ManorCare of Oklahoma City Southwest LLC v. Oklahoma Lumbermen's Association Health Plan Plus
Filing
28
ORDER the court concludes defendant's denial of benefits was in error and sufficiently so as to satisfy the "arbitrary and capricious" standard referenced in the order...the court declares and determines that plaintiff is entitled to payment from the Plan for the services rendered by it. Signed by Honorable Joe Heaton on 01/24/2014. (lam)
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IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
MANORCARE OF OKLAHOMA CITY
(SOUTHWEST), LLC,
Plaintiff,
vs.
OKLAHOMA LUMBERMEN’S
ASSOCIATION HEALTH PLAN PLUS,
Defendant.
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NO. CIV-13-0503-HE
ORDER
Gary M. Friggeri was formerly employed by Chickasha Lumber Company Inc.
During the period of his employment, he experienced medical problems resulting in his
treatment by various medical providers. Among those was the plaintiff, ManorCare of
Oklahoma City (Southwest), LLC (“ManorCare”).
During his employment, Mr. Friggeri was covered by a health plan provided by his
employer, which contracted with Oklahoma Lumbermen’s Association Health Plan Plus
(“the Plan”) for provision of health insurance benefits. The Plan is governed by the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461.
Mr. Friggeri’s claims submitted to the Plan were ultimately denied by it. He eventually
assigned to plaintiff ManorCare his rights under the Plan attributable to services rendered by
ManorCare.
ManorCare seeks a determination that the Plan’s denial of Mr. Friggeri’s claim was
improper and that it is entitled to payment for the services it provided to him. The central
dispute is whether the Plan was correct in denying Mr. Friggeri’s claim on the basis that his
injury or illness arose out of his job or occupation—hence triggering an exclusion under the
Plan—or not. The case has been submitted based on the administrative record considered
and compiled by the Plan.1
Background
The record indicates that, on July 13, 2011, Mr. Friggeri went to his physician
complaining that he had trouble concentrating, urinating, and “felt flat and preoccupied.” AR
253. He stated that these issues had gone on for two months. Id. Mr. Friggeri returned to
work the next two days, but was taken to the Grady Memorial Hospital emergency room by
his roommate on July 16 because he was “not acting right” and had experienced “multiple
falls.” AR 65. The attending doctor’s impression was hyponatremia, rhabdomyolysis, and
elevated liver enzymes; a note in the medical report read “no A/C @ home, works @ lumber
co, possibly overheated.” AR 66, 69. Following his visit to the emergency room, Mr.
Friggeri received treatment from a number of other healthcare providers, including Salman
Zubair, M.D., a neurologist at St. Anthony Hospital, who determined that heat stroke was a
possible cause of Mr. Friggeri’s condition. AR 215.
At some point subsequent to those treatments, Mr. Friggeri filed a workers’
compensation claim with the Workers’ Compensation Court of the State of Oklahoma
(“WCC”).
His then-employer denied that his medical condition was related to his
1
References to the Administrative Record will be to “AR” followed by the page number.
2
employment. In the WCC proceeding, the court considered three medical evaluations of Mr.
Friggeri: 1) an evaluation by M. Stephen Wilson, M.D., concluding that the condition was
work-related, AR 248-51; 2) an evaluation by Kent C. Hensley, M.D., concluding that the
condition was not work-related, AR 252-59; 3) and a court-ordered evaluation by John A.
Munneke, M.D., D.D.S., concluding that the condition was not work-related, AR 260-63.
Based on the three evaluations, the WCC determined that Mr. Friggeri’s condition
“was not a heat stroke . . . and was unrelated to alleged heatstroke. Instead, [the] problems
[were] related to an underlying disease and not related to employment.” AR 245. The
court’s order was entered on April 24, 2012. On May 4, 2012, Mr. Friggeri settled his
workers’ compensation claim with Chickasha Lumber Company, agreeing to release all
claims and not appeal the decision in exchange for $5,000. AR 247.
On May 14, 2012, Mr. Friggeri’s attorney notified the Plan of the outcome of the
workers’ compensation claim. AR 243. An employee of the plan administrator made a note
indicating the court’s decision and that the insurance claim should be paid.2 Id. The claim
was denied two months later, however, because the Plan determined that Mr. Friggeri’s
condition was related to his employment and thus not covered. AR 267. The claim was
again denied at the level one and level two appeals, and after a level three independent
review. AR 372, 391, 415. ManorCare then commenced this action.
2
It is unclear whether the note was intended to reflect the employee’s determination that
payment of the claim was appropriate or was just intended to reflect what Mr. Friggeri’s counsel
was requesting or suggesting.
3
Standard of Review
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), sets forth the applicable
standard of review in cases contesting a benefit determination under an ERISA plan. “[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.” Id. at 115. If the
ERISA plan “gives the administrator or fiduciary discretionary authority to determine
eligibility for benefits or to construe the terms of the plan, [the court] review[s] the
administrator's decision for an abuse of discretion.” Murphy v. Deloitte & Touch Group Ins.
Plan, 619 F.3d 1151, 1157 (10th Cir. 2010) (internal citations omitted). The court’s review
under the abuse of discretion, or arbitrary and capricious, standard is limited, “. . . asking
only whether the interpretation of the plan ‘was reasonable and made in good faith.’”3 Weber
v. GE Group Life Assur. Co., 541 F.3d 1002, 1011 (10th Cir. 2008) (quoting Flinders v.
Workforce Stabilization Plan of Phillips Petroleum Co., 491 F.3d 1180, 1189 (10th
Cir.2007)). See Cardoza v. United of Omaha Life Ins. Co., 708 F.3d 1196, 1201-02 (10th
Cir. 2013) (“Certain indicia of an arbitrary and capricious denial of benefits include lack of
substantial evidence, mistake of law, bad faith, and conflict of interest by the fiduciary.”)
(internal quotations omitted).
3
The Tenth Circuit “treat[s] the terms ‘arbitrary and capricious' and ‘abuse of discretion’
as interchangeable in this context.” Weber v. GE Group Life Assur. Co., 541 F.3d 1002, 1010 n.10
(10th Cir. 2008) (internal quotations omitted); accord Foster v. PPG Indus., Inc., 693 F.3d 1226,
1231-32 (10th Cir. 2012).
4
The parties agree that the deferential “arbitrary and capricious”standard of review
applies to the court’s review here. The general principles involved with such a review are
clear enough. In making a determination of whether the benefit denial was arbitrary and
capricious, the court necessarily considers the provisions of the plan at issue. Weber, 541
F.3d at 110. The plan documents are scrutinized as a whole and if unambiguous are
construed as a matter of law. Words are given the common and ordinary meaning that “a
reasonable person in the position of the plan participant, not the actual participant, would
have understood the words to mean.” Id. (internal quotations omitted). If the plan language
is ambiguous, the court then “take[s] a hard look and determine[s] whether [the Plan’s]
decision was arbitrary in light of its conflict of interest.” Id. (internal quotations omitted).
“As part of this review, [the court] ‘typically consider[s] whether: (1) the decision was
the result of a reasoned and principled process, (2) is consistent with any prior interpretations
by the plan administrator, (3) is reasonable in light of any external standards, and (4) is
consistent with the purposes of the plan.’” Id. (quoting Flinders, 491 F.3d at 1193). In
determining whether an abuse of discretion is shown, the court “‘consider[s] only the
rationale asserted by the plan administrator in the administrative record and determine[s]
whether the decision, based on the asserted rationale, was arbitrary and capricious.’” Id.
Although conceding that the arbitrary and capricious standard applies, plaintiff asserts
that the Plan operates under a conflict of interest since it is both the decision-maker and the
payor of benefits. It argues the conflict must be considered in determining whether the denial
was arbitrary and capricious. Defendant argues that no conflict of interest exists or that, if
5
one exists, it is de minimus.
The Supreme Court addressed the conflict of interest issue in Metropolitan Life Ins.
Co. v. Glenn, 554 U.S. 105 (2008). The Court concluded that when “the entity that
administers the plan, such as an employer or an insurance company, both determines whether
an employee is eligible for benefits and pays benefits out of its own pocket,” a conflict of
interest is created by the dual role. Id. at 108. While “the presence of a dual role conflict
does not alter the level of deference accorded an administrator’s decision,” the court “must
weigh the conflict ‘as a factor in determining whether there is an abuse of discretion,’
according it more or less weight depending on its seriousness.” Murphy, 619 F.3d at 1157
n.1 (quoting Glenn, 554 U.S. at 115)). “[A] conflict of interest affects the outcome at the
margin, when [the court] waver[s] between affirmance and reversal.”
Hancock v.
Metropolitan Life Ins. Co., 590 F.3d 1141, 1155 (10th Cir. 2009). “A conflict is more
important when ‘circumstances suggest a higher likelihood that it affected the benefits
decision,’ but less so when the conflicted party ‘has taken active steps to reduce potential
bias and to promote accuracy.’” Id. (quoting Glenn, 554 U.S. at 117).
Here, the court concludes a conflict of interest exists, due to dual status of the
defendant. However, though that conflict is more than a de minimus, it is relatively small.
That conclusion flows from the fact, among others, that the Plan is funded by multiple
members associated with the Oklahoma Lumberman’s Association, reducing the incentive
for a member of the Committee to consider the financial consequences of claim payment to
his or her particular employer. Further, because of its structure, amounts not paid by the Plan
6
on claims do not inure directly to the benefit of the members, but must be used for Plan
purposes. In any event, the court concludes a conflict is present and entitled to some
consideration, but is not a major factor in the application of the applicable standard.4
Discussion
The Plan is a self-funded, ERISA-regulated, employee benefit program. Its claims
handling procedure involves both a “Claims Administrator” and a “Plan Administrator.” The
Plan establishes a three-step appeals process for denied claims. The level one appeal is a
review by a qualified person who was uninvolved with the initial denial. AR 44. The level
two appeal is a review by the Plan Administrator, which is the Employee Benefits Committee
of the Oklahoma Lumberman’s Association. Id. The third level is an external review. Id.
Under the terms of the Plan, benefits are not payable for injuries or illnesses that are
“occupational,” which is defined as:
[A]n Injury or Sickness . . . that [] arises from work for wage or profit
including self-employment, whether or not the injured person is required to be
covered under any law for compensation for such injuries. The Plan
Administrator has sole discretion to determine if an Injury or Sickness is
Occupational.
ManorCare argues that the denial of Mr. Friggeri’s claim was an abuse of discretion
for three reasons: 1) the denial was based on a selective review of the record because it failed
to consider the decision of the workers’ compensation judge and medical evaluations
4
The court is unpersuaded by defendant’s suggestion that the existence of fiduciary duties
as to the Committee “negate[s] any alleged conflict of interest here.” [Doc. #25, p. 14]. The fact
that someone is duty bound to treat others fairly does not necessarily remove a conflict-based
incentive to do something else.
7
admitted in that case; 2) the denial improperly considered Mr. Friggeri’s settlement of the
workers’ compensation claim; and 3) the external review in the level three appeal incorrectly
interpreted the medical evaluation on which it based its opinion. The Plan counters that there
is substantial evidence in the record to support its decision, that Mr. Friggeri’s
commencement and settlement of his workers’ compensation claim amounts to an admission
that his condition was occupational, and that he is judicially estopped from denying that his
condition was occupational.
While the deferential nature of the court’s review makes the question close, the court
nonetheless concludes, after a thorough review of the Administrative Record, that the denial
of Mr. Friggeri’s claim was erroneous under the indicated standard. That conclusion flows
from a number of factors.
The treatment in the appeal process of the opinion of Dr. Munneke is perhaps the most
compelling evidence that the Plan’s ultimate denial was improper. As noted above, Dr.
Munneke’s opinion was the result of an order by the WCC judge, presumably intended to get
a medical opinion from an expert not associated with either of the parties, in the WCC
proceeding. Dr. Munneke’s opinion (i.e. his letter of November 21, 2011; AR 380) was
unequivocal as to whether Mr. Friggeri’s medical problems were work related or not. After
describing the history and treatment of Mr. Friggeri, Dr. Munneke concluded:
Based on my examination of the patient on the 21st of November of 2011 as
well as review of medical records, it is my opinion that the patient’s current
condition is unrelated to any heatstroke that occurred while at work.
...
8
It is my opinion his current complaints and neurological symptomology appear
to be related to an underlying disease process that resulted in his hyponatremia
and would not have a relationship to his employment.
The patient is in need of further medical care, however, the need for further
medical care is unrelated to his work at Chickasha Lumber Company and, in
my opinion, the patient did not sustain an injury as a result of his work at
Chickasha Lumber Company.
The WCC explicitly relied on Dr. Munneke’s opinion in concluding that Mr. Friggeri’s
condition was due to an underlying disease and not related to employment. AR 384.
However, in the initial denial of the claim and the first level review of it, the Plan appears not
to have considered the Munneke opinion or WCC determination at all. At least there is no
explicit indication that it did. Rather, it recites its reliance only on the medical records from
Grady Memorial Hospital and St. Anthony Hospital as the basis for its conclusion that Mr.
Friggeri’s condition was work-related.
The second level appeal indicates the Plan Administrator considered the WCC order
and Dr. Munneke’s opinion,5 but there is no indication of what effect it gave Dr. Munneke’s
letter or how it concluded something so completely opposed to his conclusion—the denial
simply lists the Munneke letter/opinion as part of what its decision was “based on.” While
there is no requirement in this context that every significant piece of evidence considered be
discussed in an appeal denial letter, it is at least odd that the only doctor’s opinion
specifically referenced as having been considered—which drew a conclusion exactly
5
The denial letter, AR 392, indicates it considered “Medical records from Dr. Munneke dated
November 21, 2011.” This appears to mean his November 21 letter, rather than any separate set
of “records” it received from him.
9
opposite that of the reviewer—was not discussed in some fashion.6
By the third, independent review level, the treatment of Dr. Munneke’s letter is even
more inexplicable. The letter affirming the denial of benefits, AR 411-413, concluded Mr.
Friggeri’s injury or sickness was work related, and did so with this remarkable statement:
The Letter from John A. Munneke, M.D. and the Medical records from St.
Anthony’s Hospital make clear that the treatment for which Mr. Friggeri
requests payment by the Plan was a work related injury or sickness.
That conclusion was, of course, the complete opposite of what Dr. Munneke opined and,
even giving maximum effect to whatever the St. Anthony records may have suggested, it was
plainly inaccurate to say that the two together made the work-related nature “clear.”
Defendant argues that this reference to Dr. Munneke’s letter and opinion does not
matter because Dr. Munneke’s opinion was in error, based on his mistaken understanding of
Mr. Friggeri’s body temperature at the time of his arrival at Grady Memorial Hospital. Dr.
Munneke may or may not have been in error based on the body temperature question, but at
this point that is beside the point. Defendant did not reject Dr. Munneke’s letter or opinion
on the basis it was wrong or based on inaccurate data. To the contrary, it cited Dr.
Munneke’s opinion as part of the basis for defendant’s conclusion. As noted above, the
Plan’s decision is evaluated based on “the rationale asserted by the plan administrator in the
6
The failure to mention in any fashion the decision of the WCC is also somewhat remarkable,
given the fact that it was a court determination on the issue central to the appeal denial. While that
court determination was not binding on the Plan, which was not a party to the WCC proceeding,
and the WCC judge’s determination was essentially a layman’s determination of the medical issues
based on expert testimony of others, it would nonetheless seem to be a feature not present in an
ordinary claim situation.
10
administrative record,” Weber, 541 F.3d at 1011, not some better explanation that is thought
of later.
By the time of the third level appeal—the independent review just mentioned—the
rationale for the denial had changed somewhat. The review letter continued to rely on the
view that Mr. Friggeri’s problems were work related and on Dr. Munneke’s letter, among
other things. But it also took the position that the settlement agreement entered into in the
WCC proceeding was broad enough to cover any claim he might have against the Plan. It
did not claim that entry into the settlement agreement estopped Friggeri from asserting a
claim with the Plan or that doing so violated some other provision of the Plan. Rather, it took
the position that the breadth of the Settlement Agreement’s release provisions (“The
Settlement Agreement in question is very broad.”) extended to releasing directly any claim
against the Plan: “It is the Firm’s considered opinion that the language of the Settlement
Agreement bars any claim that Mr. Friggeri would have under the Health Plan.” AR 411.
The release language of the Settlement Agreement is indeed broad in some respects,
but it was clearly directed to potential claims against the employer, Chickasha Lumber
Company, and its workers’ compensation insurer. The language cannot plausibly be read to
extend to the release of any claims Mr. Friggeri might have against his health insurer, which
was not a party to or otherwise involved in the WCC proceeding. Here, defendant tacitly
concedes this point, as it explicitly does not argue that the Settlement Agreement directly
released claims against the Plan. (“The OLA did not assert that basis for upholding the
denial, and does not assert it here. (Emphasis in the original.)) [Doc. #25, p. 10, para. 43].
11
It is true that the final denial letter from the administrator, AR 415, asserted a somewhat
different argument (relying on the settlement agreement as a basis for estoppel rather than
as effecting a direct release), but the independent review nonetheless reflected an
unreasonable reading of the Settlement Agreement.
As noted, the matter of estoppel was mentioned in the final denial later. The letter
stated:
You sued your employer in the Oklahoma Worker’s Compensation Court, you
invoked that Court’s jurisdiction, you affirmatively asserted that you were
injured on the job, and you demanded occupational injury benefits for what
you contended was an occupational injury. You successfully settled your
lawsuit, and received and accepted proceeds for your occupational injury claim
from your Worker’s Compensation carrier. You are estopped from taking a
contrary position, and from seeking non-occupational injury benefits from the
Plan for the same injury for which you demanded, received and accepted
compensation from your occupational injury carrier. (emphasis added).
Defendant continues to press the estoppel argument here. However, recognizing that ERISA
preempts application of state law estoppel principles which might otherwise apply,7 it is clear
defendant now relies on principles of judicial estoppel, as opposed to some other type.
Judicial estoppel is a doctrine designed to “protect the integrity of the judicial process
by prohibiting parties from deliberately changing positions according to the exigencies of the
moment.” Kaiser v. Bowlen, 455 F.3d 1197, 1203 (10th Cir. 2006)(quoting New Hampshire
v. Maine, 532 U.S. 742, 749-50 (2001)). The doctrine is “probably not reducible to any
7
See Kerber v. Qwest Group Life Ins. Plan, 647 F.3d 950, 962 (10th Cir. 2011), referenced
in defendant’s brief [Doc. #25, p. 23]. In other contexts, the $5000 settlement might well have had
more significant consequences for plaintiff.
12
general formulation of principle” but is an equitable doctrine invoked by the court in its
discretion. New Hampshire v. Maine, 532 U.S. at 750. The Tenth Circuit has, however,
identified the factors that will ordinarily figure into a judicial estoppel determination:
First, a party’s later position must be clearly inconsistent with its earlier
position. Moreover, the position to be estopped must generally be one of fact
rather than or law or legal theory. Second, whether the party has succeeded in
persuading a court to accept that party’s earlier position, so that judicial
acceptance of an inconsistent position in a later proceeding would create the
perception that either the first or the second court was mislead. The
requirement that a previous court has accepted the prior inconsistent factual
position ensures that judicial estoppel is applied in the narrowest of
circumstances. Third, whether the party seeking to assert an inconsistent
position would derive an unfair advantage or impose an unfair detriment on the
opposing party if not estopped.
Kaiser v. Bowlen, 455 F.3d at 1204 (quoting Johnson v. Lindon City Corp., 405 F.3d 1065,
1069 (10th Cir. 2005)); see also New Hampshire v. Maine, 532 U.S. at 750-51.
It is less than clear to the court that the Plan was, at the claim denial stage, entitled to
invoke judicial estoppel at all. The doctrine protects the integrity of the judicial process, and
its not obvious that the Plan and its benefit determination procedures would be seen to be part
of the judicial process.8 However, as this case obviously involves a second court, the
doctrine is, by now, potentially applicable.
The court concludes that judicial estoppel is not appropriate in these circumstances.
The first factor identified in Kaiser is present here. Mr. Friggeri took a different position in
8
Of course, it is possible that the reference to estoppel in the denial letter was not necessarily
intended to apply to “judicial” estoppel in particular and may have contemplated broader or
different estoppel principles.
13
the WCC proceeding, arguing that his illness was work-related, than what he and/or his
assignee urge here.9 The second factor, however, is not present. That factor requires the
prior court to have accepted the position that was being urged there. That did not occur. The
WCC rejected Mr. Friggeri’s workers’ compensation claim, specifically finding that his
injury or illness was not work-related. A determination by this court that plaintiff should
recover would in no way be inconsistent with the decision of the WCC. The subsequent
settlement agreement complicates the picture somewhat, and the court can envision
circumstances under which a substantial settlement might be viewed as a successful assertion
of the prior position, but the settlement here falls short of showing that. The receipt of $5000
is not de minimus and suggests more than a nuisance value settlement, but not by much.
Weighed against the total medical bills potentially affected by the determination, the
settlement cannot reasonably be viewed as making Mr. Friggeri a “winner” as to his prior
position or as somehow suggesting acceptance of the position he urged in the WCC.
The third factor also does not suggest that judicial estoppel is appropriate here. That
factor examines whether there is either unfair benefit to the party advocating the changed
position or unfair detriment to the other party. The court cannot see that Mr. Friggeri’s
position and conduct in these proceedings was unreasonable or that he unfairly benefits from
the positions he has asserted. From his standpoint, he knew that his injury or illness would
9
It is less clear whether the position he advocated there would necessarily be viewed, or at
least entirely viewed, as an assertion of fact rather than law. As discussed below, the factual
question of what caused Mr. Friggeri’s condition is not one that he, as a layman, would necessarily
have known the answer to.
14
be covered either by his employer’s workers’ compensation insurance, if it was work-related,
or by his employer-provided health plan if it was not. But the particular nature of his illness
was not such that he, as a layman, could have been expected to know exactly what caused
his condition. Medical professionals reached different conclusions about it. Some of these
differences may have been explainable by the nature or timing of their examinations (i.e.
preliminary, or cursory, or more detailed after examination, etc.), but at least part of the
reason was that symptoms like those displayed by Mr. Friggeri did not lend themselves to
quick and easy answers about causation.
Further, the structure of the Oklahoma court
system did not permit Mr. Friggeri to resolve the question of what caused his condition, or
of which insurance he should look to for coverage, in a single forum. In these circumstances,
the court cannot say that Mr. Friggeri acted unreasonably or was unfairly benefitted by
reason of his change of position.10 Also, the Plan is not unfairly harmed. It did not change
its position in any way based on the position Mr. Friggeri took in the WCC proceeding and
is being held liable only for amounts it would otherwise have owed anyway if a claim against
it had been pursued and established in the first instance.
In sum, defendant’s reliance on the doctrine of judicial estoppel is unpersuasive.
Finally, defendant argues that Mr. Friggeri’s assertion of the “work-related” position
in the WCC proceeding, if not a basis for estoppel, is at least an admission and substantial
10
As noted above, the receipt of money under the settlement agreement makes the question
closer than it would otherwise be, but the amount received is not sufficient to significantly shift the
equities here.
15
evidence of the work-related nature of the injury. That Mr. Friggeri first pursued a claim on
the basis his condition was work-related is no doubt some evidence that it was work-related.
But for the reasons referenced above—principally the inability of a layman to make the sort
of determination central to the issue—it is evidence with minimal weight for present
purposes and considerably less than “substantial” evidence which might otherwise justify the
Plan’s decision.
Taking these factors together, and giving some though limited impact to the conflict
of interest which potentially impacted the Plan’s decision, the court concludes defendant’s
denial of benefits was in error and sufficiently so as to satisfy the “arbitrary and capricious”
standard referenced above. The court declares and determines that plaintiff is entitled to
payment from the Plan for the services rendered by it.
IT IS SO ORDERED.
Dated this 24th day of January, 2014.
16
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