A man was a participant in his employer’s self-funded benefit plan. His son was a beneficiary under the plan. The plan considered one source of insurance coverage “primary” and another source of coverage “secondary.” If the plan was primary, its benefits were determined before those of another plan. The benefits of the other plan were not considered. When the plan was secondary, its benefits were determined after those of the other plan. In such a case, the plan's benefits may be reduced because of the other plan's benefits.
Of particular relevance, this plan contained a provision outlining the effect of No–Fault Auto Insurance vis-à-vis coverage under the plan, which stated that first-party auto insurance coverage was considered primary. The plan coordinated the benefits payable under the plan with the first-party benefits that the automobile insurance paid or would have paid without regard to fault for the same covered expenses. This also applied to the extent first-party auto insurance coverage was legally required but not in force.
The plan also contained a provision (labeled “Information and Records”) that explained the consequences of failing to provide the claims administrator with necessary information and documentation that stated that at times the claims administrator may need additional information from the participants. The participants agreed to furnish all information and proofs that may reasonably be required regarding any matters pertaining to the plan. If the participants did not provide this information when it was requested, payment of benefits may be delayed or denied.
The man’s son was seriously injured in an automobile accident and hospitalized. The man submitted numerous medical claims for his son’s treatment to the claims administrator. The claims administrator requested information from the man about the applicability of any no-fault insurance coverage and stopped processing his claims until it received this information.
Rather than provide the claims administrator with any of the requested information about the applicability or not of no-fault insurance coverage, the man brought a putative class action against the insurer. The complaint alleged that the claims administrator wrongfully denied him and other similarly situated individuals medical benefits in violation of the Employee Retirement Income Security Act (ERISA). First, he asserted claims under ERISA § 502(a)(1)(B), 29 U.S.C.A. § 1132(a)(1)(B), to “recover all unpaid, properly submitted medical expenses incurred under the clear terms of the plan or policy, and all statutory, equitable, or remedial relief as deemed appropriate[.]” Second, he brought a claim under ERISA § 502(a)(3), 29 U.S.C.A. § 1132(a)(3), which provided a cause of action for injunctive or equitable relief for breach of fiduciary duty.
The United States District Court for the Southern District of Texas dismissed both of his ERISA claims for failure to state a claim. First addressing the claim that the claims administrator breached its fiduciary duty in violation of ERISA § 502(a)(3), the district court held that this claim could not be maintained given that the man had an adequate mechanism for redress of denied benefits under section 502(a)(1)(B). Second, the district court concluded that the man failed to state a claim under section 502(a)(1)(B) given that the claims administrator acted in accordance with the express terms of the plan.
The Eight Circuit United States Court of Appeals affirmed. The court held that the man failed to state a claim under section 502(a)(1)(B), that the claims administrator wrongfully denied medical benefits in violation of the plan, and the man’s claim under 502(a)(3) that the claims administrator breached its fiduciary duty failed.
The man failed to state a claim under section 502(a)(1)(B) that the claims administrator wrongfully denied medical benefits in violation of the plan. The materials attached to his amended complaint establish that the claims administrator acted in accordance with the plan's terms when it stopped processing of his claims subject to receiving information related to no-fault insurance coverage. The man's conclusory allegation that the claims administrator improperly “denied” his benefits was insufficient to survive dismissal because it was contradicted by the documents attached to his first amended complaint.
The man’s claim under 502(a)(3) that the claims administrator breached its fiduciary duty failed. In Tolson v. Avondale Indus. Inc., 141 F.3d 604, 610 (5th Cir.1998), the Fifth Circuit held that plaintiffs may only sue for breach of fiduciary duty for personal recovery when no other appropriate equitable relief was available. Because the man had adequate relief available for the alleged improper denial of benefits through his right to sue the plan directly under 1132(a)(1), relief through the application of Section 1132(a)(3) would be inappropriate.
The Eighth Circuit United States Court of Appeals affirmed the district court's dismissal of the man’s claims against the insurer.
See: Hollingshead v. Aetna Health Inc., 2014 WL 5560255 (C.A.5 (Tex.), November 4, 2014) (not designated for publication).