L. et al v. Aetna Life Insurance Company

Filing 36

Order by Hon. Samuel Conti granting 24 Motion to Dismiss.(sclc2, COURT STAFF) (Filed on 12/17/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court

For the Northern District of California

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) Case No. C 13-2554 SC
)
ELIZABETH L., JAMES L., and
) ORDER GRANTING MOTION TO
OLIVIA L., individually and as ) DISMISS
representatives of the class of )
similarly situated individuals; )
and L.M. and N.M. as guardians )
of M.M., and as representatives )
of the class of similarly
)
situated individuals;
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Plaintiffs,
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v.
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AETNA LIFE INSURANCE CO.,
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)
Defendant.
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)
)

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I.

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INTRODUCTION
Now before the Court is Defendant Aetna Life Insurance Co.'s

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("Defendant") motion to dismiss the above-captioned Plaintiffs'

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complaint.

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briefed.

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ECF Nos. 1 ("Compl."), 24 ("MTD").
ECF Nos. 27 ("Opp'n"), 1 29 ("Reply").

The motion is fully
The Court finds it

In addition to their opposition brief, Plaintiffs attach a
declaration from an insurance appeal specialist. They claim that
this declaration merely fleshes out their complaint's allegations
and illustrates facts they intend to prove. The Court finds
otherwise. The declaration asserts new facts not pled in the

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appropriate for decision without oral argument.

Civ. L.R. 7-1(b).

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For the reasons explained below, the Court GRANTS Defendant's

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motion to dismiss, with leave to amend.

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5 II.

BACKGROUND

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This is a putative class action concerning an insurance

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dispute, in which Plaintiffs challenge Defendant's denials of

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coverage under two different employer-sponsored health benefits

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plans. 2

See Compl. ¶¶ 1-4.

Plaintiffs Olivia L. and M.M. (the

United States District Court

For the Northern District of California

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"Treated Plaintiffs") obtained residential mental health treatment

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at two different treatment facilities located in Utah, and

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Defendant, which administrated or insured the benefits plans,

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denied coverage for those stays because it found that the

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residential treatment facilities did not satisfy the plans'

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coverage criteria.

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Specifically, Defendant stated that the facilities in question were

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not staffed 24/7 with licensed mental health professionals,

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contrary to the plans' language.

Id. ¶¶ 1-4, 26-27, 30, 32, 34, 42-47.

The central issue is whether coverage under Defendant's

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policies requires a licensed "Behavioral Health

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Provider/Practitioner" ("BHP") to be on-site 24/7 at the

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residential treatment facility, in addition to the facility being

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licensed to provide on-site mental health services.

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maintains that the plans make clear that these are two distinct

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Defendant

complaint and is therefore improper. Schneider v. Cal. Dep't of
Corrections, 151 F.3d 1194, 1197 n.1 (9th Cir. 1998). The Court
accordingly STRIKES it.
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The plans are distinct, but the disputed language is the same in
each. Accordingly the parties and the Court address the plans
together.

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requirements.

Plaintiffs assert that the residential treatment

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facility itself should qualify as a covered BHP, essentially

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merging the two requirements, or at least that the relevant

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language is ambiguous.

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residential treatment facilities in question were staffed 24/7 by

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licensed mental health professionals.

Plaintiffs do not allege that the

Based on this dispute, Plaintiffs assert two causes of action

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against Defendant.

The first is a claim for benefits under 29

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U.S.C. § 1132(a)(1)(B), a provision of the Employee Retirement

United States District Court

For the Northern District of California

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Income Security Act ("ERISA").

The second is a claim for

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declaratory and injunctive relief.

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resolution of the central issue described above.

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to dismiss.

Both claims depend on
Defendant moves

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LEGAL STANDARD

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A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 679 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

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Threadbare recitals of the

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statements, do not suffice."

Id. (citing Bell Atl. Corp. v.

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Twombly, 550 U.S. 544, 555 (2007)).

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complaint must be both "sufficiently detailed to give fair notice

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to the opposing party of the nature of the claim so that the party

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may effectively defend against it" and "sufficiently plausible"

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such that "it is not unfair to require the opposing party to be

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subjected to the expense of discovery."

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1202, 1216 (9th Cir. 2011). 3

The allegations made in a

Starr v. Baca, 652 F.3d

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United States District Court

For the Northern District of California

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DISCUSSION

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Plaintiffs' case depends on how the plans' terms are to be

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interpreted.

Defendant attached summaries of the plans to its

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motion to dismiss, ECF No. 24 ("Sparks Decl.") Exs. A, B, and the

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Court takes judicial notice of them as being incorporated by

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reference into Plaintiffs' Complaint.

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relevant policy provisions at issue in this case -- the plans'

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definitions of "Residential Treatment Facility" and BHP -- state:

Fed. R. Evid. 201.

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Residential Treatment Facility (Mental Disorders)

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The two

This is an institution that meets all of the
following requirements:

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On-site licensed Behavioral Health Provider 24
hours per day/7 days a week. 4
Provides a comprehensive patient assessment
(preferably before admission, but at least upon

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The Court declines to address the parties' dispute over which
ERISA standard of review -- de novo or abuse of discretion -should apply in this case. Even on a de novo standard, the Court
concludes (as explained below) that Defendant's policy is
unambiguous, and Defendant's interpretation of its terms is
correct. Accordingly, the Court GRANTS the Plaintiffs' motion to
file a sur-reply, ECF No. 33, but finds it non-dispositive.
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In reference to this bullet point's being the basis of
Plaintiffs' exclusion for coverage, the parties and the Court call
it the "24/7 Exclusion."

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United States District Court

For the Northern District of California

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admission).
Is admitted by a Physician.
Has access to necessary medical services 24
hours per day/7 days a week.
Provides living arrangements that foster
community living and peer interaction that are
consistent with developmental needs.
Offers group therapy sessions with at least an
RN or Masters-Level Health Professional.
Has the ability to involve family/support
systems in therapy (required for children and
adolescents; encouraged for adults).
Provides access to at least weekly sessions
with a Psychiatrist or psychologist for
individual psychotherapy.
Has peer oriented activities.
Services are managed by a licensed Behavioral
Health Provider who, while not needing to be
individually contracted, needs to (1) meet the
Aetna credentialing criteria as an individual
practictioner, and (2) function under the
direction/supervision of a licensed
psychiatrist (Medical Director).
Has individualized active treatment plan
directed toward the alleviation of the
impairment that caused the admission.
Provides a level of skilled intervention
consistent with patient risk.
Meets any and all applicable licensing
standards established by the jurisdiction in
which it is located.
Is not a Wilderness Treatment Program or any
such related or similar program, school and/or
education service.

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Behavioral Health Provider/Practitioner
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A licensed organization or professional
providing diagnostic, therapeutic or
psychological services for behavioral health
conditions.

MTD at 5-6.
To state a claim for benefits under ERISA, plan participants

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and beneficiaries have to plead facts making it plausible that a

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provider owes benefits under the plan.

See 29 U.S.C. §

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1132(a)(1)(B); Iqbal, 556 U.S. at 677.

In interpreting an ERISA

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plan, the Court must apply contract principles derived from state

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law, guided by policies expressed in ERISA and other federal labor

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law.

Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d

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982, 985 (9th Cir. 1997).

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the plan's terms in an ordinary and popular sense, as would a

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person of average intelligence and experience.

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v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir. 1990)).

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resolving disputes over ERISA plans, the Court must look first to

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the agreement's specific language and determine the parties' clear

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intent, relative to the context giving rise to the language's

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inclusion. Id. (citing Armistead v. Vernitron Corp., 944 F.2d 1287,

In doing so, the Court must interpret

Id. (citing Evans

United States District Court

For the Northern District of California

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1293 (6th Cir. 1991)).

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provision consistently with the entire document such that no

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provision is rendered nugatory.

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F.3d 1189, 1194 (9th Cir. 2007) (citing Richardson, 112 F.3d at

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In

Finally, the Court must construe each

985).

Gilliam v. Nev. Power Co., 488

The Court does not find any of Plaintiffs' arguments

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compelling.

First, Plaintiffs' interpretation of the plan's plain

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language does not comport with any logical or legal interpretation

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of the plan language.

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not appear to support their argument in any event.

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remaining arguments are also unconvincing.

Second, Plaintiffs' reading of Utah law does
Plaintiffs'

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A.

Plain Language and Interpretation Under ERISA

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Plaintiffs contend that because the definition of BHP includes

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the phrase "licensed organization or professional," a residential

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treatment center licensed under Utah law -- like the centers where

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the Treated Plaintiffs stayed 5 -- counts as a BHP that satisfies

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the Residential Treatment Facility definition's requirement that

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The parties do not dispute that these facilities were licensed
under Utah law, or that Utah law is applicable to the parties'
licensure disputes.

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such facilities provide an "[o]n-site licensed Behavioral Health

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Provider 24 hours per day/7 days a week."

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argument is based on Plaintiffs' contention that the plans' plain

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terms comport with Plaintiffs' interpretation, points of Utah

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licensing law (discussed below) aside.

Opp'n at 10-15.

This

On a basic level, Plaintiffs' arguments fail to rebut the

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plain interpretation of Defendant's plans' two separate

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requirements that (1) a covered facility must be licensed by the

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state where it is located and (2) licensed BHPs must be on-site

United States District Court

For the Northern District of California

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24/7.

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on-site licensed organization per the definition of BHP, as

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Plaintiffs submit, then there would be no reason for the plans'

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language to include the 24/7 Exclusion because satisfaction of the

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plans' licensing requirement would always satisfy the 24/7 BHP

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requirement.

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interpret ERISA plans such that no provision is nugatory).

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Plaintiffs' reading would render the plans' distinct requirements

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nugatory and incomprehensible, since it would not account for

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Defendant's having clearly set out two different provisions and

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defined terms in the requirements.

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If the licensed residential treatment facility is itself the

Richardson, 112 F.3d at 985 (requiring courts to

As a matter of law, the Court finds that Plaintiffs' reading

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does not suit an interpretation of the plan's terms in an ordinary

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and popular sense.

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correct.

Defendant's interpretation of the terms is

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B.

"Organizations" and Utah Law

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The parties also dispute whether Utah law allows residential

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treatment facilities to qualify as licensed BHPs under Defendant's

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plans.

Opp'n at 12; MTD at 11 & n.7.

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In an attempt to avoid the

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basic failing described above, Plaintiffs apply a complicated set

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of Utah licensing rules providing for the licensure of residential

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treatment facilities staffed by mental health professionals, with

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unlicensed professionals being supervised at all times by the

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licensed staff.

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can be a BHP simply by meeting Utah's licensing requirements -- the

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facility would be licensed, and it "provides" mental health

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services in a way, so according to Plaintiffs, it meets all of the

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plans' requirements.

Plaintiffs therefore argue that a facility itself

Id. at 12-14 (citing Utah Admin. Code Section

United States District Court

For the Northern District of California

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R510-19-5, -10, -12).

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exclusive interpretation of its plans would render the BHP

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definition's distinction of "organizations" and "professionals"

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superfluous.

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Plaintiffs also contend that Defendant's

This argument is not convincing.

Plaintiffs are correct that

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the definition of BHP includes organizations that provide

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diagnostic, therapeutic, or psychological services for behavioral

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health conditions.

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Utah licenses the operation of residential treatment facilities

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like the ones at issue in this case, and that licensed facilities

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must employ licensed mental health professionals, at least some of

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whom must be responsible for supervising any unlicensed staff.

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(citing relevant rules).

Opp'n at 11-12.

They are also correct that

Id.

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However, Plaintiffs still do not overcome the basic

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interpretative problem in their argument, as discussed above.

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the licensed mental health therapy professionals are always on-

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site, then the facilities would always comport with both Utah

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licensing law and the plan's 24/7 requirements, and this point of

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argument would be unnecessary.

If

If a facility's staff ever provided

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mental health therapy services absent the supervision of a licensed

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clinical professional, the treatment facility would contravene both

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Utah licensing law and the plans' terms requiring 24/7 care.

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Admin. Code § R501-19-1 (unlicensed residential treatment facility

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staff must be supervised by licensed professionals); Utah Code §§

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58-60-109(1)(a), -111(1) (unlicensed practice of mental health

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therapy is a felony).

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provide mental health therapy services absent its staff.

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finds Plaintiffs' argument here unconvincing.

United States District Court

For the Northern District of California

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Utah

And obviously, a facility alone cannot
The Court

It relies on far-

fetched and illogical readings of the plans in relation to the law.
Finally, forbidding the facility itself to qualify as a

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covered BHP does not render nugatory the "organizations" or

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"professionals" distinction in the plans' language.

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notes, the term "organization" must be read in context, and in

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context, "organizations" here can refer to licensed professional

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practice groups.

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continues to exclude Plaintiffs' convoluted defense of its

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facilities-alone argument while still supporting the legal and

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analytical distinction between organizations and professionals

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under the plans.

As Defendant

This interpretation is reasonable, and it

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C.

Ambiguity and Remaining Arguments

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The Court also finds that the plans' terms are unambiguous.

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Ambiguity exists only when an ERISA plan's provisions are subject

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to two reasonable competing definitions.

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Co., 167 F.3d 502, 507 (9th Cir. 2007).

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average person of ordinary intelligence and experience could

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reasonably believe Plaintiffs' interpretation of the plan's

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language.

The Court is not convinced.

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Deegan v. Cont'l Cas.
Plaintiffs claim that an

Plaintiffs' interpretation

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is convoluted and unreasonable.

The plan clearly sets out a list

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of different requirements that an average person would understand

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to be separate and non-duplicative, not recursive and confusing.
Finally, the Court rejects Plaintiffs' other interpretive

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arguments.

First, the doctrine of contra proferentem -- the

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contractual doctrine stating that a contract's terms must be

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construed against the drafter, here Defendant -- does not apply

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here.

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Co., 910 F.2d 534, 539-540 (9th Cir. 1990) (doctrine applies when

There is no ambiguity.

See Kunin v. Benefit Trust Life Ins.

United States District Court

For the Northern District of California

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terms are ambiguous).

Second, Plaintiffs' contention that the plan

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should be interpreted according to their "reasonable expectations"

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fails because the exclusion was conspicuous.

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Baker Med. Trust, 35 F.3d 382, 387) (9th Cir. 1994) (conspicuous

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exclusions rebut the "reasonable expectations" argument).

Saltarelli v. Bob

Accordingly, Plaintiffs' ERISA claim is DISMISSED.

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Plaintiffs' claim for declaratory and injunctive relief is also

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DISMISSED because it relies on the same theory as the ERISA claim.

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Both dismissals are without prejudice, so that Plaintiffs can plead

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facts concerning the 24/7 Exclusion or otherwise amend their

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pleadings to render their claims plausible.

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V.

CONCLUSION
As explained above, Defendant Aetna Life Insurance Co.'s

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motion to dismiss the above-captioned Plaintiffs' complaint is

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GRANTED, and the complaint is DISMISSED with leave to amend.

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Plaintiffs have thirty (30) days to file an amended complaint.

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they do not do so, the Court may dismiss this action with

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prejudice.

If

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IT IS SO ORDERED.

United States District Court

For the Northern District of California

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Dated: December 17, 2013

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UNITED STATES DISTRICT JUDGE

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