documents to a third party unless authorized in writing by the participant or beneficiary to do so. "While a plan administrator may be penalized for ignoring a request for information," the court said, "Shaw Industries quickly responded in an attempt to obtain the estate's consent. In so doing, Shaw Industries acted consistently with ERISA."
Claim for Life Insurance Benefit Barred by Failure to Exhaust Administrative Remedies
Lopez v. Reliance Standard Life Ins. Co. | 2016 WL 3191242 (W.D.N.C. June 3, 2016)
Lopez submitted a claim for life insurance benefits to Reliance Standard arising out of the death of Ricardo Galarza. At the time of his death, Galarza was insured under a group life insurance policy issued by Reliance Standard to his employer, RSI Home Products, to fund benefits under an employee welfare benefit plan.
Reliance Standard denied Lopez's claim because of discrepancies in the name, age, and marital status of Galarza and the person identified on the death certificate submitted by Lopez.
The denial letter, dated April 30, 2013, informed Lopez that she could request a review of the claim determination within 60 days. The letter further informed Lopez that "failure to request a review within the 60 days ... may constitute a failure to exhaust the administrative remedies available under [ERISA] and may affect your ability to bring a civil action under [ERISA]."
Lopez did not seek a review of the claim determination within 60 days of receiving the letter. In August 2014, Reliance Standard received a letter from counsel for Lopez requesting a review. Reliance Standard declined to consider that letter and notified Lopez and her attorney that its denial of coverage had become final.
Lopez filed a breach of contract claim in state court, and Reliance Standard removed the case to federal court. Reliance Standard then moved for judgment on the pleadings, arguing that the complaint should be dismissed because Lopez had failed to exhaust administrative remedies available to her under the plan and ERISA. The court converted the motion to one for summary judgment and granted the motion.
The court first determined that Lopez's breach of contract claim was preempted by section 502(a) of ERISA, 29 U.S.C. § 1132(a), such that it had jurisdiction over the claim. Next, the court held that Lopez's claim was barred by her failure to exhaust administrative remedies: "While ERISA does not contain an explicit exhaustion provision, an ERISA welfare benefit plan participant must, nevertheless, both pursue and exhaust plan remedies before gaining access to the federal courts," the court said. Accordingly, summary judgment was granted for Reliance Standard.
Statute Barring Defense Based on Application Does Not Prevent Insurer from Relying on Policy Exclusion
Russell v. Gill | 2016 WL 1452494 (S.C. App. Apr. 13, 2016)
This case involves an intoxication exclusion in an individual disability policy. Russell applied to Penn Life for the policy in 1999. The policy was issued with an intoxication exclusion, providing that Penn Life would "not be liable for any loss which result[ed] from [the insured] being: (1) intoxicated; or (2) under the influence of any narcotic unless taken on the advice of a Physician."
In 2002, Russell increased his monthly disability benefit, and he received a receipt with similar language. Neither party disputed that the policy contained the intoxication exclusion.
In 2008, Russell was injured in a motorcycle accident and was issued a citation for driving under the influence. He applied for disability benefits under the policy, which Penn Life paid until it learned that alcohol may have been a factor in the accident.
Russell filed suit, alleging bad faith refusal to pay first-party benefits, breach of contract to procure insurance, and breach of contract. Penn Life filed a counterclaim for declaratory judgment that Russell's loss was not covered because of the intoxication exclusion.
The South Carolina Circuit Court held that a statute, S.C Code § 38–71–30, prevented Penn Life from enforcing the intoxication exclusion, because its proof of delivery of the policy was insufficient. That statute provides:
"Every insurer doing accident or health insurance business in the State shall deliver with each policy of insurance issued by it a copy of the application made by the insured so that the whole contract appears in the application and policy of insurance. If the insurer violates this requirement, no defense is allowed to the policy on account of anything contained in or omitted from the application. If the insurance policy is issued upon an oral application, no defense is allowed to the policy on account of anything contained in or omitted from the oral application."
On appeal, the South Carolina Court of Appeals reversed, finding that a violation of the statute only prohibits an insurer's use of any defense "on account of anything contained in or omitted from the application." The statute does not bar an insurer from asserting defenses based on the terms of the policy itself.
Because the intoxication exclusion was contained within the policy, rather than within the application, the Court of Appeals held that § 38–71–30 did not prohibit Penn Life from enforcing the exclusion.
Court Denies Dismissal of Complaint Against Potential Plan Administrator
Haysman v. Metropolitan Life Ins. Co., 2016 WL 1305360 (S.D. Ga. Mar. 28, 2016)
Haysman purchased life insurance as part of an ERISA plan established by his employer, Patcomp Inc. After Haysman's death and the denial of his beneficiaries' claim for death benefits, plaintiffs brought suit under ERISA against MetLife, which issued the coverage, and an entity called Bill Lucas & Associates, Inc. (BLA), described by plaintiffs as being "actively engaged in soliciting, enrolling, and servicing the Employee Benefit Plan of Patcomp and its employees."
The complaint alleged that BLA was "the agent and representative of Defendant Patcomp in the administration and carrying out of the employee benefit plan and acted on behalf of the Plan Administrator in carrying out the requirements of the plan." Finally, the complaint asserted that BLA "advis[ed] employees of Patcomp on all aspects of said benefit plans, including determinations of eligibility for benefits."
BLA moved to dismiss the complaint, asserting that it was "utterly devoid of any contention that [BLA] is a plan administrator or fiduciary subject to liability as an ERISA entity." Plaintiffs argued that they had "properly alleged that Defendant BLA was a ‘de facto Plan Administrator with control over the employee benefits program of Patcomp.'"
The court denied the motion to dismiss, concluding that plaintiffs had "sufficiently alleged that Defendant BLA is a plan administrator." Among the allegations, the court noted, was the "contention that Defendant BLA was somehow involved in determining whether individuals were eligible for plan benefits." According to the court, "[t]his type of activity would render Defendant BLA a plan administrator and subject to suit under ERISA for the improper denial of benefits."
The court acknowledged that "it very well may be that Defendant BLA does not qualify as a plan administrator." At this early stage of the litigation, however, only a "short and plain statement" of the claim showing entitlement to relief was required.
ERISA Denial of Benefits Affirmed, Despite Award of SSDI Benefits
Sobh v. Hartford Life and Accident Ins. Co. | 2016 WL 3564380 (11th Cir. July 1, 2016)
Sobh, a former employee of JPMorgan Chase Bank, sued to recover long term disability benefits under his employer's ERISA plan after his claim was denied under the "any occupation" standard. The denial of benefits was based in part on a surveillance video, described as reflecting no impairment, and the opinion of an independent medical examiner that Sobh was capable of employment that allowed for frequent positional changes.
Hartford acknowledged that Sobh had been awarded Social Security disability benefits, but according to the court, the company "explained why Hartford reached a different conclusion than the Social Security Administration regarding disability benefits." During the administrative review of the claim denial, Hartford noted that the definition of disability in the plan was different from that utilized by Social Security, and that Hartford had reviewed "key evidence" that was not considered by the Social Security Administration, including the surveillance material and the opinion of the treating physician that Sobh could "perform full-time sedentary work."
The trial court granted summary judgment in favor of Hartford, and Sobh appealed. Affirming the trial court's ruling, the Eleventh Circuit noted that its decision was not altered by the decision of the Social Security Administration. First, the court wrote, the determination of disability under the plan differed significantly from the "framework" utilized by the Social Security Administration. In a footnote, the court elaborated that "[u]nlike ERISA claim administrators, whose disability assessments are governed by plan documents, the Social Security Administration employs a highly particularized, five-step ‘sequential evaluation process' prescribed by regulations."
Moreover, "the circumstances that caused Hartford to conclude that Sobh was no longer disabled did not occur until two years after the Social Security Administration's determination."
Specifically, the court noted, the "Social Security Administration did not have before it at the time it made its disability determination, the surveillance video recordings or Sobh's treating physician's opinion that Sobh was able to perform sedentary work." As a result, the earlier Social Security determination was "of little consequence."
"Right of Payment" versus "Rate of Payment" Distinction Irrelevant for Out-of-Network Case
Alliance Med, LLC v. Blue Cross and Blue Shield of Ga., Inc. | 2016 WL 3208077 (N.D. Ga. June 10, 2016)
A group of medical providers brought suit in state court against Blue Cross, which removed the case to federal court. Following removal, the providers amended their complaint to set out certain state law claims for misrepresentation, fraud, and unfair trade practices. The providers admitted that some of the insurance agreements at issue constituted ERISA plans.
Nonetheless, the providers moved to remand the case to state court. The issue was whether the state law claims were subject to complete preemption by ERISA and therefore supported federal question removal jurisdiction.
The court noted that the gravamen of the claims was "the difference between the rates paid to out-of-network providers and the representations made to the employers that purchased policies from Defendants." The court concluded that these claims "were directly related to the terms of the plans themselves."
The providers relied on the distinction between "rate of payment" cases and "right of payment" cases. Cases addressing the former issue are sometimes determined not to be removable to federal court, because the amount of payment (versus the right to payment) may be dependent upon the terms of provider contracts, rather than the terms of the plan itself.
The court, however, determined that this distinction "is irrelevant in cases involving out-of-network providers because a ‘rate of payment' dispute is governed by the provider agreement." Here, the providers were not "in-network providers and thus do not hold a provider agreement with Defendants."
The court also concluded that resolution of the claims would "necessarily require examining the contract between Defendants and Plaintiff's patients." In addition, it "would be difficult, if not impossible, to determine the amount of damages without considering the plan documents."
The court denied the motion to remand. The court further concluded that it could exercise supplemental jurisdiction under 28 U.S.C. § 1367 as to state law claims that were not preempted by ERISA, because they arose out of the "same common nucleus of operative fact."
One-Year Contractual Limitation Provision Bars Claim for Death Benefits under ERISA Plan
Webb was a participant in an ERISA-governed plan sponsored by his employer, Adobe. He was insured under a group policy issued by Liberty, providing basic and optional life and accidental death insurance benefits. On December 27, 2013, Mr. Webb died from a self-inflicted gunshot wound to the head.
By December 31, 2013, Adobe provided Liberty with the information it was required to submit and noted that the cause of Webb's death was a "possible suicide." On January 24, 2014, Liberty received Mrs. Webb's completed claim form and the death certificate, which stated that the cause of death was suicide.
On January 27, 2014, Liberty paid the basic life benefit to Mrs. Webb but denied the other benefits based on suicide exclusions. On March 26, 2014, Mrs. Webb, through an attorney, appealed the claim decision and provided additional proof. On June 23, 2014, Liberty upheld its decision.
Mrs. Webb filed suit on June 12, 2015. Liberty moved for summary judgment based on the contractual limitations provision.
Under the group policy, a legal action could not be commenced "more than one year after the time Proof of claim is required." The "proof of claim" provision stated: "Satisfactory Proof of loss must be given to Liberty no later than 30 days after the date of loss. Failure to furnish such Proof within such time shall not invalidate or reduce any claim if it was not reasonably possible to furnish such Proof within such time. Such Proof must be furnished as soon as reasonably possible, and in no event, except in the absence of legal capacity of the claimant, later than one year from the time Proof is otherwise required."
Citing Harrison v. Liberty Life Assurance Co. of Boston, 2011 WL 2118954, at *2 (N.D. Fla. May 27, 2011), the court construed the contractual limitation provision to mean that a legal action could not be filed "more than one year plus 30 days from the date of loss," unless it was not "reasonably possible" for the claimant to submit proof within 30 days of the date of loss, in which case the legal action could not be filed more than two years plus 30 days from the date of loss.
Because Mrs. Webb could, and did, submit the required proof of loss within 30 days of the loss, the court concluded the applicable limitations period was one year and 30 days from the date of loss, or January 27, 2015. Mrs. Webb did not file suit until June 12, 2015. The court found "no reason not to enforce the contractual limitations period" and granted judgment in favor of Liberty.
ERISA Preempts State Community Property Law in Interpleader Action
Companion Life Ins. Co. v. McCreary, 2016 WL 3090649 (D.S.C. May 9, 2016)
Companion Life issued a group life insurance policy, insuring employees of The Society of St. Vincent de Paul as part of an employee welfare benefit plan. Rodney Moore, an employee of The Society, enrolled in the group policy and designated his mother, Jean Bankett, as the beneficiary.
The policy was delivered in Arizona, where Moore worked and lived until his death. After his death, Moore's wife, Michelle McCreary, claimed that she was entitled to 50% of the death benefit under the community property law of Arizona.
Faced with competing claims for the death benefit, Companion Life filed an interpleader action. The court recognized and the parties did not dispute that the policy was governed by ERISA. McCreary argued, however, that there was no conflict with ERISA if the court were to apply the Arizona community property law first, awarding her 50% of the death benefit, prior to administering the plan to pay the remaining benefit to Bankett as the designated beneficiary.
Citing Egelhoff v. Egelhoff, 532 U.S. 141 (2001), the court rejected McCreary's argument. The Arizona community property law related to and attempted to affect benefits paid pursuant to the plan, and therefore, was preempted by ERISA.
The court also rejected Bankett's assertion that she should receive an award of interest on the death benefit as compensation for the delay caused by McCreary's claim. The court found that Companion Life's interpleader action was properly filed. Auto Parts Mfg. Miss., Inc. v. King Constr. of Houston, LLC, 782 F.3d 186, 194 (4th Cir. 2015) ("It is not for the district court, in determining whether interpleader is proper, to consider whether the competing claims are meritorious.").
Insured Who Is Already Totally Disabled by Sickness Cannot Recover Lifetime Benefits Based on Injury
Silverman v. Unum Life Ins. Co. of Am. | Case No. 1:13-cv-04296 (N.D. Ga. July 12, 2016)
Dr. Silverman, an endocrinologist, was insured under two individual disability policies issued by Unum. The policies provided a maximum benefit period to age 65 for total disability due to sickness. Accident benefit riders provided lifetime benefits if Silverman became totally disabled as the result of an accidental bodily injury that "prevents [the insured] from engaging in his regular occupation."
Silverman stopped working in May 2009 due to illness. He submitted a claim for total disability benefits based on myasthenia gravis, peripheral neuropathy, degenerative disc disease, and other medical conditions. Unum began paying total disability benefits under the sickness provisions of the policies in July 2009, after Silverman had satisfied the elimination period.
Two and a half months later, in September 2009, Silverman suffered a traumatic brain injury when he fell down a flight of stairs. According to his doctor, Silverman sustained a post concussive syndrome with cognitive impairment, which "would significantly impact his continuing practice as a physician."
In 2011, Silverman submitted a claim to Unum, seeking lifetime benefits under the accident benefit riders. Unum denied the claim, stating, "[y]our injury, or fall in September 2009, was not the cause of your Total Disability."
Unum continued to pay total disability benefits until the maximum benefit period for disability due to sickness was reached in 2013. Silverman then sued, seeking a declaratory judgment that he was entitled to lifetime benefits for total disability due to injury under the accident benefit riders.
Unum filed a motion for summary judgment, which was granted. The court noted that at the time of his traumatic brain injury, Silverman "had already been forced to leave his endocrinology practice as a result of sickness." Thus, the court said, the question was this: "[A]ssuming that Silverman's injury would ordinarily have prevented him from engaging in his regular occupation, is his injury nonetheless outside the policy because he was already completely prevented from engaging in his regular occupation?"
The court held that lifetime benefits were not payable. "There is no evidence that Silverman would have been able to practice in 2011, when he submitted his claim, or even in 2013, when Unum ceased making benefit payments, since these same unabated conditions rendered him completely unable to practice beginning in 2009," the court said. "Thus, the effect of his injury could not have prevented him from doing something he was already unable to do. Accordingly, a material condition of the ‘total disability' definition is not met, meaning Silverman is not entitled to the [lifetime] benefit."
Loss Due to Intoxication Cannot Be Established by Elevated Blood Alcohol and its Common Effects
Prelutsky v. Greater Georgia Life Ins. Co. | 2016 WL 4177469 (N.D. Ga. Aug. 8, 2016)
Prelutsky, a partner in a law firm, was a participant in an ERISA plan and was insured under a group disability policy. While on a ski vacation in Aspen, he fell down a flight of stairs, resulting in traumatic brain injuries. No one witnessed the fall. His son found him unconscious.
Within 20 minutes after arriving at the hospital, Prelutsky's blood alcohol concentration ("BAC") was 281 mg/dL. The test records stated: "These unconfirmed ‘screening' results are to be used for medical purposes only. They are not intended for non-medical purposes (e.g., employment and/or legal testing)." The medical records were replete with other references to Prelutsky's intoxication, including: "Patient ... drank heavily this evening; fall 20 carpeted steps with immediate loss of consciousness. His son and family friends are present in the ER."
Three weeks later, Prelutsky was transferred to a long-term rehabilitation facility. The admitting physician noted that Prelutsky had a history of binge drinking and that he was intoxicated when he fell. The records from the rehabilitation facility contained several references to Prelutsky's "blood alcohol level of 0.25 at the time of his fall."
Prelutsky submitted a claim for benefits. The insurer had discretionary authority to administer the claim and was responsible for paying benefits. Under the group policy, disability caused by, resulting from, or related to intoxication was excluded from coverage.
The insurer denied Prelutsky's claim based on the intoxication exclusion, citing a federal regulation describing physical and mental symptoms associated with a BAC between 0.20 and 0.29 (e.g., stupor, severe motor impairment, loss of understanding, impaired sensation, loss of consciousness, possibility of falling).
Prelutsky appealed, submitting an affidavit from the owner of the Aspen home, who stated she did not see Prelutsky fall, but he did not appear intoxicated before the fall. The owner speculated that Prelutsky tripped over his ski pants.
The insurer obtained an independent medical records review. Citing medical treatises, the physician noted that at "0.25% BAC, the individual needs assistance in walking, and experiences total mental confusion." Because Prelutsky's BAC was .281 at the time, the physician opined that intoxication most probably contributed to the fall. The insurer upheld its claim decision.
Prelutsky filed suit. On cross-motions for judgment, the court noted that the insurer had a minimal burden of proof (i.e., to show that the injury was "related to" intoxication) and that the deferential standard of review applicable in ERISA cases applied. But the court granted judgment for Prelutsky, finding the insurer's decision to be both de novo wrong and an abuse of discretion.
The court found the evidence sufficient to establish that Prelutsky was intoxicated at the time of the fall, stating it was reasonable to place more weight on the medical evidence than the homeowner's personal opinion that Prelutsky did not appear intoxicated.
The court construed the intoxication exclusion to require a causal link between Prelutsky's intoxication and his loss. Citing Capone v. Aetna Life Ins. Co., 592 F.3d 1189 (11th Cir. 2010), and cases from other jurisdictions, the court concluded the insurer could not sustain its burden by relying solely on Prelutsky's BAC and a general list of alcohol's effects. Nor would a medical expert's opinion as to causation be sufficient if based solely on such evidence.
Thus, the court concluded the insurer was required to conduct a further investigation to determine if Prelutsky's intoxication resulted in a "degradation of his physical and cognitive abilities such that the causal link can reasonably be drawn between the injury and intoxication." The court rejected the insurer's argument that, because there was no eyewitness, further investigation would not have yielded any information as to the cause of the fall.
The court suggested that Prelutsky's son and the family friends who were in the ER could have provided additional information "regarding Plaintiff's physical and mental state immediately preceding the fall." The court identified additional "facts that logically could [have been] investigated to evaluate the relationship between the intoxication and the fall," such as the volume of alcohol consumed, the type of alcohol consumed, the time period over which it was consumed, whether Prelutsky was tired as a result of physical activity, and whether he was wearing attire that might cause a fall.