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LeCates v. Blue Cross of Idaho

United States District Court, D. Idaho

September 16, 2016

BROOKS LECATES, Plaintiff,
v.
BLUE CROSS OF IDAHO, a corporation licensed to do business in the state of Idaho, Defendants.

          MEMORANDUM DECISION AND ORDER

          Honorable Candy W. Dale United States Magistrate Judge

         INTRODUCTION

         Before the Court are cross motions for summary judgment filed by Plaintiff Brooks LeCates and Defendant Blue Cross of Idaho, as well as Blue Cross's evidentiary motion asking the Court to strike the affidavits LeCates submitted in opposition to Blue Cross's motion for summary judgment. (Dkt. 16, 22, 23.) The motions are fully briefed, and the Court heard oral argument from the parties on August 29, 2016.

         LeCates seeks payment of benefits due under his health insurance plan for hospitalization and medical treatment he received for injuries sustained in a motorcycle accident. Blue Cross contends LeCates failed to exhaust his administrative remedies under the terms of the Plan, and for that reason, argues the Complaint should be dismissed with prejudice. LeCates contends he exhausted all required administrative remedies, or alternatively, that further pursuit of such remedies would have been futile. As to the merits, Blue Cross and LeCates differ over the interpretation of the “illegal act exclusion” Blue Cross applied and upon which it based its denial of benefits determination.

         After carefully considering the parties' written memoranda, relevant case law, and the parties' arguments, the Court will grant Blue Cross's motion to strike; deny Blue Cross's motion for summary judgment; and grant LeCates's motion for summary judgment.

         FACTS[1]

         1. Plan Terms

         LeCates is an eligible dependent of an enrollee in a group health plan sponsored by Gritman Medical Center (“Gritman”). That group plan, titled “ASC Preferred Blue Master Group Plan, ” was effective January 1, 2014, through December 31, 2014. (Dkt. 16-7 at 35 -112.)[2] It is subject to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001, et seq. See Compl. ¶ 3.

         Gritman is identified as the Plan Administrator, and benefits under the Plan are paid by Gritman. (Dkt. 16-7 at 85.) According to the Plan, Gritman is the “sole fiduciary of the Plan, [and] has all discretionary authority to interpret the provisions and control the operation and administration of the Plan…. All decisions made by the Plan Administrator…shall be final and binding on all parties.”

         Blue Cross is defined as a nonprofit mutual insurance company, hired by Gritman, to act as the third party Contract Administrator to perform claims processing and other administrative services as outlined in the Plan. (Dkt. 16-7 at 78.) The Plan states that Blue Cross, as the Contract Administrator, is “not an insurer of health benefits under this Plan, is not a fiduciary of the Plan and does not exercise any of the discretionary authority and responsibility granted to the Plan Administrator. The Contract Administrator is not responsible for Plan financing and does not guarantee the availability of benefits under this Plan.” Id.

         The Plan provides for various benefits but also contains certain exclusions in the “Exclusions and Limitations Section.” (Dkt. 16-7 at 90 - 16-7 at 94.) Specifically, the Plan states:

A. General Exclusions and Limitations There are no benefits for services, supplies, drugs or other charges that are:
****
AL. For the treatment of injuries sustained while committing a felony, voluntarily taking part in a riot, or while engaging in an illegal act or occupation, unless such injuries are the result of a medical condition or domestic violence.

(Dkt. 16-7 at 92.) (emphasis added).

         Under the terms of the Plan, Blue Cross was responsible for processing claims for benefits in accordance with the Administrative Services Agreement between Blue Cross and Gritman. (Dkt. 16-7 at 96.) In addition, Blue Cross was vested with authority and discretion to determine eligibility for coverage under the terms of the Plan, and to determine the amount of benefits owed on covered claims. (Dkt. 16-7 at 109.)

         The Plan contains a section outlining the inquiry and appeals procedures in Section XV. (Dkt. 16-7 at 102.) Participants who wish to formally appeal a post-service claim decision by Blue Cross, who acts on behalf of the Plan Administrator, may do so through the following process:

1. A written appeal must be sent to the Appeals and Grievance Coordinator within one hundred eighty (180) days after receipt of notice of Adverse Benefit Determination. This written appeal should set forth the reasons why the Participant contends BCI's decision was incorrect. Any written comments, documents or other relevant information may be submitted with the appeal.
2. After receipt of the written appeal, all facts, including those originally used in making the initial decision and any additional information that is sent or that is otherwise relevant, will be reviewed by a BCI Medical Director, or physician designee if the appeal requires medical judgment. BCI shall mail a written reply to the Participant within thirty (30) days after receipt of the written appeal. If the original decision is upheld, the reply will list the specific reasons for denial and the specific provisions on which the decision is based.
****
4. If the original decision is upheld upon reconsideration, the Participant may send an additional written appeal to the Appeals and Grievance Coordinator requesting further review. This appeal must set forth the reasons for requesting additional reconsideration and must be sent within sixty (60) days of BCI's mailing of the initial reconsideration decision. A BCI Medical Director who is not subordinate to the Medical Director or physician designee who decided the initial appeal, will issue a final decision after consideration of all relevant information, if the appeal requires medical judgment. A final decision on the appeal will be made within thirty (30) days of its receipt. If the appeal does not require medical judgment, a BCI Vice President who did not decide the initial appeal will issue the decision.

(Dkt. 16-7 at 103.) (Emphasis added.) “A Participant must first exhaust BCI's internal grievance and appeal process. Exhaustion of that process includes completing all levels of appeal.” (Dkt. 16-7 at 104.)

         Elsewhere, the Plan outlines the appeals process in plain language in the section titled, “Rights of Plan Participants.” (Dkt. 16-7 at 111.) In that section, the Plan states that, if a claim for benefits is denied, “you will receive a written explanation of the reason for the denial. If you do not agree with the denial, you have the right to ask the Plan Administrator to review the claim. If you are not satisfied with the result of such a review, you may file suit in a state or federal court.” (Dkt. 16-7 at 111.)

         2. The Accident and Claims Process

         LeCates, a 22-year-old male, was injured on April 12, 2014, when he was riding his road bike (motorcycle), lost control, and hit a fence. (Dkt. 16-3 at 22.) According to the Accidental Injury Questionnaire LeCates completed, LeCates lost control of the motorcycle when he hit soft gravel on a corner while traveling on Highway 12 near Lenore, Idaho.[3] (Dkt. 16-6 at 20.) He suffered serious injuries[4] and required extensive medical treatment at St. Joseph Regional Medical Center in Lewiston, Idaho. (Dkt. 16-3 at 22 - 24.) The treating physician's report indicates LeCates “does drink quite heavily.” (Dkt. 16-3 at 24.) According to the laboratory report, tests taken at the time of his admission to the emergency room indicated a blood alcohol serum level of .104. (Dkt. 16-3 at 32.)[5]

         Blue Cross initially paid benefits to medical care providers following LeCates's inquiry about why his providers' bills were going unpaid. But, on April 16, 2014, Blue Cross notified LeCates in writing that benefits for his inpatient stay at the hospital beginning April 12, 2014, were denied based upon the illegal act exclusion in the policy. (Dkt. 16-3 at 17.)

         On or about May 26, 2014, LeCates received Explanation of Benefits statements denying $45, 841.01 in medical charges submitted by St. Joseph Regional Medical Center. (Dkt. 16-3 at 42-43). In contrast to Blue Cross's April 16, 2014 letter, the EOB noted the reason for the denial was that the services were not medically necessary and not eligible for coverage.

         On July 17, 2014, LeCates[6] submitted an appeal of the April 16, 2014 denial. (Dkt. 16-3 at 14.) LeCates asserted Blue Cross did not review all available information, and could not have made a determination that LeCates's injuries were the result of an illegal act. LeCates did not submit additional documents nor did he identify what documents should have been reviewed.

         On July 28, 2014, Blue Cross acknowledged receipt of LeCates's request for reconsideration of his claim for medical benefits. (Dkt. 16-3 at 11.) The letter requested a signed authorization form to allow LeCates's representative to appeal the claim decision on his behalf. LeCates submitted the authorization form on July 31, 2014. (Dkt. 16-3 at 10.) By letter dated August 7, 2014, Blue Cross informed LeCates it had received the appeal and the signed authorization form as of August 4, 2014, and that it was reviewing the appeal. Blue Cross indicated that, unless it needed additional information, a response would be sent within 30 days from the date it received the signed authorization form. (Dkt. 16-3 at 9.)

         Blue Cross sent a second denial letter dated September 2, 2014, responding to LeCates's appeal requesting reconsideration of his claim for services from April 12, through April 16, 2014. (Dkt. 16-3 at 1-2.) Blue Cross indicated it was upholding its denial under the illegal act exclusion, stating as follows:

Mr. LeCates' policy does not require that he be cited or found guilty in a court of law, only that he be engaged in an illegal act. Mr. LeCates' medical records provided by St. Joseph Regional Medical Center, included hospital admittance tests immediately following his single motorcycle crash. These medical records included a blood alcohol serum level of .104, which support that he was over the legal limit for alcohol at the time of the accident. It is illegal to drive while under the influence; therefore, he was engaged in an illegal act, under the terms of his policy.

(Dkt. 16-3 at 1-2.) Blue Cross indicated previously approved claims for medical services rendered were being adjusted and reversed. The letter further explained that, once the claims were adjusted, LeCates would receive a new EOB, that new appeal rights would become available, and that LeCates “may submit a second appeal requesting further review” within 180 days from the date of the new EOB. (Dkt. 16-3 at 2.)

         A new EOB dated September 8, 2014, indicated additional claims previously approved were denied. (Dkt. 16-7 at 113 - 118.) According to the EOB, the appeal procedures involved writing a letter with supporting documentation contesting the denial of benefits. Upon receipt of a decision upholding the initial decision, the EOB explained the plan participant “may have the right to file a second appeal. An external review process may be available to you following completion of the internal review process. Under Section 502(a) of the Employment retirement Income Security Act, you may also have the right to file a civil action following the exhaustion of the complete appeals process.” (Dkt. 16-7 at 118.)

         LeCates did not file any further appeals, and instead filed a complaint in this Court on March 5, 2015. (Dkt. 1). On March 25, 2015, Blue Cross notified Gritman of the Complaint. (Dkt. 16-6 at 27.) In an email response dated April 6, 2015, Gritman indicated it had received the materials Blue Cross sent to it regarding the denial of benefits and that it agreed with Blue Cross's denial of LeCates's claims for benefits. (Dkt. 16-7 at 32.)

         LeCates's suit against Blue Cross seeks benefits due under the Plan pursuant to Section 502(a)(1)(B) of ERISA (29 U.S.C. § 1132(a)(1)(B)), and for an award of any equitable remedies available under Section 502(a)(3) (29 U.S.C. § 1132(a)(3)).

         DISPOSITION

         1. Motion to Dismiss for Failure to Exhaust ...


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