Every month, the International Foundation releases the Legal and Legislative Reporter, a compilation of new employee benefits-related case summaries. Below is a summary we thought you’d be interested in. Content provided by Morgan, Lewis & Bockius LLP.
The U.S. District Court for the Southern District of Ohio denies the defendant claims administrator’s motion to dismiss because there are sufficient facts to support a claim against it.
The plaintiff is a participant in an employee welfare benefit plan sponsored and maintained by his employer. The defendant is the third-party claims administrator of the plan. The plan is governed by the Employee Retirement Income Security Act of 1974 (ERISA).
The plan is self-funded, meaning that all benefits funding is derived from the plan sponsor’s general assets and employee premium contributions. The plan also excludes coverage for the care and treatment of injuries or sickness that arise from work for wages or profit, including self-employment an occupational exclusion. Here, in addition to working for the plan sponsor, the plaintiff owns and operates a farm for profit and also raises and butchers cattle for personal consumption. The plaintiff was injured when a calf (he purchased and raised for personal use) kicked his ankle. The plaintiff’s injured ankle required immediate surgery. The plaintiff sought to have his medical claim covered by the plan; however, the defendant denied his claim under the occupational exclusion. The plaintiff appealed this determination, and the defendant reaffirmed its denial of coverage. The defendant also requested that the plaintiff respond to certain questions explaining the injury and potential applicability of the plan, which the plaintiff provided. Upon receipt of the plaintiff’s responses, the defendant confirmed the denial of the claim based on the occupational exclusion. The plaintiff appealed and was denied one final time before bringing this suit under ERISA Section 502(a)(1)(B).
Under ERISA, fiduciary status applies broadly to those who act with discretion with respect to management of the plan or control over the disposition of the plan’s assets. The defendant moved to dismiss the plaintiff’s complaint, arguing that it is not a fiduciary, and thus is not an appropriate defendant. The plaintiff counters that as a claims administrator, the defendant exercised control or influence over the decision to deny the plaintiff’s claim for benefits, thereby making the defendant a fiduciary. To survive a motion to dismiss, the complaint must state a claim for relief that is plausible on its face. Here, the court finds that the plaintiff does state a plausible claim against the defendant.
The court notes that the determination of a proper defendant in claim denial actions under ERISA has been debated. The court points to a Supreme Court decision that is instructive despite addressing a different section of ERISA, Section 502(a)(3). In that case, the Supreme Court concluded that an action under the relevant provision could be maintained against a nonfiduciary because it does not specifically limit who can be a defendant. The Supreme Court also referenced another section of ERISA that permits the Secretary of Labor to bring civil actions against individuals who participate in a fiduciary’s violation, which compels the conclusion that an individual can be a proper defendant under ERISA, and that being a defendant is not necessarily conditioned on being explicitly subject to one of ERISA’s substantive provisions.
The court applies the Supreme Court’s logic to this case and the relevant ERISA provision, Section 502(a)(1)(B). The court explains that Section 502(a)(1)(B) similarly does not limit the possible defendants. Even though the defendant argues that it had no obligations to the plaintiff, the court rejects this position because the pertinent question is whether the defendant played a role in controlling or influencing the decision to deny the plaintiff’s benefits. Taking the plaintiff’s allegations as true, the court finds that the plan sponsor played no role in denying the plaintiff’s benefits. Instead, the defendant had broad discretionary authority to construe and interpret the plan, make eligibility determinations, and resolve disputes. Here, the defendant received the plaintiff’s claim and appeals and responded to each directly. Furthermore, the plan assigns responsibility to first-level appeals to the plan sponsor and the defendant. Consequently, the court finds that there is some degree of authority delegated to the defendant, and that the defendant exercised sufficient control over the plan administration to support a claim against it. Therefore, the court finds that there are sufficient facts to support the plaintiff’s claim against the defendant under ERISA.
Accordingly, the court denies the defendant’s motion to dismiss.
Stover v. CareFactor, No. 2:22-cv-01789-SDM-CMV (S.D. Ohio, January 9, 2023).
