B. v. HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY

Filing 63

OPINION. Signed by Judge Claire C. Cecchi on 8/25/17. (gh, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

RACHEL B,

Civil Action No.: 14-cv-1 153
Plaintiff,
OPINION

V.

HORIZON BLUE CROSS BLUE SHIELD OF
NEW JERSEY,
Defendant.
CECCHI, District Judge.
I.

INTRODUCTION

This matter comes before the Court by way of Defendant Horizon Blue Cross Blue Shield
of New Jersey’s (“Defendant” or “Horizon”) motion for summary judgment,

Fed. R. Civ. P.

56(a),. against Plaintiff Rachel B. (“Plaintiff’) (ECF No. 43); Plaintiffs cross-motion for summary

judgment against Defendant (ECF No. 46); and Plaintiffs motion to determine the administrative
record (ECF No. 47). The Court has considered the submissions made supporting and opposing
the instant motions. The motions are decided without oral argument pursuant to Fed. R. Civ. P.
78(b).’ For the reasons set forth below, Defendant’s motion is GRANTED in part and DENIED
in part; Plaintiffs cross-motion for summary judgment is GRANTED in part and DENIED in part;
and Plaintiffs motion to determine the administrative record is DENIED.
The Court has jurisdiction pursuant to 28 U.S.C.

§ 1331.

‘The Court considers any new arguments not presented by the parties to be waived.
Brenner
v. Local 514, United Bhd. of Carpenters & Joiners of Am., 927 F.2d 1283, 1298 (3d Cir. 1991).
1

II.

BACKGROUND

The parties have submitted briefs, statements of facts pursuant to Local Civil Rule 56.1,
declarations, and exhibits reflecting the following factual background.
Plaintiff brings this action under 29 U.S.C.

§

1 132(a)(1)(B) of the Employee Retirement

Income Security Act of 1974 (“ERISA”), claiming Defendant wrongfully denied her benefits
under an ERISA-covered health plan (the “Plan”) under which she is a covered dependent.
A.

Plaintiffs Health Plan

Plaintiffs Plan covers treatment furnished by a recognized health care provider that is
medically necessary and appropriate. (Def.’s 56.1

¶ 9).

Defendant determines medical necessity

and appropriateness “at its discretion” according to certain criteria.2

( ¶ 7).

Defendant contracted with Magellan Behavioral Health (“Magellan”) to manage the Plan.

( ¶ 26;

Pl.’s 56.1

¶

1$ n.2). The Plan provides claimants an internal appeal process in which

Defendant conducts a two-level internal review of denied claims. (Def.’s 56.1

¶

10). The Plan

also provides an external appeal to an Independent Utilization Management Review Organization
(“IURO”), selected by the New Jersey Department of Banking and Insurance (“DOBI”), for
claimants who first exhaust the internal process. (Id.

¶ 10; Flynn Dccl. Ex. A at HOR-197).

If the

IURO determines Defendant has deprived an insured of medically necessary treatment, it will
inform Defendant and the insured of its determination of what medically necessary treatment the
insured should receive. (Def.’s 56.1

¶

10). The IURO’s treatment plan then becomes binding on

2

These include whether treatment is: “(a) necessary for the symptoms and diagnosis or treatment
of the condition, illness or injury; (b) provided for the diagnosis, or the direct care and treatment,
of the condition, illness or injury; (c) in accordance with generally accepted medical practice; (d)
not for the convenience of a Covered Person; (e) the most appropriate level of medical care the
Covered Person needs; and (f) furnished within the framework of generally accepted methods of
medical management currently used in the United States.” (Flynn Dccl. Ex. A at HOR-174).
2

Horizon and the insured, “except to the extent that other remedies are available to either party
under state or federal law.” (Flynn Deci. Ex. A at HOR-198). The Plan appears to be silent as to
the binding effect on Defendant or an insured if the IURO upholds Defendant’s denial of coverage.
B.

Plaintiffs Hospitalization

Plaintiff has a history of an eating disorder and other mental health issues. On April 4,
2013, Plaintiff, then age 21, was admitted to the Oliver-Pyatt Center (“OPC”) in Miami, Florida,
for partial hospitalization treatment (“PHT”) with overnight boarding. (P1.’s 56.1

¶

¶ 7; Def.’s 56.1

13). There, Plaintiff was diagnosed with “eating disorder not otherwise specified,” anxiety

disorder, attention deficit hyperactivity disorder, and depression. (Pl.’s 56.1

¶ 8).

When admitted,

Plaintiff was five feet, three inches tall and weighed 98.6 pounds, well below what her doctors
deemed to be her ideal body weight. (Id.
purging four to five times per week.

¶ 9).

Plaintiff reported skipping meals and snacks, and

(4 ¶ 10).

When Plaintiff was admitted at OPC, Defendant told Plaintiff and OPC that authorization
was required for PHT. (Def.’s 56.1

¶

April 4 to April 29, 20l3. (Id.

18, 21). On April 25, 2013, Defendant informed OPC and

¶J

17). Defendant provided coverage for PHT at OPC from

Plaintiff it had determined not to cover PHT after April 29 because only an intensive outpatient
plan (“lOP”) was medically necessary. (j

¶

2 1-22). On Plaintiffs behalf, OPC appealed

Defendant’s denial of PHT for dates after April 29. (Id.

¶J 24-25).

OPC did not have a discharge

plan in place because neither of Plaintiffs parents were willing to take Plaintiff into their
respective homes after discharge.

(¶

30). On May 3, 2013, after an expedited appeal and

second level appeal, Defendant affirmed its denial of PHT as no longer medically necessary, but

Defendant initially denied PHT as not medically necessary from April 18 to April 29, but reversed
its decision after an expedited appeal. (Def.’s 56.1 ¶J 20-2 1).
3

covered Plaintiff’s PHT for April 29 to May 2, 2013. (Id.

¶ 38).

Defendant informed Plaintiff of

this decision by letter dated May 3, 2013, in which Defendant stated, “We have approved
continuation of coverage through 05/02/2013 to allow completion of your appeal request.
Continuation of coverage from 05/03/2013 forward remains denied.” (Flynn Deci. Ex. G-2).
C.

External Appeal

On May 6, 2013, Plaintiff appealed Defendant’s denial of PHI coverage to an IURO.
(Def.’s 56.1

¶ 39).

F at HOR-349).

The DOBI assigned the appeal to an entity called Permedion. (Flynn Deci. Ex.
Dr. Lauren Ozbolt, Plaintiffs treating psychiatrist at OPC, submitted to

Defendant a letter dated May 6, 2013 in support of the IURO appeal. (Green Decl. Ex. B at
RachelBO92O-22; Pl.’s 56.1

¶ 50).

This letter states the following:

It has become clear to staff that [Plaintiff] “under reports her
symptoms and struggles.” She has a very superficial understanding
of her illness and often uses concepts in an inappropriate and
inaccurate way. [Plaintiff’s previously undiagnosed Pervasive
Development Disorder] contributes to [Plaintiffs] inability to
manage her distressing and ruminative eating disorder thoughts, as
well as her inability to actively follow through.
At this time, [Plaintiff] shows difficulty in maintaining her personal
living in staff supported housing, and struggles with social
interactions.
Should she step down to a lower level of care, it is
extremely likely that her isolation will not improve, but worsen.
Ability to maintain adequate social support is a self-care skill that
[Plaintiff] is not capable of at this time. If [Plaintiff] were to
discharge from PHP, it is clear that she would quickly decompensate
in the manner that occurred after her discharge from [a previous
treatment facility].
.

.

.

According to all parties who have evaluated [Plaintiff], and
according to American Psychiatric Association criteria, [Plaintiff]
requires support at and after all meals; she requires nutritional
management which is medically monitored; she must have all meals
and calorie intake monitored; she is at high risk for ongoing
restricting and purging. Support at all meals is necessary in order to
be able to continue to restore weight and also not return to her
previous behaviors.
4

[Plaintiff] has been working to build trust with the OPC treatment
team and setting[.] [B]ecause of the high frequency of sessions, and
the highly individualized treatment team approach[,] a disruption to
her treatment would be highly destabilizing to her.... This would
most certainly not result in progression toward recovery; rather it
would create disruption and likely cause an exacerbation of
depression and worsening of her eating disorder.
(Green Decl. Ex. B at RachelBO92O-21).
On May 8, 2013, Permedion upheld Defendant’s finding that PHT was no longer medically
necessary. (Def.’s 56.1

¶ 40). In a section labeled “Reviewer’s Findings,” Permedion noted that

Plaintiff “has improved substantially during the course of her stay and there is no indication that
she could not be safely and effectively treated at a less intensive level of care.” (Flynn Decl. Ex.
F at HOR-359). It further stated “[t]he information submitted for review in sum does not indicate
why she could not be safely and effectively managed in the context of an lOP.”

(). Permedion

found “[t]here is no indication that this enrollee is partially motivated” in her treatment, and
“nothing in the records submitted to indicate that the enrollee has not been adherent to the dietary
plan or that there has been any other problem behavior.” (I4 at HOR-360). Permedion’s report
does not address Dr. Ozbolt’s letter except to list it as a document it reviewed.4 (I at HOR-358-

Permedion indicates that it reviewed the following documents:
• 5-6-13, letter to Permedion from State of New Jersey Department of Banking and Insurance
(NJ DOBI)
• Document entitled: Application for the Independent Health Care Appeals Program
• Document entitled: Summary of Case
• 5-3-13, letter to enrollee from Horizon
• 5-2-13, letter to Horizon from Karin R. Lawson, Psy.D.; Oliver-Pyatt Centers
• 4-30-13, letter to enrollee from Louis Parrott, MD, Ph.D., Magellan Behavioral Health
(Magellan)
• 4-30-13, letter to enrollee from Larel Doty; Magellan
• Document entitled: Magellan Health Services 2013 Universal PA Template; Initial Review
Recommendation (Physician Advisor Review or Administrative Appeal)
• Document entitled: Horizon Level 2 Expedited/Standard Appeal Summary
• Document entitled: Partial Hospitalization, Eating Disorders; Criteria for Admission
5

60). Defendant informed Plaintiff of its intent to abide by Permedion’s decision in a letter dated
May 9, 2013, stating: “the request for partial hospitalization from 5/03/13 forward at Oliver Pratt
[sic] Center has been denied and will remain denied. Please be advised that this is the final level
of appeal available to you.” (Flynn Decl. Ex. G-3).
D.

Plaintiff’s Continued Treatment at OPC

Notwithstanding Defendant’s denial of PHT from May 3 onward, Plaintiff continued PHT
at OPC until she was discharged on July 3, 2013 and transitioned to an lOP. (Pl.’s 56.1

¶ 60, 67).

During her stay at OPC, she continued to struggle with her eating disorder and other psychological
conditions.

( ¶J 61-66).

Plaintiff submitted claims to Defendant seeking coverage of Plaintiffs

PHI takingplace on May 3, 9, 10, 11, and 12, 2013. (Def.’s 56.1

¶ 43).

Plaintiff submitted some

of these claims even after Defendant had informed Plaintiff in the May 9 letter of its decision to
abide by Permedion’s final determination. (Id.

¶J 43-44).

PHT to Defendant for dates after May 12, 2013. (Id.
III.

Plaintiff never submitted claims for

¶ 45).

LEGAL STANDARD
Summary judgment is appropriate if the “depositions, documents, electronically stored

information, affidavits or declarations, stipulations.

.

.

admissions, interrogatory answers, or other

materials” demonstrate that there is no genuine issue as to any material fact, and, construing all
facts and inferences in a light most favorable to the non-moving party, “the moving party is entitled

•
•
•
•

5-7-13, letter from enrollee’s father to Permedion
5-6-13, letter from Oliver-Pyatt Centers to Horizon from Lauren Ozbolt, MD
Document entitled Client Facesheet
Document entitled “All Progress notes for a Patient via Date Range From 05/03/2013 to
05/07/2013.”
• 05/06/2013 Psychiatric Progress Notes
(Flynn DecI. Ex. F at HOR-358).
6

to ajudgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.s. 317, 330 (1986); Pollock v.
Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986).
The moving party has the initial burden of proving the absence of a genuine issue of
material fact. See Celotex, 477 U.S. at 323. Once the moving party meets this burden, the nonmoving party has the burden of identifying specific facts to show that, to the contrary, a genuine
issue of material fact exists for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586-87 (1986). In order to meet its burden, the nonmoving party must “go beyond the
pleadings and by [its] own affidavits, or by the ‘depositions, answers to interrogatories, and
admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.”
Celotex, 477 U.S. at 324; see also Big Apple BMW. Inc. v. BMW of N. Am., Inc., 974 F.2d 1358,
1363 (3d Cir. 1992) (“To raise a genuine issue of material fact,” the opponent must “exceed the

‘mere scintilla’ threshold

.

.

.

.“).

An issue is “genuine” if it is supported by evidence such that a

reasonable jury could return a verdict in the nonmoving party’s favor. Anderson v. Liberty Lobby
Inc., 477 U.S. 242, 248 (1986). A fact is “material” if, under the governing substantive law, a
dispute about the fact might affect the outcome of the suit. Id. In considering a motion for
summary judgment, a district court may not make credibility determinations or engage in any
weighing of the evidence; instead, the non-moving party’s evidence “is to be believed and all
justifiable inferences are to be drawn in his favor.” Marino v. Indus. Crating Co., 358 F.3d 241,
247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).
IV.

DISCUSSION
A.

Appropriate Standard of Review on Summary Judgment

First, the Court must determine the standard of review for the denial ofPlaintilfs benefits.
The Court agrees with Defendant that an arbitrary and capricious standard applies.

7

A challenge to the denial of benefits under 29 U.S.C.

§ 1 132(a)(1)(B) “is to be 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 terms of the plan.” Doroshow v.
Hartford Life & Accident Ins.

Co., 574 F.3d 230, 234 (3d Cir. 2009) (quoting Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). “When the administrator has discretionary
authority to determine eligibility for benefits.. the decision must be reviewed under an arbitrary
.

and capricious standard.”

“Whether a plan administrator’s exercise of power is mandatory or

discretionary depends upon the terms of the plan,” which are “construed without deferring to either
party’s interpretation.” Luby v. Teamsters Health, Welfare & Pension Trust funds, 944 F.2d 1176,
1180 (3d Cir. 1991). “Discretionary powers maybe implied by a plan’s terms even if not granted
expressly.”

Moreover, the arbitrary and capricious standard only applies if discretionary

authority is actually used. Gritzer v. CBS, Inc., 275 f.3d 291, 296 (3d Cir. 2002) (“[I]t is the
trustee’s analysis, not his or her right to use discretion or a mere arbitrary denial, to which a court
should defer.”). The arbitrary and capricious standard also applies to independent persons or
entities exercising discretionary authority granted to them under the terms of the ERISA plan. $.cc
çg, Werbier v. Horizon Blue Cross & Blue Shield of N.J., No. 05-cv-3528, 2006 WL 3511181,
at *3 (D.N.J. Dec. 5, 2006) (“Because the Defendant’s Plan gave an unaffihiated physician assigned
by the IURO full discretion to determine eligibility for benefits, the Court will apply the arbitrary
and capricious standard of review.”).
Plaintiff does not appear to argue that Defendant lacked discretionary authority. Indeed,
the terms of the Plan delegate discretion to Defendant to determine medical necessity, and a
medical necessity determination was made here. See supra Part II.A. Rather, Plaintiff contends
Defendant did not exercise its discretionary authority under the Plan because Permedion, which

8

Plaintiff contends had no discretion under the Plan, made the final decision to deny Plaintiffs
claims. (P1.’s Br.5 at 19-22). The Court disagrees, for several reasons.6
First, Permedion did have discretion under the Plan, which it exercised in upholding the
denial of Plaintiffs claims. The Plan provides for an external appeal to an IURO selected by the
DOBI (Def.’s 56.1

¶ 10; Flynn Deci. Ex. A at HOR-197), whose decision is binding on Defendant

and the claimant if it reverses the denial of benefits. (Flynn Deci. Ex. A at HOR- 198). The purpose
of this review is for the IURO to determine whether Defendant denied an insured medically
necessary care. (Id. at HOR-197-98). This constitutes a grant of discretion to the IURO. Here,
Permedion was the IURO that the DOBI selected. (P1.’s 56.1

¶J 49, 52).

Second, Plaintiff cites no case law supporting the proposition that the Plan’s provision for
an external appeal divests Defendant of discretionary authority, and the Court is aware of none.
To the contrary, case law in this Circuit shows the arbitrary and capricious standard is still
applicable even when a plan administrator or trustee’s denial of benefits is subject to an external
appeal. See, e.g., Mirsky v. Horizon Blue Cross & Blue Shield of N.J., No. 11-cv-203$, 2013 WL
5503659, at *2..4 (D.N.J. Sept. 30, 2013) (applying arbitrary and capricious standard to final
determination by an IURO); Hurst v. Siemens Corp. Grp. Ins., 42 F. Supp. 3d 714 (E.D. Pa. 2014)
(same); Kohn v. AETNA, No. 12-cv-2920, 2013 WL 1903346, at *2 (D.N.J. May 6, 2013) (same);
Werbler, 2006 WL 3511181, at *3 (same).
Finally, Defendant exercised discretionary authority as well. Because Permedion upheld
Defendant’s denial, its determination ultimately appears not to have been binding on Defendant.

Unless otherwise specified, references to briefs are to the parties’ submissions regarding the
motion and cross-motion for summary judgment.
6

The Court expresses no opinion as to whether the parties’ stipulation that the “arbitrary and
capricious” standard of review applies to this case (ECF No. 19) is binding on the Court.
9

(Flynn Dccl. Ex. A at HOR- 198). Thus, Defendant could have reversed its denial of Plaintiffs
claims, but chose not to do so.
B.

Motion to Determine the Administrative Record

Next, before conducting its review of the decision to deny Plaintiffs claims, the Court
addresses Plaintiffs motion to determine the administrative record. Specifically, Plaintiff lists a
series of Bates ranges from Defendant’s and her document productions that Plaintiff contends
“comprise the administrative record to be reviewed by the Court” and moves for the Court to deem
these documents to be the administrative record.

Plaintiff also moves to exclude from the

administrative record two documents Defendant has submitted in support of its motion, namely,
the Declaration of Michelle Ganguly and Horizon’s February 2013 Health Care Professional
Manual, because neither was included in Defendant’s initial disclosures pursuant to Fed. R. Civ.
P. 26(a)(1)(A)(i), and were not “generated or considered during the course of the appeals
determination.” (Br. in Supp. of Pl.’s Mot. to Determine the Admin. Record at 5-6).
“The administrative record in an ERISA action..

.

.

simply consists of the evidence that

was before the plan administrator when it made the decision being reviewed.”

Bicknell v.

Lockheed Martin Grp. Benefits Plan, 410 F. App’x 570, 577 n.8 (3d Cir. 2011) (citing Mitchell v.
Eastman Kodak, 113 F.3d 433, 440 (3d Cir. 1997)). “Materials that the parties failed to put before
the administrator are not usually relevant to the inquiry of whether the administrator abused its
discretion.” Howley v. Mellon Fin. Corp., 625 F.3d 788, 793 (3d Cir. 2010). However, the Court
may consider evidence outside the administrative record for certain purposes, such as evidence of
the administrator’s “biases and conflicts of interest.” Id. at 793-94 (internal quotation omitted).
Here, both parties have submitted evidence that was not before Defendant or Permedion
when Plaintiffs claims and appeals were denied—that is, evidence that is not part of the

10

administrative record.

Bicknell, 410 F. App’x at 577 n.8. To the extent Plaintiff moves for

the Court to deem evidence to be part of the administrative record that was not before Defendant
or Permedion, this is inappropriate. To the extent Plaintiff moves for the Court to deem evidence
that was before Defendant or Permedion to be part of the administrative record, this is unnecessary.
To the extent Plaintiff moves to exclude from the administrative record evidence submitted by
Defendant in support of its summary judgment motion, this is also unnecessary, because the Court
will not treat such evidence as though it was before the administrator if it was not.
This ruling does not preclude the Court from considering evidence outside the
administrative record for certain permissible purposes if it is admissible for those purposes under
the Federal Rules of Evidence and Civil Procedure, including Fed. R. Civ. P. 26(a)(1)(A)(i).
Accordingly, Plaintiffs motion to determine the administrative record is denied.
C.

Whether Denial was Arbitrary and Capricious

“An administrator’s decision is arbitrary and capricious if it is without reason, unsupported
by substantial evidence orerroneous as a matter of law.” Miller v. Am. Airlines, Inc., 632 F.3d
837, 845 (3d Cir. 2011) (internal quotations omitted). The Court “is not free to substitute its own
judgment for that of the defendants in determining eligibility for plan benefits.” Doroshow, 574
F.3d at 234 (internal quotation omitted). Although “[a]dministrators of ERISA plans are not
required to defer to the opinions of a participant’s treating physicians[,] Ricca v. Prudential Ins.
Co. of Aim, 747 F. Supp. 2d 43$, 444 (E.D. Pa. 2010) (citing Black & Decker Disability Plan v.
Nord, 538 U.S. 822, 831 (2003)), they “may not arbitrarily refuse to credit a claimant’s reliable
evidence, including the opinions of a treating physician.” Nord, 53$ U.S. at 834. The Court’s
review focuses on the “final, post-appeal decision[.]” Funk v. CIGNA Grp. Ins., 648 F.3d 182,
191 n.H (3d Cir. 2011) (abrogated on other grounds by Montanile v. Bd. of Trustees of Nat’l

11

Elevator Industry Health Benefit Plan, 136 S. Ct. 651(2016)). Because Defendant makes different
arguments for treatment taking place during different time periods, the Court separately considers
three periods of time for which Plaintiff received PHI: from April 30 to May 2, 2013; from May
3 to May 12, 2013, and from May 13, 2013 until Plaintiffs discharge on July 3, 2013.
1.

April30toMay2,2013

The parties agree Defendant covered Plaintiffs PHT for these dates. ($çç Def.’s 56.1

¶ 38).

Summary judgment for Defendant is warranted because Plaintiff was not denied benefits.
2.

May3toMay 12,2013

Defendant contends its denial of Plaintiffs PHT for these dates was not arbitrary and
capricious.

Plaintiff counters that Defendant and Permedion acted improperly in affirming

Defendant’s denial of PHT by (1) failing to address Dr. Ozbolt’s May 6, 2013 letter indicating
Plaintiff continued to need PHI; (2) applying the wrong definition of medical necessity; and (3)
relying on a paper review of Plaintiffs condition rather than giving her a psychiatric evaluation.
The Court agrees with Plaintiff that Permedion acted arbitrarily and capriciously by failing
to account for Dr. Ozbolt’s May 6, 2013 letter, which repeatedly undermines Peimedion’ s findings.
First, the “Reviewer’s Findings” section of Permedion’s report stated there was “no
indication” Plaintiff could not be treated at a lower level of care. (Flynn Decl. Ex. F at HOR-359).
Yet, Dr. Ozbolt wrote that “[i]f [Plaintiff] were to discharge from PHP, it is clear that she would
quickly decompensate[,]” that “a disruption to her treatment would

.

.

.

.

likely cause an

exacerbation of depression and worsening of her eating disorder[,]” and that “[s]hould she step
down to a lower level of care, it is extremely likely that her isolation will not improve, but worsen.”
(Green Decl. Ex. B at RachelBO92 1). Permedion also found no indication Plaintiff “could not be
safely and effectively managed in the context of an TOP.” (Flynn Decl. Ex. F at HOR-359). Dr.

12

Ozbolt, on the other hand, wrote that “[s]upport at all meals is necessary in order to be able to
continue to restore weight and also not return to her previous behaviors{,]” which apparently is not
possible in an lOP. (Green Decl. Ex. B at RachelBO92l).
Next, Permedion found “[t]here is no indication that this enrollee is partially motivated” in
her treatment. (Flynn Deci. Ex. F at HOR-360). To the contrary, Dr. Ozbolt indicated Plaintiff
“under reports her symptoms and struggles’

..

.

has a very superficial understanding of her illness

and often uses concepts in an inappropriate and inaccurate way[,]” which gives rise to “her inability
to actively follow through” with treatment. (Green Deci. Ex. B at RachelBO92l).
Finally, Permedion found that “nothing in the records submitted to indicate that the enrollee
has not been adherent to the dietary plan or that there has been any other problem behavior.”
(Flynn Decl. Ex. F at HOR-360). Dr. Ozbolt’s letter calls this finding into question by attributing
Plaintiffs adherence to the plan to OPC’s management and supervision rather than Plaintiffs
personal improvement. (Green Decl. Ex. B at RachelBO92O-21).
“An administrator may not selectively consider and credit medical opinions without
articulating its thought processes for doing so.” Ricca, 747 F. Supp. 2d at 445. Permedion’s
repeated failure to explain its implicit rejections of Dr. Ozbolt’ s opinions and observations was
arbitrary and capricious.

(arbitrary and capricious for administrator not to “discuss the

reasons why probative evidence supporting plaintiffs claim was discounted or rejected” and to
“accept the opinions and conclusions of its experts without explanation”). Accordingly, summary
judgment in Plaintiffs favor is warranted for claims filed from May 3 to May 12, 2Ol3.

Thus, the Court does not reach the question of whether Defendant or Permedion acted arbitrarily
and capriciously by applying the wrong definition of medical necessity or by relying on a paper
review of Plaintiffs condition rather than giving her a psychiatric evaluation.
‘

13

3.

May 13 through July 3, 2013

Defendant argues it is entitled to summary judgment for PHT that Plaintiff received during
these dates because Plaintiff never submitted claims for the treatment. The Court agrees.
Plaintiffs seeking to enforce the terms of an ERISA benefit plan are required to exhaust
plan remedies before filing suit. D’Amico v. CBS Corp., 297 F.3d 287, 290-91 (3d Cir. 2002).
By failing to submit claims to Defendant for treatment dates on and afier May 13, 2013, Plaintiff
failed to exhaust Plan remedies as required before filing an ERISA claim for denied benefits.
Plaintiff does not argue that she exhausted remedies for these dates. Instead, Plaintiff
argues exhaustion was futile. (Pl.’s Br. at 22-25). Plaintiff focuses on the language in Defendant’s
May 9, 2013 letter indicating that “the request for partial hospitalization from 5/03/13 forward at
Oliver Pratt [sic] Center has been denied and will remain denied.” (Flynn Decl. Ex. G-3). Plaintiff
contends the word “forward” indicates Defendant had determined unequivocally that it would not
cover Plaintiffs PHT in the future, rendering Plaintiffs future claims submissions unnecessary.
(P1.’s Br. at 22-23). The Court finds this argument unpersuasive.
A plaintiff “is excused from exhausting administrative procedures under ERISA if it would

be futile to do so [,]“ if she makes a “clear and positive showing of futility.” Harrow v. Prudential
Ins. Co. of Am., 279 F.3d 244, 249 (3d Cir. 2002) (internal quotations omitted). To decide whether
a plaintiff has made this showing, the Court considers: “(1) whether plaintiff diligently pursued
administrative relief; (2) whether plaintiff acted reasonably in seeking immediate judicial review
under the circumstances; (3) existence of a fixed policy denying benefits; (4) failure of the
insurance company to comply with its own internal administrative procedures; and (5) testimony
of plan administrators that any administrative appeal was futile.” Id. at 250.

14

All five Harrow factors weigh against the Court finding exhaustion to be futile. The first
and second factors weigh against futility because Plaintiff did not pursue administrative relief for
the denial of coverage for treatment on and after May 13, 2013, thus denying Defendant an
opportunity to review more current information about Plaintiff’s condition and reevaluate whether
PHT had become necessary in the interim. The third factor weighs against futility because Plaintiff
provides no evidence of a fixed policy denying benefits; indeed, Defendant had twice previously
reversed its decision not to cover earlier dates for Plaintiffs PHT. The fourth and fifth factors
weigh against futility because Plaintiff submits no evidence Defendant failed to comply with its
own internal administrative procedures, and no testimony of plan administrators.
In light of all five Harrow factors weighing against Plaintiff, the May 9, 2013 letter is
insufficient by itself to allow Plaintiff to make a clear and positive showing of futility. Although
the language “from 5/03/13 forward” could perhaps be interpreted to mean Defendant would not
reconsider approving PHT in the future, even if Plaintiff submitted new medical testimony or
evidence of changed circumstances, it is not at all “clear” or “positive” this is what Defendant
meant. Even Plaintiff seems initially not to have understood “from 5/03/13 forward” to mean “in
perpetuity” because Plaintiff continued to submit claims for PHT for several days after this letter
was sent. (Def.’s 56.1

¶J 43-44).

Therefore, Plaintiff cannot meet its burden to show futility.

Nor does the Court agree with Plaintiffs argument that her failure to submit claims is
excused because under the “notice prejudice” rule Defendant suffered no prejudice. (Pl.’s Br. at
25-26 (citing,

UNUM Life Ins. Co. v. Ward, 526 U.S. 358 (1999)). The “notice-prejudice

rule” is a rule based in state law8 that limits an insurer’s ability to assert a defense that it received

8

The parties do not address which state’s notice-prejudice rule applies. Plaintiff cites cases (ç
Pl.’s Br. at 25 n.15) applying California’s rule, which requires the insurer to show it “suffered
substantial prejudice” from the untimely notice, see Ward, 526 U.S. at 366-67 (internal quotation
15

untimely notice of an insured’s claim. Ward, 526 U.S. at 366-67. The Supreme Court in Ward
held that California’s notice-prejudice rule applied in an ERISA case. j, at 3 68-78.
First, this rule seems to apply in cases in which notice to the insurer was late, not where it
was never given. Plaintiffs cited cases all support this proposition. $ç Ward, 526 U.S. at 363;
Trs. of Univ. of Penn., 815 F.2d at 895; Pavelovskyv. UNUM Provident Corp., No. 05-cv-1029,
2006 WL 208995$, at *1 & n.1 (W.D. Pa. July 25, 2006); Foley v. Int’l Blid. of Elec. Workers
Local Union 98 Pension Fund, 91 F. Supp. 2d 797, 802-03 (E.D. Pa. 2000); Garcia v. Fortis
Benefits Ins. Co., No. 99-cv-826, 2000 WL 92340, at *$.9 (E.D. Pa. Jan. 24, 2000). This rule
limits an insurer’s ability to mount a late notice defense, not a lack of notice defense. See, e.g.,
Ward, 526 U.S. at 364 (under California’s rule “an insurer cannot avoid liability although the proof
of claim is untimely, unless the insurer shows it was prejudiced by the delay” (emphasis added)).
Second, Defendant has, in fact, been prejudiced by Plaintiffs failure to submit claims for
treatment dated May 13, 2013 and later. By failing to notify Defendant of its claims before filing
this lawsuit, Plaintiff bypassed the Plan’s administrative process through which Defendant could

omitted), and Pennsylvania’s rule, requiring the insurer to show “actual prejudice.” Trs. of Univ.
of Penn. v. Lexington Ins. Co., $15 F.2d 890, 896 (3d Cir. 1987). However, neither California nor
Pennsylvania law has any apparent connection to this case.
In New Jersey, Defendant’s home state, the insurer “must show a likelihood of appreciable
prejudice to prevail on a late notice defense[.]” British Ins. Co. of Cayman v. Safety Nat’l Cas.,
335 F.3d 205, 212 (3d Cir. 2003) (citing Cooperv. Gov’t Emps. Ins. Co., 51 N.J. 86(1968); Pfizer,
Inc. v. Emp’rs Ins, of Wausau, 154 N.J. 187 (1998)). Plaintiffs home state of New York, by
contrast, does not put the burden on the insurer to show prejudice. Unigard Sec. Ins. Co. v. N.
River Ins. Co., 79 N.Y.2d 576, 581 (1992). Neither does Florida, where Plaintiff was treated. Am.
Fire & Cas. Co. v. Collura, 163 So.2d 784, 792-93 (Fla. Dist. Ct. App. 1964). Nevertheless, the
Court is satisfied no choice-of-law analysis is necessary here. As explained below, the Court finds
that, notwithstanding the notice-prejudice rule articulated in Plaintiffs brief, Plaintiffs failure to
exhaust the Plan’s remedies is not excused here because Plaintiff never gave notice to Defendant
about these claims, and because Defendant was in fact prejudiced. None of these three states’ rules
appears to exempt a plaintiff from ERISA’s exhaustion requirements on these facts. Thus, the
outcome is the same whether New York, New Jersey, or Florida law applies.
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have produced a written decision that the Court likely would have evaluated under the deferential
“arbitrary and capricious” standard. See supra Part IV.A. Moreover, the lack of notice effectively
denied Defendant the opportunity to examine Plaintiff from May 13 through July 3, 2013 and
scrutinize her treating physicians’ conclusions. Thus, by failing to submit these claims, Plaintiff
has made it much more difficult for Defendant to defend its determination that Plaintiff’s PHT
from May 13 through July 3, 2013 was not medically necessary under the Plan.
Thus, notwithstanding the notice-prejudice rule Plaintiff cites, Plaintiff was still required
to exhaust its administrative remedies under the Plan. Plaintiffs failure to do so warrants summary
judgment in Defendant’s favor with respect to Plaintiffs coverage from May 13 to June 3, 2013.
D.

Rule 56(d)

The Court may deny or defer a motion for summary judgment if “a nonmovant shows by
affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its
opposition.” Fed. R. Civ. P. 56(d). Plaintiff contends Defendant’s summary judgment motion
should he denied or deferred because there is outstanding discovery with respect to facts essential
to Plaintiffs opposition. (Pl.’s Br. at 35-36). Specifically, Plaintiff claims she cannot oppose the
motion before she deposes Ms. Ganguly, receives unredacted copies of the reports of Drs. Harrops
and O’Donnell, and learns the identity of the reviewer at Permedion who reviewed Plaintiffs
external appeal. (Id.). The Court disagrees.
The Court has reviewed Ms. Ganguly’s declaration (Flynn Dccl. Ex. B), and the only
information contained therein having any bearing on this Court’s decision is her contention that
Plaintiff filed no claims with Defendant on or after May 13, 2013, a fact Plaintiff does not dispute.
Thus, it is not apparent how deposing Ms. Ganguly would help Plaintiff defeat summary judgment.

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Drs. Harrops and O’Donnell conducted two of Defendant’s internal appeals of the denial
of Plaintiffs PHT from May 3, 2013 onward. (Flynn Deci. Exs. D and E). The Court is already
granting summary judgment in Plaintiffs favor for the period between May 3 and May 12, 2013,
and it is not apparent how unredacted copies of these reports would help Plaintiff defeat summary
judgment on the administrative exhaustion issue.
The identity of the Permedion reviewer was the subject of a discovery dispute before
Magistrate Judge Waldor that has been resolved since the briefing of the present motions. Judge
Waldor ruled on December 12, 2016 that Permedion could not be compelled to disclose the
reviewer’s name. (ECF No. 55). Plaintiff has not appealed Judge Waldor’s December 12 order to
the undersigned.

Because prolonging discovery will not eventually yield this information,

Plaintiffs Rule 56(d) motion with respect to the Permedion reviewer’s identity is now moot.
E.

Remedy

Having determined that Defendant acted arbitrarily and capriciously in denying Plaintiffs
PHT for dates between May 3 and May 12, 2013, the Court “may decide whether to remand its
decision to the administrator or directly grant.

.

.

benefits.” Fisher v. Aetna Life Ins. Co., $90 F.

Supp. 2d 473, 485-86 (D. Del. 2012) (citing Carney v. Int’l Bhd. Of Elec. Workers Local Union
Pension fund, 66 F. App’x 381, 386-87 (3d Cir. 2003)). The Court has “considerable discretion’
in deciding the appropriate remedy.”

Moskalski v. Bayer Corp., No. 06-cv-56$, 200$ WL

2096892, at *10 (W.D. Pa. May 16, 200$) (quoting Kaelin v. Tenet Emp. Benefit Plan, No. 04-cv2871, 2006 WL 2382005, at *10 (E.D. Pa. Aug. 16, 2006); accord Dunn v. Reed Grp. Inc., No.
0$-cv-1632, 2009 WL 2848662, at *19 (D.N.J. Sept. 2, 2009). Remand is appropriate when “the
plan administrator has ‘fail[ed] to make adequate findings or to explain adequately the grounds of
[its] decision.” Dunn, 2009 WL 2848662, at *19 (quoting Caldwell v. Life Ins. Co. of N. Am.,

18

287 f.3d 1276, 1288 (10th Cir. 2002) (alterations in original); accord Moskaiski, 2008 WL
2096892, at *10.
Here, Permedion’s report, which Defendant adopted, did not adequately explain why it did
not credit Dr. Ozbolt’s letter, which largely contradicted its finding that PHT was not medically
necessary and appropriate on and after May 3, 2013. See supra Part IV.C.2. In light of the “general
preference that eligibility to benefits be determined by the plan, rather than the courts[,]”
Moskaiski, 2008 WL 2096892, at * 10, the Court is reluctant on this record to hold affirmatively
that Plaintiffs PHT was medically necessary and appropriate from May 3 to May 12, 2013. Cf
Hirsh v. Boeing Health & Welfare Benefit Plan, 943 F. Supp. 2d 512, 524 (E.D. Pa. 2012)
(remanding to administrator for “re-evaluation” when “we cannot discern from the record before
us how long after [the date that coverage ceased] A.H. may have continued to require the care
provided”).

Therefore, the Court remands this matter for Defendant to conduct further

administrative review with respect to Plaintiffs claims for May 3 through May 12, 2013,
consistent with this Opinion.
V.

CONCLUSION
For the foregoing reasons, the motions are decided as follows:
Defendant’s motion for summary judgment (ECF No. 43) is DENIED with respect to

treatment taking place between May 3 and May 12, 2013, and GRANTED in all other respects.
Plaintiffs motion to determine the administrative record (ECF No. 47) is DENIED.
Plaintiffs cross-motion for summary judgment (ECF No. 46) is GRANTED in that the
Court finds Defendant’s denial of benefits between May 3 and May 12, 2013 was arbitrary and
capricious. This matter is remanded to Defendant for further administrative proceedings consistent
with this Opinion. Plaintiffs cross-motion is DENIED in all other respects.

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An appropriate Order accompanies this Opinion.

s/Claire C. Cecchi
CLAIRE C. CECCHI, U.S.D.J.
Dated: August 25, 2017

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