Tuttle v. Varian Medical Systems Incorporated Medical Plan Administrator et al, No. 2:2012cv01424 - Document 35 (D. Ariz. 2013)
Court Description: ORDER denying 23 Plaintiff Deana Tuttle's Motion Re: Standard of Review. Signed by Judge G Murray Snow on 9/24/13.(TLJ)
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Tuttle v. Varian Medical Systems Incorporated Medical Plan Administrator et al 1 Doc. 35 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Deana Tuttle, 10 No. CV-12-01424-PHX-GMS Plaintiff, ORDER 11 v. 12 Varian Medical Systems Inc., Medical Plan Administrator; United Healthcare Insurance Company, 13 14 Defendants. 15 16 17 18 Pending before the Court is Plaintiff Deana Tuttle’s Motion Regarding Standard of Review, (Doc. 23). For the reasons discussed below, the Motion is denied. BACKGROUND 19 At issue in this case is an employee welfare plan’s denial of an employee’s claim 20 for the reimbursement of medical payments. The crux of this Motion is to request the 21 Court to apply a non-deferential standard to its review of that denial. 22 Plaintiff Deana Tuttle is employed by Defendant Varian Medical Systems, Inc. 23 (“Varian”) as a Medical Physicist. (Doc. 1 (Compl.) ¶ 8.) As an employee, Ms. Tuttle is a 24 participant in Varian’s Welfare Benefit Plan (the “Plan”) which is a health and medical 25 reimbursement insurance plan. (Id. ¶ 4; Doc. 15 (Ans.) ¶ 4.) Varian is the Plan Sponsor 26 and Defendant United Healthcare Insurance Company (“UHIC”) is the insurer of the Plan 27 as well as the claims administrator. (Doc. 1 ¶¶ 5–6; Doc. 15 ¶¶ 5–6.) The Parties dispute 28 whether the Plan delegates to UHIC the discretionary authority to make benefits Dockets.Justia.com 1 determinations. (Doc. 1 ¶ 7; Doc. 15 ¶ 7.) 2 In July 2009, Ms. Tuttle was diagnosed with breast cancer by the Mayo Clinic of 3 Scottsdale, Arizona (the “Clinic”). (Doc. 1 ¶ 13; Doc. 15 ¶ 13.) She underwent multiple 4 breast cancer surgical procedures at the Clinic on August 4 and 12, 2009. (Doc. 1 ¶ 14; 5 Doc. 15 ¶ 14.) 6 After the surgeries, Ms. Tuttle’s providers at the Clinic billed the Plan for payment 7 of medical expenses related to her treatment from August 4 to 12. (Doc. 1 ¶ 28; Doc. 15 ¶ 8 28.) Although the Parties agree that the Plan, acting through UHIC, paid expenses, they 9 dispute the percentage of expenses that the Plan paid and what percentage it advised Ms. 10 Tuttle that she must pay. (Doc. 1 ¶ 29–30; Doc. 15 ¶ 29–30.) Ms. Tuttle filed an 11 administrative appeal of the Plan’s benefits determination pursuant to the procedure set 12 out in the Plan. (Doc. 1 ¶ 31; Doc. 15 ¶ 31.) The Plan’s benefits determination was 13 upheld on appeal on January 12, 2010. (Doc. 1 ¶ 32; Doc. 15 ¶ 32.) A letter describing 14 the decision to Ms. Tuttle advised her of the right to request an independent review of her 15 claim’s denial within thirty calendar days. (Doc. 1 ¶ 32; Doc. 15 ¶ 32.) 16 Based on the Plan’s instructions, Ms. Tuttle sent a completed “Health Care Appeal 17 Request Form” to the Plan on February 16, 2010. (Doc. 1 ¶ 35; Doc. 15 ¶ 35.) The Parties 18 dispute whether the Plan acknowledged receipt of the Form and processed it for 19 independent review. (Doc. 1 ¶ 36–37; Doc. 15 ¶¶ 36–37.) 20 Ms. Tuttle filed an action against Varian in this Court on August 23, 2011. (Doc. 1 21 ¶ 38; Doc. 15 ¶ 38.) The Parties stipulated to dismiss the action without prejudice to 22 allow the Arizona Department of Insurance (the “Department”) to perform an external 23 independent review of Ms. Tuttle’s claim; the action was dismissed on November 21. 24 (Doc. 1 ¶ 39; Doc. 15 ¶ 39.) The Department, however, declined to review the matter 25 because the appeal was about the amount of coverage and not whether services were 26 covered under the Plan. (Doc. 1 ¶ 43; Doc. 15 ¶ 43.) As a result of her appeals, Ms. Tuttle 27 has fully exhausted administrative remedies required by the Plan. (Doc. 1 ¶ 44; Doc. 15 ¶ 28 44.) -2- 1 During the period in question, the Plan and UHIC acted at least under a structural 2 conflict of interest because UHIC was the insurer and made benefits determinations. 3 (Doc. 1 ¶ 45; Doc. 15 ¶ 45.) That conflict of interest allegedly influenced the Plan’s 4 benefits determination regarding Ms. Tuttle’s medical expenses. (Doc. 1 ¶ 46.) Ms. Tuttle 5 alleges that she suffered economic damage as a result of Defendants’ processing of her 6 claim and that the Plan, acting through UHIC, violated the terms and conditions of the 7 Plan, failed to act on her appeal until she filed suit, and denied her a full and fair review 8 of her claim. (Id. ¶¶ 48–52.) She requests Plan benefits pursuant to 29 U.S.C. § 9 1132(a)(1)(B) and attorney’s fees and costs pursuant to id. § 1132(g)(1). (Id. ¶ 52.) She 10 now moves the Court to determine that a de novo standard of review should apply to its 11 review of the Plan’s benefits determination. DISCUSSION 12 13 I. DETERMINATION OF STANDARD OF REVIEW 14 The presumptive standard of review of a fiduciary’s decision to deny benefits is de 15 novo. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006) (en banc); 16 see also Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089 (9th Cir. 1999). “In adopting 17 the de novo standard, the Supreme Court was guided by principles of trust law because 18 ERISA was enacted to protect employees and the plan administrators have a fiduciary 19 duty to the beneficiaries.” Gonzales v. Unum Life Ins. Co. of Am., 861 F. Supp. 2d 1099, 20 1106 (S.D. Cal. 2012) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111 21 (1989)). But “[t]rust principles make a deferential standard of review appropriate when a 22 trustee exercises discretionary powers.” Firestone, 489 U.S. at 111. Therefore, if a plan 23 “unambiguously provide[s] discretion to the administrator,” a denial of benefits is 24 reviewed for abuse of discretion. Abatie, 458 F.3d at 963. 25 If a plan confers such discretionary authority, an abuse of discretion standard 26 applies even if the decisionmaker was also the funding source. Abatie 458 F.3d at 967. 27 Judicial review in that case, however, is “informed by the nature, extent, and effect on the 28 decision-making process of any conflict of interest that may appear in the record.” Id. -3- 1 The plan administrator or fiduciary has the burden of proving the abuse of discretion 2 standard is provided for by the plan documents. Thomas v. Or. Fruit Prods. Co., 228 F.3d 3 991, 994 (9th Cir. 2000). 4 II. PLAN DOCUMENTS 5 To determine whether the Plan grants discretionary authority, the Court first must 6 determine which documents constitute the Plan. ERISA requires that “[e]very employee 7 benefit plan shall be established and maintained pursuant to a written instrument,” 29 8 U.S.C. § 1102(a)(1), and an administrator must act “in accordance with the documents 9 and instruments governing the plan” insofar as they accord with the statute, id. § 10 1104(a)(1)(D). “Each such plan must (1) provide a policy and a method for funding the 11 plan, (2) describe a procedure for plan operation and administration, (3) provide a 12 procedure for amending the plan, and (4) specify a basis for payments to and from the 13 plan.” Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1441-42 (9th Cir. 1995) (internal 14 quotation marks and citation omitted); 29 U.S.C. § 1102(b). 15 Ms. Tuttle contends that the administrative record before this Court does not 16 contain the Plan. Defendants dispute that contention and assert that the Plan document is 17 the Policy in the record; it constitutes the written instrument that should control the 18 review of the benefits determination. Ms. Tuttle does not dispute that the Plan is 19 sponsored by Varian and insured by UHIC. The Policy issued by UHIC to Varian and its 20 employees under the Plan consists of the following: (1) the Group Policy; (2) the 21 Schedule of Benefits; (3) the Certificate of Coverage; (4) the Enrolling Group’s 22 Application; (5) Riders; and (6) Amendments. (Doc. 22-1 (Admin. Record) at 124.) The 23 Certificate of Coverage states that the Policy “is a legal document between [UHIC] and 24 [Varian] to provide Benefits to Covered Persons, subject to the terms, conditions, 25 exclusions and limitations of the Policy.” (Id. at 54.) Further, the Policy is defined therein 26 as the “entire agreement” between UHIC and Varian under the Plan. (Id. at 124.) 27 “[I]t is clear that an insurance policy may constitute the “written instrument” of an 28 ERISA plan . . . .” Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1441 (9th Cir. 1995) (internal -4- 1 citations omitted); See Sterio v. HM Life, 369 F. App’x 801, 803 (9th Cir. 2010) (“We 2 reject [the plaintiff’s] contention that the district court should have applied a de novo 3 standard because there is no ‘plan’ document, only an insurance policy. The insurance 4 policy is the plan document in this case.”); Gonzales, 861 F. Supp. 2d at 1108 (finding 5 that the ERISA plan at issue was contained, in part, in the group insurance policy). 6 Further, “[a] plan may incorporate other formal or informal documents, such as a 7 collective bargaining agreement or a certificate of insurance.” Gonzales, 861 F. Supp. 2d 8 1099, 1107–08 (citing Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 9 982, 983 (9th Cir. 1997)). “[T]here is no requirement that documents claimed to 10 collectively form the employee benefit plan be formally labeled as such.” Horn v. 11 Berdon, Inc. Defined Benefit Pension Plan, 938 F.2d 125, 127 (9th Cir. 1991). 12 Ms. Tuttle argues that the Policy is not a Plan document because the Policy refers 13 to other Plan documents that may be obtained from the Plan administrator. For example, 14 the Policy states that a Plan participant may contact the administrator for “assistance in 15 obtaining documents” or “to obtain, . . . copies of documents governing the operation of 16 the plan, including insurance contracts and collective bargaining agreements, and copies 17 of the latest annual report . . . and update Summary Plan Description.” (Doc. 22-1 at 166, 18 491) (internal alterations omitted). Those references do not show that the Policy is not the 19 operative Plan document in this matter but demonstrate that there are other documents 20 related to the Plan described in the Policy. “An employee benefit plan under ERISA can 21 be comprised of more than one document.” Gonzales, 861 F. Supp. 2d at 1107. 22 Ms. Tuttle also suggests that the Policy is not a Plan document because the Plan 23 existed before the Policy became effective in 2009 and the terms of the Plan were defined 24 before UHIC became the insurer that year. Ms. Tuttle incurred the medical expenses at 25 issue in 2009. The Policy covers any claims for expenses incurred on after January 1, 26 2009. (Doc. 22-1 at 14.) Further, the Policy states that it “replaces and overrules any 27 previous agreements relating to Benefits for Covered Health Services between [Varian] 28 and [UHIC].” (Id. at 5.) The fact that UHIC became the insurer of the Plan in 2009, (see -5- 1 Doc. 23-2 (2009 Benefits Guide) at 3), does not indicate that the Policy is not a Plan 2 document for purposes of reviewing the denial of Ms. Tuttle’s benefits. The Plan is 3 subject to change in any given year and benefits determinations are governed by the 4 terms and conditions in effect during the applicable time period. Based on the 5 administrative record before it, the Court determines that the various sections of the 6 Policy described above are the controlling Plan documents. 7 The Policy also includes a section entitled “ERISA Statement” with a subheading 8 of “Summary Plan Description.” Plan administrators are required to provide Plan 9 participants with summary plan descriptions and with summaries of material 10 modifications “written in a manner calculated to be understood by the average plan 11 participant” that are “sufficiently accurate and comprehensive to reasonably apprise such 12 participants and beneficiaries of their rights and obligations under the plan.” CIGNA 13 Corp. v. Amara, ____ U.S. ____, 131 S. Ct. 1866, 1874–75, 179 L. Ed. 2d 843 (2011); 29 14 U.S.C. §§ 1022(a), 1024(b). The Supreme Court has held that “the summary documents, 15 important as they are, provide communication with beneficiaries about the plan, but that 16 their statements do not themselves constitute the terms of the plan . . . .” CIGNA, 131 S. 17 Ct. at 1878 (emphasis in original). 18 Defendants argue that the Statement is not the summary document they are 19 required to furnish to Plan participants under 29 U.S.C. § 1022(a). Instead, they 20 characterize the Statement as a “Rider” to the Policy and as belonging to the set of Plan 21 documents. But the Statement’s language and the Policy’s terminology indicate 22 otherwise. The Statement is contained within a section of the Policy entitled 23 “Amendments, Riders and Notices (As Applicable).” (Doc. 22-1 at 28.) Only some of the 24 subsections’ titles therein include the terms “amendment”, “rider”, or “notice”. The 25 Statement is not one of them; it is not designated as a Rider anywhere in the Policy. 26 Further, the Statement’s subheading is “Summary Plan Description” and includes much, 27 but not all, of the information listed in 29 U.S.C. § 1022(b) as required for the mandated 28 summary plan description. The Court finds that the Statement is a Summary Plan -6- 1 Description and is therefore not a Plan document. 2 III. DISCRETIONARY AUTHORITY 3 A. Grant of Discretionary Authority in the Policy 4 The language of the written instrument determines whether discretionary authority 5 was conferred to the plan administrator or fiduciary. Firestone, 489 U.S. at 111–12. 6 Therefore, “[t]o assess the applicable standard of review, the starting point is the wording 7 of the plan.” Abatie, 458 F.3d at 962–63 (internal citation omitted). 8 Although there are no “magic words” that a plan must include to confer discretion, 9 it must nevertheless clearly indicate that the decision-maker has discretion to grant or 10 deny benefits, or to interpret the plan’s terms. See Feibusch v. Integrated Device Tech., 11 Inc. Emp. Benefit Plan, 463 F.3d 880, 884 (9th Cir. 2006); Abatie, 458 F.3d at 964. The 12 Ninth Circuit has described the level of clarity with which discretion must be conferred in 13 the plan: 14 15 16 17 18 19 20 21 We think it appropriate to insist, . . . that the text of a plan be unambiguous. If an insurance company seeking to sell and administer an ERISA plan wants to have discretion in making claims decisions, it should say so. It is not difficult to write, “The plan administrator has discretionary authority to grant or deny benefits under this plan.” When the language of a plan is unambiguous, a company purchasing the plan, and employees evaluating what their employer has purchased on their behalf, can clearly understand the scope of the authority the administrator has reserved for itself. . . . it is easy enough to confer discretion unambiguously if plan sponsors, administrators, or fiduciaries want benefits decisions to be reviewed for abuse of discretion. Where they fail to do so, in this circuit at least, they should expect de novo review. 22 23 24 25 26 27 28 Ingram v. Martin Marietta Long Term Disability Income Plan for Salaried Emps. of Transferred GE Operations, 244 F.3d 1109, 1113–14 (9th Cir. 2001) (internal quotation marks and citations omitted). The Policy includes a Certificate of Coverage. In the Certificate is a section entitled “Our Responsibilities” in reference to UHIC’s responsibilities under the Plan. It provides the following: -7- Determine Benefits 1 2 6 [UHIC] make[s] administrative decisions regarding whether this Benefit plan will pay for any portion of the cost of a health care service [Plan participants] intend to receive or have received. Our decisions are for payment purposes only. [UHIC does] not make decisions about the kind of care [Plan participants] should or should not receive. [Plan participants] and [their] providers must make those treatment decisions. 7 [UHIC has] the discretion to do the following: 3 4 5 8 Interpret Benefits and the other terms, limitations and exclusions set out in this Certificate, the Schedule of Benefits, and any Riders and/or Amendments. 9 10 Make factual determinations relating to Benefits. 11 12 (Doc. 22-1 at 58). Further, a section entitled “General Legal Provisions” in the Policy 13 states 14 15 16 Interpretation of Benefits [UHIC has] the sole and exclusive discretion to do all of the following: 17 Interpret Benefits under the Policy. 18 Interpret the other terms, conditions, limitations and exclusions set out in the Policy, including this Certificate, the Schedule of Benefits, and any Riders and/or Amendments. 19 20 21 22 23 Make factual determinations related to the Policy and its Benefits. [UHIC] may delegate this discretionary authority to other persons or entities that provide services in regard to the administration of the Policy. 24 25 (Id. at 112) (emphasis added). 26 The Policy’s language “unambiguously” grants UHIC discretion “to construe 27 disputed or doubtful terms” in the Plan and determine eligibility for benefits. See 28 Firestone, 489 U.S. at 111, 115; Abatie, 458 F.3d at 963. Further, the Ninth Circuit has -8- 1 “repeatedly held that similar plan wording—granting the power to interpret plan terms 2 and to make final benefits determinations—confers discretion on the plan administrator.” 3 Abatie, 458 F.3d at 963–64; see, e.g., id. at 963 (plan provided that “[t]he responsibility 4 for full and final determinations of eligibility for benefits; interpretation of terms; 5 determinations of claims; and appeals of claims denied in whole or in part under the 6 [policy] rests exclusively with [the insurer]”) Bergt v. Ret. Plan for Pilots Employed by 7 MarkAir, Inc., 293 F.3d 1139, 1142 (9th Cir. 2002) (plan’s terms granted the 8 administrator the “power” and “duty” to “interpret the plan and to resolve ambiguities, 9 inconsistencies and omissions” and to “decide on questions concerning the plan and the 10 eligibility of any Employee”); Grosz–Salomon v. Paul Revere Life Ins. Co., 237 F.3d 11 1154, 1159 (9th Cir. 2001) (plan provided that the administrator “has the full, final, 12 conclusive and binding power to construe and interpret the policy under the plan . . . 13 [and] to make claims determinations” grants discretion). Therefore, the Plan confers 14 discretion on UHIC to make benefits determinations. 15 B. Fiduciary Status 16 Ms. Tuttle argues that even if the Policy granted discretionary authority to UHIC, 17 the insurer, it is not a fiduciary under the Plan. The applicable standard of review in an 18 ERISA case is determined based on general trust principles. Abatie, 458 F.3d at 963. 19 Therefore, an abuse of discretion standard only applies when a fiduciary to plan 20 participants is the party exercising discretion to make claims decisions. Id. If an 21 unauthorized body that does not have fiduciary discretion denies benefits, de novo review 22 applies. Jebian v. Hewlett-Packard Co. Employee Benefits Org. Income Prot. Plan, 349 23 F.3d 1098, 1105 (9th Cir. 2003) (internal citation omitted). 24 “Fiduciary status under ERISA is to be construed liberally, consistent with 25 ERISA’s policies and objectives.” Ariz. State Carpenters Pension Trust Fund v. Citibank, 26 (Ariz.), 125 F.3d 715, 720 (9th Cir. 1997) (internal citation omitted). ERISA “defines 27 ‘fiduciary’ not in terms of formal trusteeship, but in functional terms of control and 28 authority over the plan.” Mertens v. Hewitt Assocs., 508 U.S. 248, 262 (1993) (emphasis -9- 1 in original and internal citation omitted). Thus, ERISA fiduciaries “include not only those 2 specifically named in the employee benefit plan, 29 U.S.C. § 1102(a), but also any 3 individual who ‘exercises any discretionary authority or discretionary control respecting 4 management of such plan or exercises any authority or control respecting management or 5 disposition of its assets,’ [id.] § 1002(21)(A)(i).” Johnson v. Couturier, 572 F.3d 1067, 6 1076 (9th Cir. 2009). 7 In support of her argument that UHIC is not a fiduciary, Ms. Tuttle refers to the 8 following provisions in the Policy. (Doc. 23 at 4.) In its introduction letter, the Policy 9 states 10 11 12 13 [UHIC] will not be deemed or construed as an employer or plan administrator for any purpose with respect to the administration or provision of benefits under [Varian’s] benefit plan. [UHIC is not] responsible for fulfilling any duties or obligations of an employer or plan administrator with respect to [Varian’s] benefit plan. 14 (Doc. 22-1 at 5.) Under the “General Provisions” section, a subsection entitled “ERISA” 15 provides 16 17 18 19 20 21 When this Policy is purchased by [Varian] to provide benefits under a welfare plan governed by the federal Employee Retirement Income Security Act 29 U.S.C., 1001 et seq., [UHIC] will not be named as, and will not be, the plan administrator or the named fiduciary of the welfare plan, as those terms are used in ERISA. (Id. at 10.) Finally, in sections relating to “continuation coverage,” the Policy provides 24 [UHIC] will not provide any administrative duties with respect to [Varian’s] compliance with federal or state law. All duties of the plan sponsor or plan administrator remain the sole responsibility of [Varian], including but not limited to notification of COBRA and/or state law continuation rights and billing and collection of Premium. 25 .... 26 [UHIC is not Varian’s] designated “plan administrator” as that term is used in federal law, and [UHIC does not] assume any responsibilities of a “plan administrator” according to federal law. 22 23 27 28 - 10 - 1 (Id. at 10, 93.) Although these provisions state that UHIC is not to be deemed an 2 employer, plan administrator, plan sponsor, or named fiduciary, the Policy does not reject 3 UHIC’s role as a fiduciary in all circumstances. An entity may be a fiduciary without 4 formal designation as such. UHIC had the functional role of a fiduciary under the Plan 5 because, as discussed above, the Policy grants UHIC the discretionary authority to grant 6 or deny benefits claims to Plan participants.1 See Mertens, 508 U.S. at 262; Johnson, 572 7 F.3d at 1076. 8 C. 9 Ms. Tuttle contends that Varian did not properly delegate to UHIC the fiduciary 10 Delegation of Fiduciary Responsibility responsibility and consequently, the discretionary authority set out in the Policy. 11 As discussed above, the Policy unambiguously grants discretionary authority to 12 UHIC, as a fiduciary, to make factual and other determinations related to benefits claims. 13 (See id. at 58, 112.) Nevertheless, Ms. Tuttle argues that Varian did not set out 14 procedures in the Policy to confer discretionary authority to an entity and then follow 15 such procedures to confer it on UHIC. That argument misconstrues ERISA’s 16 1 17 18 19 20 The Court has determined that the “ERISA Statement” is not a Plan document. Nevertheless, the Statement is instructive as to the intent of Defendants to confer discretion on UHIC for benefits determinations. The Statement explains that “[Varian] retains all fiduciary responsibilities with respect to the Plan except to the extent [Varian] has delegated or allocated to other persons or entities one or more fiduciary responsibility with respect to the Plan.” (Id. at 167) (emphasis added). The Statement next designates UHIC as the “Claims Fiduciary.” (Id.) Further below, it states that 21 Benefits are paid pursuant to the terms of a group health policy issued and insured by [UHIC] 22 .... 23 The Plan is administered on behalf of the Plan Administrator by [UHIC] pursuant to the terms of the group Policy. [UHIC] provides administrative services for the Plan including claims processing, claims payment, and handling appeals. 24 25 26 27 28 (Id.) The Policy states elsewhere that “administrative” services include determinations of “whether this Benefit plan will pay for any portion of the cost of a health care service [Plan participants] intend to receive or have received.” (Id. at 58.) Thus, the Statement that purports to summarize the Plan is consistent with the finding that under the Plan, UHIC retained fiduciary responsibilities to Plan participants including Ms. Tuttle in matters of claims processing and payment, and related determinations of benefits. - 11 - 1 requirements. ERISA states that “[t]he instrument under which a plan is maintained may 2 expressly provide for procedures” for allocating fiduciary responsibilities among named 3 or other fiduciaries.2 29 U.S.C. § 1105(c)(1). But the instrument may also allocate 4 fiduciary responsibility as well as discretionary authority in ipsum documentum. Id. § 5 1002(21)(A) (“[A] person is a fiduciary with respect to a plan to the extent . . . he has any 6 discretionary authority or discretionary responsibility in the administration of such 7 plan.”). The Policy properly allocated fiduciary responsibility and conferred discretionary 8 authority to UHIC under the Plan.3 9 Ms. Tuttle contends that pursuant to a 2009 Benefits Guide based on the Plan, 10 Varian retained discretionary authority and did not confer it on UHIC.4 She argues that 11 12 2 An example of such language is found in the Policy itself 15 [UHIC] may delegate this discretionary authority to other persons or entities that may provide administrative services for this Benefit plan, such as claims processing. The identity of the service providers and the nature of their services may be changed from time to time in our discretion. In order to receive Benefits, [Plan participants] must cooperate with those service providers. 16 (Doc. 22-1 at 58.) 13 14 3 17 18 19 20 21 22 23 24 25 26 27 28 Ms. Tuttle also argues that authority was not conferred on UHIC because a 2007 policy under the Plan gave discretionary authority only to Varian and did not give Varian the power to delegate it. She refers to relevant provisions in a 2007 Benefit Handbook. She contends that Defendants have not shown that the Plan was thereafter amended pursuant to any disclosed procedures to give Varian the power to delegate that discretionary authority to UHIC in 2009. Even assuming the Handbook is a valid Plan document, Ms. Tuttle again conflates the two methods for conferring authority on fiduciaries: following procedures set out in the written instrument(s) or conferring it in the written instrument itself. Further, the 2007 policy is not relevant in this matter. When reviewing a denial of benefits, the language of the governing written instrument determines which entity retained authority to interpret the disputed terms of the plan and the power to exercise discretion. Gonzales, 861 F. Supp. 2d at 1106 (citing Firestone, 489 U.S. at 111–12). In this case, it is the Policy. 4 The Guide states that Varian has the discretionary authority to control and manage the operation and administration of all of the benefit plans and policies. Varian may make whatever rules, interpretations and computations — and take any other actions to administer the plans and policies — that Varian considers appropriate, as long as the company does not abuse its authority. These rules, interpretations, computations and actions of the company will be binding and conclusive on all persons. - 12 - 1 because the Guide conflicts with the Policy and it is more favorable to her as a Plan 2 participant, citing to Banuelos v. Constr. Laborers’ Trust Funds for S. Cal., 382 F.3d 897 3 (9th Cir. 2004) (“Courts will generally bind ERISA defendants to the more employee- 4 favorable of two conflicting [ERISA plan] documents––even if one is erroneous.”), the 5 Guide should be deemed the written instrument for review of UHIC’s denial of benefits. 6 Defendants argue that the Guide is not a Plan document since it is an open enrollment 7 guide that describes changes for the relevant enrollment year and provides cost and 8 eligibility information and other resources. The Guide states 9 10 11 12 13 This guide does not constitute a legal commitment to provide benefits or an official summary plan description of [the Plan]. This benefits guide provides an overview of the Varian changes for 2009. The official plan documents and contracts for each plan provide the detailed, legal information about your coverage, and are used to determine how and when benefits are paid. 15 If there is any discrepancy between the information in this guide and the official plan documents and contracts, the plan documents and contracts will govern. 16 (Doc. 22-3 (2009 Benefits Guide) at 14.) The Guide gave clear notice to Plan participants 17 that it was not a Plan document. The Court finds that it is not. Therefore, any apparent 18 conflict between the Policy and the Guide is of no consequence in this matter. 14 19 D. 20 Ms. Tuttle asserts that the grant of discretionary authority to UHIC in the Policy is 21 unlawful because of the California Insurance Commissioner’s withdrawal of approval of 22 discretionary clauses in other policies. The Policy states, and Defendants do not dispute, 23 that the Policy is regulated by the California Department of Insurance. (Doc. 22-1 at 3.) 24 Discretionary Clauses Under California Law In 2004, the Commissioner published a Notice stating that it was withdrawing its 25 26 27 28 In addition, Varian reserves the right to amend, modify or terminate any or all of the plans, in whole or in part, at any time and for any reason, at its sole discretion. (Doc. 22-3 (2009 Benefits Guide) at 14.) - 13 - 1 prior approval of policies listed in the Notice because they contained discretionary 2 clauses “that purport to confer on the insurer discretionary authority to determine 3 eligibility for benefits and to interpret the terms and provisions of the policy. Included in 4 this definition are sole discretion clauses, allocation of authority provisions, interpretation 5 of plan provisions and other similar terms.” Cal. Dept. of Ins., Notice to Withdraw 6 Approval 1 (Feb. 27, 2004). The Commissioner reasoned that such clauses render 7 insurance contracts “‘fraudulent or unsound insurance’ within the meaning of [California] 8 Insurance Code § 10291.5” because they make an insurer’s promise to pay benefits 9 “contingent on the unfettered discretion of the insurer, thereby nullifying the promise to 10 pay and rendering the contract potentially illusory.” Id. He also stated that “[i]n the case 11 of . . . disability contracts that are governed by ERISA, the presence of a discretionary 12 clause has the effect of limiting judicial review of a denial of benefits to a review for 13 abuse of discretion” which “deprives California insureds of access to the protections in 14 the Insurance Code and in California law.” Id. at 2. 15 The court in Firestone v. Acuson Corp. Long Term Disability Plan, 326 F. Supp. 16 2d 1040 (N.D. Cal. 2004), considered the impact of the Notice on a group disability 17 insurance policy with a discretionary clause that was not listed in the Notice. The court 18 held that the Notice did not apply to the policy even as persuasive authority. Id. at 1049– 19 51. It reasoned that when the terms of an insurance policy had been approved by the 20 Commissioner, Section 10291.5 (cited in the Notice) did not provide an insured with the 21 right to “reform the nature of his policy and obtain benefits for which he never bargained 22 by engaging courts to second-guess the Commissioner’s approval of the policy.” Id. at 23 1050 (quoting Peterson v. American Life and Health Ins. Co., 48 F.3d 404, 410 (9th Cir.), 24 cert. denied, 516 U.S. 942 (1995)). “Once the Commissioner has approved a plan, ‘an 25 otherwise valid policy is a binding contract and governs the obligations of the parties 26 until the Commissioner revokes his approval.’” Id. at 1050 (quoting Peterson, 48 F.3d at 27 410). The court explained that the appropriate remedy to challenge a discretionary clause 28 in a policy that is offensive under Section 10291.5(b) is to “petition a court for a writ of - 14 - 1 mandamus requiring that the Commissioner rescind her approval of the plan.” Id. at 1050. 2 The Notice is similarly not applicable to the Policy here. The Policy was not listed 3 in the Notice which was published five years earlier. Although Ms. Tuttle seems to 4 contend that the Notice is applicable to policies issued between 2004 and 2012, that is not 5 the case.5 The Notice withdrew approval of only the listed policies and requested all other 6 California insurers to submit policies containing discretionary clauses as of 2004 for the 7 Commissioner’s review. Further, Ms. Tuttle does not argue or show that the 8 Commissioner has rescinded approval of the Policy after its issuance in 2009. She also 9 does not argue that the Policy was never approved by the Commissioner pursuant to 10 California Insurance Code § 10270.9 or that the discretionary clauses are void on public 11 policy grounds in order to avoid their application. See Horn v. Provident Life & Acc. Ins. 12 Co., 351 F. Supp. 2d 954, 964–65 (N.D. Cal. 2004). Therefore, the Notice does not make 13 unlawful the Policy’s grant of discretionary authority to UHIC. CONCLUSION 14 15 The determination of the applicable standard of review in this case depends on 16 whether the Plan granted discretionary authority to the decisionmaker, UHIC, to make 17 benefits decisions. Defendants have shown that the Plan documents, consisting of various 18 sections of the Policy, unambiguously granted such authority to UHIC. They have also 19 shown that the Plan properly delegated that authority to UHIC. Further, Ms. Tuttle has 20 not shown that the discretionary clauses in the Plan were unlawful under California law. 21 Accordingly, the appropriate standard of review is abuse of discretion and not de novo. 22 /// 23 /// 24 25 26 27 5 In 2012, California enacted Insurance Code § 10110.6 making void and unforceable any policy that provides life or disability insurance coverage for any California resident and “contains a provision that reserves discretionary authority to the insurer, . . . to determine eligibility for benefits or coverage, to interpret the terms of the policy, . . . or to provide standards of interpretation or review that are inconsistent with the laws of this state . . . .” The Parties agree that the statute is not applicable to the Policy which was issued in 2009. 28 - 15 - 1 2 3 IT IS THEREFORE ORDERED that Plaintiff Deana Tuttle’s Motion Re: Standard of Review, (Doc. 23), is denied. Dated this 24th day of September, 2013. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 16 -
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