Ravannack v. United HealthCare Insurance Company

Filing 34

ORDER AND REASONS denying 17 Motion for Partial Summary Judgment. The parties may file additional briefing as outlined in this Order. Signed by Judge Jane Triche Milazzo. (ecm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
JOCEL RAVANNACK

CIVIL ACTION

VERSUS

NO: 14–2542

UNITED HEALTHCARE
INSURANCE COMPANY

SECTION: "H"(3)

ORDER AND REASONS
Before the Court is Defendant's Motion for Partial Summary Judgment
(Doc. 17). For the following reasons, the Motion is DENIED. The Court also
gives notice to the parties that it is considering granting partial summary
judgment to Plaintiff pursuant to Rule 56(f). In light of this notice, the parties
may file additional briefing as outlined in this order.
BACKGROUND
Plaintiff Jocel Ravannack filed this action in Louisiana state court seeking
judicial review of Defendant United Healthcase's denial of health insurance
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benefits. Defendant removed the action to this Court, contending that the health
insurance plan at issue was governed by the Employee Retiree Income Security
Ace of 1974 ("ERISA"). In response to this Court's case management order, the
parties stipulated that ERISA governed the plan at issue (Doc. 15). The parties
do not agree, however, on the appropriate standard of review in this case.
Accordingly, Defendant filed the instant Motion asking this Court to determine
the appropriate standard.
LAW AND ANALYSIS
Summary judgment is appropriate "if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law."1 A genuine issue of fact exists only
"if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party."2 Because the standard of review applicable to an ERISA case
is a pure question of law,3 summary judgment is an appropriate vehicle for
raising the issue.
It is well settled that ERISA benefit denials are "reviewed under a de novo
standard unless the benefit plan gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits or to construe the
1

Fed. R. Civ. P. 56(c) (2012).

2

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

3

Branson v. Greyhound Lines, Inc., Amalgamated Council Ret. & Disability Plan, 126
F.3d 747, 756 (5th Cir. 1997).

2

terms of the plan."4

"Discretionary authority cannot be implied; an

administrator has no discretion to determine eligibility or interpret the plan
unless the plan language expressly confers such authority on the
administrator."5 The plan need not contain any specific "magic words" granting
discretion to the administrator.6 Rather, the Court must consider the plan
language as a whole, focusing on the breadth of the administrator's power.7
The crux of this dispute turns on the effect of an amendment to the plan.
The amendment, labeled "Discretionary Clause Amendment," removed almost
every reference to discretion in the plan documents. For example, prior to the
amendment, Section 8 of the plan, entitled "General Legal Provisions," read, in
pertinent part:
Interpretation of Benefits
We have the discretion in accordance with state and
federal law, to do all of the following:
• Interpret Benefits under the Policy.
• 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.
• Make factual determinations related to the
Policy and its Benefits.
We may delegate this discretionary authority to other
persons or entities that provide services in regard to the
4

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).

5

Wildbur v. ARCO Chem. Co., 974 F.2d 631, 636 (5th Cir. 1992).

6

Id. at 637.

7

Id.

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administration of the Policy.
In certain circumstances, for purposes of overall cost
savings or efficiency, we may, in our discretion, offer
Benefits for services that would otherwise not be
Covered Health Services. The fact that we do so in any
particular case shall not in any way be deemed to
require us to do so in other similar cases.8
The "Discretionary Clause Amendment" replaced "We have the discretion" with
"We will" in the first sentence and deleted the other two references to discretion
entirely.9
Defendant has not offered any explanation for this amendment, but it
insists that it had no effect on the plan terms. In other words, Defendant
contends that an amendment deleting almost every reference to its discretion
had no effect on the broad discretion conferred by the plan.

Defendant's

argument is belied not only by the plain terms of the amendment but, more
importantly, by Texas law.
The plan specifically provides that,
We are delivering the Policy in the State of Texas. The
Policy is governed by ERISA unless the Enrolling
Group is not an employee welfare benefit plan as
defined by ERISA. To the extent that state law applies,
the laws of the State of Texas are the laws that govern
the Policy.10
Texas state law prohibits the inclusion of discretionary clauses in insurance
8

Doc. 21-2, p. 97–98 (bold in original, italics added).

9

Id. at 133.

10

Id. at 35.

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policies.11

Specifically, the Texas Administrative Code provides that the

"[i]nclusion of a discretionary clause in any form to which this subchapter
applies is prohibited."12 The Code defines a discretionary clause as, inter alia,
a clause that "gives rise to a standard of review in any appeal process that gives
deference to the original claim decision."13 The ban on discretionary clauses
clearly applies to the policy at issue.14
Texas is not the only state to enact such a ban. In fact, nearly half of all
states either ban or restrict the use of discretionary clauses in insurance
policies.15 Furthermore, every federal decision that this Court could locate has
enforced state law bans on discretionary clauses against ERISA plans.16
11

28 Tex. Admin. Code § 3.1201, 3.1202, 3.1203.

12

28 Tex. Admin. Code § 3.1203.

13

28 Tex. Admin. Code § 3.1202.

14

28 Tex. Admin. Code § 3.1201 provides that the ban applies to any policy to which the
Texas Insurance Code applies. The Texas Insurance Code expressly applies to all policies of
health or accident insurance issued in Texas. Tex. Ins. Code Ann. § 1701.002. The plan at
issue here explicitly states that the policy is issued in Texas. Doc. 21-2, p. 35.
15

See D. Andrew Portinga & Claire Madill, Conflicts of Laws and State Law Bans
Discretionary Clauses Under ERISA, 55 No. 12 DRI For Def. 46 (collecting authorities).
16

Standard Ins. Co. v. Morrison, 584 F.3d 837, 845 (9th Cir. 2009) (holding that
Montana Insurance Commissioner's practice of refusing to approve insurance policies
containing discretionary clauses was not preempted by ERISA); Am. Council of Life Insurers
v. Ross, 558 F.3d 600, 609 (6th Cir. 2009) (holding that Michigan insurance regulation
prohibiting discretionary clause is not preempted by ERISA); Novak v. Life Ins. Co. of N. Am.,
956 F. Supp. 2d 900, 909 (N.D. Ill. 2013) (holding that Illinois insurance regulation prevented
ERISA plan from granting authority to plan administrator); Murray v. Anderson Bjornstad
Kane Jacobs, Inc., No. 10-484, 2011 WL 617384, at *4 (W.D. Wash. Feb. 10, 2011) (holding that
Washington insurance regulation prevented ERISA plan from granting authority to plan
administrator); see also Hancock v. Metro. Life Ins. Co., 590 F.3d 1141, 1149 (10th Cir. 2009)
(implying, in dicta, that a blanket ban on discretionary clauses would be enforceable against
ERISA plans).

5

In light of the foregoing, it appears clear to this Court that the
"Discretionary Clause Amendment" was intended to bring the plan in line with
Texas state law banning discretionary clauses. Defendant's argument that the
amendment had no effect on its discretionary authority seems questionable at
best. Even if the Court were inclined to accept this argument, it is clear that
insurance policies delivered in Texas may not grant discretionary authority to
plan administrators. Therefore, the Court is inclined to hold that, pursuant to
Texas law, the plan does not grant "discretionary authority to determine
eligibility for benefits or to construe the terms of the plan."17 If the Court were
to so hold, the administrator's decision would be reviewed de novo.
There exists one procedural obstacle to the Court's ruling.

While

Defendant moved the Court to hold that the abuse of discretion standard
applied, Plaintiff made no motion to hold otherwise. Nonetheless, Rule 56(f)
permits the Court to grant summary judgment to a nonmovant "after giving
notice and a reasonable time to respond."18 Because the grounds identified by
the Court in this Order were not fully briefed by the parties, the Court will grant
the parties an opportunity for further briefing. Accordingly, Defendant may file
a brief, no later than 20 days from the issuance of this order. If Defendant files
such a brief, Plaintiff may file a reply within 10 days. If Defendant fails to file
a timely brief, the Court will issue an order granting partial summary judgment
to Plaintiff on this issue and holding that the standard of review is de novo.

17

Firestone, 489 U.S. at 115.

18

Fed. R. Civ. Pro. 56(f).

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CONCLUSION
For the foregoing reasons, the Motion is DENIED. The Court notifies the
parties that it is considering granting summary judgment sua sponte to Plaintiff
pursuant to Rule 56(f) on the issue discussed in this Order. Accordingly, the
parties may file additional briefing as outlined in this Order.
New Orleans, Louisiana, this 15th day of May, 2015.

___________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE

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