COHEN, M.D., F.A.C.S. v. BLUE CROSS BLUE SHIELD OF ILLINOIS et al
Filing
24
OPINION filed. Signed by Judge Anne E. Thompson on 4/11/2012. (eaj)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
Dr. Jason M. COHEN, M.D., F.A.C.S., as
authorized representative of W.Y. and C.Y., as
assignee of W.Y. and C.Y., and W.Y. and C.Y.
Civ. No. 11-7270
Plaintiffs,
OPINION
v.
BLUE CROSS BLUE SHIELD OF ILLINOIS
and AON, INC.,
Defendants.
THOMPSON, U.S.D.J.
This matter has come before the Court on Defendant Aon Corporation’s (“Aon”) Motion
to Dismiss [15] the Complaint [1] filed by Plaintiffs, Dr. Jason M. Cohen, M.D., F.A.C.S., as
authorized representative and assignee of W.Y. and C.Y. (“Cohen”), W.Y. and C.Y.
(collectively, “Plaintiffs”). Defendant Blue Cross Blue Shield of Illinois (“BCBS”) (Aon and
BCBS collectively, “Defendants”) has joined Aon’s Motion [21]. The Plaintiffs oppose the
Defendants’ motion [22]. The Court has decided this motion after considering the submissions
of the parties and without oral arguments pursuant to Federal Rule of Civil Procedure 78(b). For
the following reasons Defendants’ motion will be denied.
I.
BACKGROUND
The Court accepts as true for purposes of deciding this motion all of the Plaintiffs’ wellpleaded factual allegations. See Fowler v. UMPC Shadyside, 578 F.3d 203, 210–11 (3d Cir.
2009). Cohen is a board certified spinal surgeon who performed spinal surgery on C.Y. on June
13, 2011. (Compl. ¶¶ 1, 2(a)). At the time that this surgery was performed, C.Y. was insured by
BCBS. (Id. ¶ 2(a)). W.Y. is C.Y.’s husband and is a plan member of the Defendants’ insurance
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agreement and plan (“the Plan”). (Id. ¶ 2(b)). Aon is both W.Y.’s employer and Plan sponsor.
(Id. ¶ 2(c)).
Prior to performing the surgery, Cohen sought prior approval from Defendants to perform
the services and was approved. (Id. ¶ 5). After performing surgery on C.Y., Cohen sought
payment from Defendants in the amount of $290,553.00 under C.Y.’s plan I.D.#
AON847536384 for the “out of network” services that he performed. (Id. ¶¶ 3–4, 11). In
addition, C.Y. assigned his right to payment under the Plan to Cohen and also designated Cohen
as his authorized representative to appeal any adverse determination of Defendants on her behalf.
(Id. ¶¶ 9–10). Eventually, the claim for C.Y. was received and designated as claim #
780118155119820H. (Id. ¶ 12). BCBS made a single payment on this claim number in the
amount of $25,445.96, which was then paid to Cohen. (Id. ¶ 13). Cohen filed an appeal on July
26, 2011 with BCBS on behalf of C.Y.’s claim, but this appeal was denied via a form letter dated
August 28, 2011. (Id. ¶¶ 16, 21). Defendants did not provide to Plaintiffs an explanation of the
procedure for further appeal in this letter. (Id. ¶ 22). Plaintiffs also claim to “have exhausted all
administrative remedies with Defendant and/or are excused from this requirement in accordance
with 29 C.F.R. 2560.503-1.” (Id. ¶ 24).
Count One of the Complaint raises a claim under § 502(a) of the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1101, et seq. Count Two alleges a breach
of fiduciary duty by Defendants under ERISA for failing to comply with 29 C.F.R. 2560.503-1.
Defendant Aon has now moved to dismiss these claims, arguing that Plaintiffs failed to exhaust
the administrative remedies available under the plan.
II.
LEGAL STANDARD
On a motion to dismiss for failure to state a claim, a “defendant bears the burden of
showing that no claim has been presented.” Hedges v. United States, 404 F.3d 744, 750 (3d Cir.
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2005). When considering a Rule 12(b)(6) motion, a district court should conduct a three-part
analysis. Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). “First, the court must ‘take note
of the elements a plaintiff must plead to state a claim.’” Id. (quoting Ashcroft v. Iqbal, --- U.S. --, 129 S. Ct. 1937, 1947 (2009)). Second, the court must accept as true all of a plaintiff’s wellpleaded factual allegations and construe the complaint in the light most favorable to the plaintiff.
Fowler, 578 F.3d at 210–11. But, the court should disregard any conclusory allegations
proffered in the complaint. Id. Finally, once the well-pleaded facts have been identified and the
conclusory allegations ignored, a court must next determine whether the “facts are sufficient to
show that plaintiff has a ‘plausible claim for relief.’” Id. at 211 (quoting Ashcroft v. Iqbal, 129
S. Ct. at 1949). This requires more than a mere allegation of an entitlement to relief. Id. “A
complaint has to ‘show’ such an entitlement with its facts.” Id. A claim is only plausible if the
facts pleaded allow a court reasonably to infer that the defendant is liable for the misconduct
alleged. Id. at 210 (quoting Iqbal, 129 S. Ct. at 1948). Facts suggesting the “mere possibility of
misconduct” fail to show that the plaintiff is entitled to relief. Id. at 211 (quoting Iqbal, 129 S.
Ct. at 194).
III.
ANALYSIS
Exhaustion of internal administrative procedures is a prerequisite to filing suit in federal
court seeking redress for the improper denial of benefits under an ERISA plan. See, e.g., Weldon
v. Kraft, Inc., 896 F.2d 793, 800 (3d Cir. 1990). Here, the Plan at issue provides for two levels
of appeal.1 Following the denial of a claim, in whole or in part, a Plan participant may contact
customer service concerning this determination. (Madden Cert., Ex. A at 55). Then, if BCBS
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Although a court generally does not take into consideration documents outside of the pleadings when deciding a
motion to dismiss, consideration of a document that forms the basis of a claim or that is “integral to or explicitly
relied upon in the complaint” is appropriate. See, e.g., In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,
1426 (3d Cir. 1997) (citations omitted). Therefore, the Court deems it appropriate to rely on the document
governing administration of the Plan in this case.
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determines that the claim was appropriately denied, an appeal must be made in writing within
180 days from the date the participant receives notice of the denial. (Id.). A written decision
will follow within 60 days from the date of this request. (Id.). Then, if still unsatisfied with the
BCBS determination after this first appeal, a Plan participant may take a second appeal by
appealing BCBS’s determination to the Benefits Committee within 180 days of receipt of the
first appeal decision. (Id. at 56).
There is no dispute in this case that Plaintiffs properly went through the first appeal
procedure outlined above. (Compl. ¶ 16). Defendants, however, argue that Plaintiffs have not
exhausted all administrative remedies because Plaintiffs failed to take the second appeal to the
Benefits Committee, which is available under the Plan. Plaintiffs counter that both the
Explanation of Benefits (EOB), (Roth Cert., Ex. C), and the denial letter of the first appeal sent
to Plaintiffs (the “Denial Letter”), (Roth Cert., Ex. E), were legally insufficient, which therefore
relieved Plaintiffs from the obligation to take the second appeal to the Benefits Committee before
filing the instant suit. Because the Court finds that the Denial Letter failed to conform to the
pertinent regulations adopted by the Secretary of Labor, Plaintiffs are deemed to have exhausted
their administrative remedies and Defendants’ motion must be denied.
As an initial matter, the Court deems it appropriate to consider the both contents of the
EOB and the Denial Letter in deciding this motion because these documents are specifically
referred to in the Complaint or otherwise integral to Plaintiffs’ claims. (See Compl. ¶¶ 21); see
also Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006) (A court “may consider
. . . any matters incorporated by reference or integral to the claim, items subject to judicial notice,
matters of public record, orders, [and] items appearing in the record of the case.”) (citations and
quotations omitted). The Denial Letter consists of a one-page form containing some basic
information about the appeal and several boxes that are meant to (when check-marked) indicate
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that either additional information is needed to process the appeal or that the appeal was denied.
(See Roth Cert., Ex. E). For some reason not explained by either party, none of the boxes on the
Denial Letter are appropriately marked. Neither party, however, argues with the characterization
of this letter as a denial of Plaintiffs’ insurance claim on the first appeal.
Section 503 of ERISA provides that every employee benefit plan shall “(1) provide
adequate notice in writing to any participant or beneficiary whose claim for benefits under the
plan has been denied, setting forth the specific reasons for such denial, written in a manner
calculated to be understood by the participant, and (2) afford a reasonable opportunity to any
participant whose claim for benefits has been denied for a full and fair review by the appropriate
named fiduciary of the decision denying the claim.” 29 U.S.C. § 1133. The pertinent
regulations promulgated by the Secretary of Labor regarding denials of coverage after an appeal
further provide that:
The plan administrator shall provide a claimant with written or electronic
notification of a plan’s benefit determination on review. . . . In the case of an
adverse benefit determination, the notification shall set forth, in a manner
calculated to be understood by the claimant—
(1) The specific reason or reasons for the adverse determination;
(2) Reference to the specific plan provisions on which the benefit
determination
is
based;
(3) A statement that the claimant is entitled to receive, upon request and
free of charge, reasonable access to, and copies of, all documents, records,
and other information relevant to the claimant's claim for benefits.
Whether a document, record, or other information is relevant to a claim for
benefits shall be determined by reference to paragraph (m)(8) of this
section;
(4) A statement describing any voluntary appeal procedures offered by the
plan and the claimant’s right to obtain the information about such
procedures described in paragraph (c)(3)(iv) of this section, and a
statement of the claimant’s right to bring an action under section 502(a) of
the Act;
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29 C.F.R. § 2560.503-1(j)(4).2 The Denial Letter satisfies none of these requirements, and this is
fatal to Defendants’ pending motion. Although some courts have held that only substantial
compliance with these requirements is necessary in a denial letter,3 the Denial Letter in this case
is completely devoid of any meaningful information that could be said to substantially comply
with these requirements.
The regulations also provide that a claims procedure, which encompasses an appeal of an
adverse benefits determination, is reasonable only if, inter alia, it complies with the requirements
of subsection (j) as outlined above. See 29 C.F.R. § 2560.503-1(b)(1). Then, in subsection (l)
entitled “Failure to establish and follow reasonable claims procedures,” the regulations are
unambiguous in that:
In the case of the failure of a plan to establish or follow claims procedures
consistent with the requirements of this section, a claimant shall be deemed to
have exhausted the administrative remedies available under the plan and shall be
entitled to pursue any available remedies under section 502(a) of the Act on the
basis that the plan has failed to provide a reasonable claims procedure that would
yield a decision on the merits of the claim.
Id. § 2560.503-1(l). Therefore, the inadequacies of the Denial Letter are alone sufficient to deny
Defendants’ motion. See Linder v. Byk-Chemie USA, Inc., 313 F. Supp. 2d 88, 94 (D. Conn.
2004) (Subsection (l) “is unequivocal that any failure to adhere to a proper claims procedure is
sufficient to deem administrative remedies exhausted.”). Whether the EOB was also insufficient
under applicable ERISA regulations is a question that the Court need not, and does not, address.
2
This is a separate and distinct requirement from the disclosures necessary in a notification of benefit determination,
such as the EOB in this case. Compare 29 C.F.R. § 2560.503-1(g) with 29 C.F.R. § 2560.503-1(j).
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See, e.g., Wahl v. First Unum Life Ins. Co., No. 93-4813, 1994 U.S. Dist. LEXIS 1960, at *9 (E.D. Pa. Feb. 18,
1994). The Court also notes, however, that this standard is likely no longer applicable after subsection (l), discussed
infra, was added to the regulations in the year 2000. See generally Employee Retirement Income Security Act of
1974; Rules and Regulations for Administration and Enforcement; Claims Procedure, 65 Fed. Reg. 70246, 70255–
56 (Nov. 21, 2000) (codified at 29 C.F.R. § 2560.503-1(l)) (discussing the purpose for inclusion of subsection (l)
into the regulations).
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IV.
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss is denied. An appropriate
Order will follow.
/s/ Anne E. Thompson
ANNE E. THOMPSON, U.S.D.J.
Date: April 11, 2012
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