Brian H. et. al. v. Blue Shield of California

Filing 78

ORDER DENYING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY ADJUDICATION RE: STANDARD OF REVIEW; DIRECTIONS TO PARTIES. The Court, taking into account all relevant factors, will review Blue Shield's decision for abuse of discretion. The parties shall, no later than November 16, 2018, submit a proposed schedule for the filing of their respective briefs and hearing on the merits. Signed by Judge Maxine M. Chesney on November 1, 2018. (mmclc2, COURT STAFF) (Filed on 11/1/2018)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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BRIAN H. and ALEX H.,
Plaintiffs,

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United States District Court
Northern District of California

Case No. 17-cv-03095-MMC

v.

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BLUE SHIELD OF CALIFORNIA, et al.,

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Defendants.

ORDER DENYING PLAINTIFFS’
MOTION FOR PARTIAL SUMMARY
ADJUDICATION RE: STANDARD OF
REVIEW; DIRECTIONS TO PARTIES
Re: Dkt. No. 73

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Before the Court is plaintiffs Brian H.and Alex H.’s “Motion for Partial Summary

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Adjudication re: Standard of Review,” filed August 24, 2018, by which motion plaintiffs

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ask the Court to review de novo, rather than for an abuse of discretion, a decision to deny

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them benefits under an ERISA plan. Defendants1 have filed opposition, to which plaintiffs

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have replied. Having read and considered the papers filed in support of and in opposition

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to the motion, the Court rules as follows.

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1.

The ERISA plan here at issue, the Blue Shield PPO Health Plan

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(hereinafter, “the Plan”), contains language sufficient to grant Blue Shield, the plan

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administrator, discretionary authority to determine eligibility for and entitlement to benefits

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thereunder. (See Administrative Record (hereinafter “AR”) at BSC000059 (providing

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Defendants are California Physicians’ Service dba Blue Shield of California
(hereinafter, “Blue Shield”); Trinet Group, Inc. Section 125, Section 129, and Flexible
Spending Account Plan; and Trinet Group, Inc.
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“Blue Shield shall have the power and authority to construe and interpret the provisions of

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this Plan, to determine the Benefits of this Plan and determine eligibility to receive

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Benefits under this Plan”)); 2 see also, e.g., Bergt v. Ret. Plan for Pilots Employed by

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Markair, Inc., 293 F.3d 1139, 1142 (9th Cir. 2002) (holding plan “unambiguously” gave

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“broad discretion” to plan administrator by granting plan administrator “‘power’ and ‘duty’

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to ‘interpret the plan and to resolve ambiguities, inconsistencies and omissions’ and to

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‘decide on questions concerning the plan and the eligibility of any Employee’”).

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2.

Contrary to plaintiffs’ argument, § 10110.6 of the California Insurance Code,

which precludes enforcement of a discretionary clause in a “policy . . . that provides or
funds life insurance or disability insurance coverage,” see Cal. Ins. Code § 10110.6(a), is

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United States District Court
Northern District of California

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not applicable, as the Plan provides health insurance. (See AR at BSC 000021); Bain v.

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United Healthcare Inc., 2016 WL 4529495, at *9 (N.D. Cal. Aug. 30, 2016) (holding

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“Section 10110.6 does not void the discretionary clause” where coverage is provided by

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“a health care service plan and not a disability insurance policy”).3

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3.

Contrary to plaintiffs’ argument, the “ultimate decisionmaker” (see Mot. at

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6:6) was not Blue Shield’s Mental Health Administrator (hereinafter, “MHSA”), to which

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discretionary authority arguably has not been granted. Although the initial decision

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denying plaintiffs’ claims was made by MHSA (see AR at BSC000022, BSC000825-26),

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the final decision was made by Blue Shield (see id. at BSC000060-61, BSC000827-28,

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BSC001740-42), to which, as discussed above, discretionary authority has been

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granted.4

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While not conceding the above-quoted language suffices to grant discretionary
authority, plaintiffs have not argued to the contrary.
Although one district court has held a health plan’s discretionary clause void
under § 10110.6, see Mahlon D. v. Cigna Health & Life Ins. Co., 291 F. Supp. 3d 1029,
1031, 1033 (N.D. Cal. 2018) (finding “health insurance is a form of disability insurance for
purposes of the California Insurance Code”), the Court finds the reasoning set forth in
Bain more persuasive. See Bain, 2016 WL 4529495, at *7-9.
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Contrary to plaintiffs’ argument, raised for the first time in their Reply, the
decision by Blue Shield did considerably more than “restate the determination of MHSA”
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4.

Contrary to plaintiffs’ argument, Blue Shield’s decision denying plaintiffs’

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claims does not constitute a “gross deviation from the Plan terms” (see Mot. at 3:4-28,

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4:1-4, 7:3), nor did Blue Shield “utterly fail[] to follow applicable procedures” (see id. at

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7:6-7). In particular, contrary to plaintiff’s argument, nothing in the Plan precludes Blue

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Shield from applying the “Magellan Medical Necessity Criteria Guidelines” in determining

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whether services are “medically necessary” under the Plan. (See AR at BSC000067-68

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(broadly defining “Medically Necessary”)); see also Abatie v. Alta Health & Life Ins. Co.,

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458 F.3d 955, 971 (9th Cir. 2006) (holding de novo review applies “[w]hen an

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administrator engages in wholesale and flagrant violations of the procedural requirements

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United States District Court
Northern District of California

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of ERISA, and thus acts in utter disregard of the underlying purpose of the plan”).
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Contrary to plaintiff’s argument, the existence of a structural conflict of

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interest, i.e. where, as here, the same entity “acts as both the plan administrator and the

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funding source for benefits,” see Abatie, 458 F.3d at 965, does not require the Court to

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review Blue Shield’s denial of plaintiffs’ claims with “heightened skepticism” (see Reply at

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8:8-10). Rather, although a structural conflict should be weighed as a “factor” in

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determining whether a plan administrator has abused its discretion, see Metropolitan Life

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Ins. Co. v. Glenn, 554 U.S. 105, 115 (2008), courts need not accord such factor

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significant weight in the absence of evidence of bias. See Abatie, 458 F.3d at 968

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(holding level of skepticism by which court views decision by administrator with structural

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conflict “may be low” if conflict “unaccompanied, for example, by any evidence of malice,

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of self-dealing, or of a parsimonious claims-granting history”). At this stage of the

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proceedings, no such additional evidence has been offered.
CONCLUSION

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For the reasons set forth herein, plaintiffs’ motion is hereby DENIED. The Court,

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taking into account all relevant factors, will review Blue Shield’s decision for abuse of

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discretion.

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(see Reply at 9:17). (See AR at BSC 001740-41, BSC002182-89.)
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In light of the above, the parties are hereby DIRECTED to submit, no later than

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November 16, 2018, a proposed schedule for the filing of their respective briefs and

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hearing on the merits.

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IT IS SO ORDERED.

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Dated: November 1, 2018
MAXINE M. CHESNEY
United States District Judge

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United States District Court
Northern District of California

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