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King v. Blue Cross and Blue Shield of Illinois

United States Court of Appeals, Ninth Circuit

September 8, 2017

Gary King, as personal representative of Linda King, Plaintiff-Appellant,
v.
Blue Cross and Blue Shield of Illinois; United Parcel Service of America, Inc.; UPS Health and Welfare Plan for Retired Employees; Does, 1 through 10, Defendants-Appellees.

          Argued and Submitted March 9, 2017 Pasadena, California

         Appeal from the United States District Court for the Southern District of California, No. 3:13-cv-01254-CAB-JMA Cathy Ann Bencivengo, District Judge, Presiding

          Patrick A. Calhoon (argued) and Craig A. Miller, Law Offices of Craig A. Miller, San Diego, California, for Plaintiff-Appellant.

          Eileen R. Ridley (argued) and Alan R. Ouellette, Foley & Lardner LLP San Francisco, California, for Defendant-Appellee Blue Cross and Blue Shield of Illinois.

          John Timothy McDonald (argued) and Sedric D. Bailey, Thompson Hine LLP, Atlanta, Georgia, for Defendants-Appellees United Parcel Service of America, Inc., and UPS Health and Welfare Plan for Retired Employees.

          Before: Richard A. Paez, Marsha S. Berzon, and Morgan Christen, Circuit Judges.

         SUMMARY[*]

         Employee Retirement Income Security Act

         The panel reversed the district court's grant of summary judgment in favor of the defendants in an ERISA action regarding the denial of a welfare benefit plan participant's claim for medical benefits on the basis of the plan's lifetime benefit maximum.

         The panel held that ERISA, as amended by the Patient Protection and Affordable Care Act, does not ban lifetime benefit maximums for certain retiree-only plans.

         The panel held that the defendants violated ERISA's statutory and regulatory disclosure requirements by providing a faulty summary of material modifications describing changes to the lifetime benefit maximum. The panel concluded that the summary did not reasonably apprise the average plan participant that the lifetime benefit maximum continued to apply to the retiree plan.

         The panel also held that genuine disputes of material fact precluded summary judgment on claims of breach of fiduciary duty in the failure to comply with ERISA's disclosure requirements. The panel held that a defendant claims administrator was a fiduciary because it had authority to grant, deny, and review benefits claims, and there was a genuine dispute of material fact about whether this defendant misled the ERISA plan participant.

         The panel remanded the case to the district court.

          OPINION

          CHRISTEN, CIRCUIT JUDGE:

         Linda King participated in a welfare benefit plan that the defendants sponsored and administered. In November 2012, Mrs. King suffered a back infection that required immediate surgery and extensive post-surgery rehabilitative care. After initially approving her treatment as medically necessary, the defendants denied her claim for benefits because Mrs. King exceeded her plan's $500, 000 lifetime benefit maximum.

         Mrs. King filed suit against the defendants-Blue Cross and Blue Shield of Illinois, United Parcel Service of America, Inc. (UPS), the UPS Health and Welfare Plan for Retired Employees, and Does 1 through 10-under the Employment Retirement Income Security Act of 1974 (ERISA). She sought declaratory relief and alleged breach of contract and breach of fiduciary duties. Mrs. King passed away while her suit was pending before the district court and Mr. King was substituted as the representative of her estate. In response to the defendants' motions for summary judgment, Mr. King argued that the defendants failed to adequately disclose that the lifetime benefit maximum applied to the plan. The district court granted summary judgment to the defendants, and Mr. King appeals.

         We hold: (1) that ERISA, as amended by the Affordable Care Act, does not ban lifetime benefit maximums for certain retiree-only plans; (2) that the defendants violated ERISA's statutory and regulatory disclosure requirements by providing a faulty summary of material modifications describing changes to the lifetime benefit maximum in September 2010; and (3) that genuine disputes of material fact preclude summary judgment on the breach of fiduciary duty claims. Accordingly, we reverse the district court's order granting summary judgment.

         BACKGROUND

         I. The UPS Health and Welfare Package for Retired Employees

         UPS administers two employee welfare benefit plans governed by ERISA: (1) the UPS Health and Welfare Package for active employees (the Employee Plan); and (2) the UPS Health and Welfare Package for Retired Employees (the Retiree Plan). UPS is the Plan Administrator and Plan Sponsor. Blue Cross is a claims administrator for medical coverage under the plans.

         Mrs. King became a participant in the self-funded Retiree Plan as a covered dependent when her husband retired from UPS in March 2011. The Retiree Plan offers medical, dental, and vision coverage for eligible retired employees, their spouses, and their dependent children. Coverage under the Retiree Plan begins at retirement and ends when the retiree or covered dependent turns sixty-five and becomes eligible for Medicare.

         A. The Summary Plan Description

         The Retiree Plan's substantive benefit provisions are explained in the Summary Plan Description (SPD), which the Retiree Plan Document incorporates by reference. The SPD governs both the Employee Plan and the Retiree Plan, and is comprised of two parts: (1) the 2006 SPD and (2) a series of summaries of material modifications describing amendments to the plans that have been adopted since 2006.[1] The 2006 SPD is ninety-six pages and has nineteen sections on topics such as "If a Claim is Denied, " "Retired Employee Health Care Coverage, " and "ERISA and Other Important Information." The table of contents lists the nineteen sections, but does not refer to any of the amendments that appear in the summaries of material modifications.

         UPS issued twelve such summaries between May 2006 and December 2012. Each summary indicates the month and year it was issued and whether it modifies one or both of the plans. UPS instructs plan participants to keep the summaries with the 2006 SPD for future reference. The summaries vary between one and four pages in length, and total twenty-five pages all together. They are not cumulative; each summary of material modifications describes only newly announced amendments. Thus, to determine the current language for each benefit provision, a plan participant must read the relevant section from the 2006 SPD and then read all twelve summaries of the plan modifications.

         B. The Lifetime Benefit Maximum

         The Employee Plan and Retiree Plan originally contained different lifetime benefit caps on medical coverage. The 2006 SPD section titled "Retired Employee Health Care Coverage" explains: "There is a new lifetime maximum that begins when you retire and become eligible for benefits from the UPS Health and Welfare Package for Retired Employees." On the next page, under the subheading "The Lifetime Benefit Maximum, " the SPD states:

Up to $500, 000 in lifetime medical benefits (unlimited in HMO Option) can be paid for each person participating in the UPS Health and Welfare Package for Retired Employees. Only benefits paid while you receive coverage as a retired employee count toward the $500, 000 total. . . . Each January, up to $1, 000 in individual benefits paid during the preceding year will automatically be restored.

         In an earlier section titled "Medical, " the SPD explains that the Employee Plan has a $1 million lifetime maximum. In September 2010, however, UPS issued a summary of material modifications (the 2010 Summary of Modifications) that eliminated the Employee Plan's lifetime benefit cap in response to the Patient Protection and Affordable Care Act (the Affordable Care Act). The 2010 Summary of Modifications provided that this amendment would become effective on January 1, 2011. The parties dispute whether this modification also applies to the Retiree Plan.

         C. The 2010 Summary of Modifications[2]

         The 2010 Summary of Modifications included amendments to both the Employee Plan and the Retiree Plan. At the top of the first page, the 2010 Summary of Modifications states, in italicized font:

This notice details Plan improvements, changes, clarifications, and required notifications effective January 1, 2011, unless otherwise noted. Items noted with an asterisk (*) do not apply to retirees or their covered dependents. You should keep this with your UPS Health and Welfare Package and UPS Health and Welfare Package for Retired Employees Summary Plan Description for future reference.

         Directly under this text, the page divides into two columns. At the top of the column on the left-hand side of the page, there is a single-spaced paragraph of text titled "Health Care Reform*" in bold. Below the title, this paragraph states:

In March, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA), also known as "health care reform." Effective January 1, 2011, PPACA requires the following changes to your UPS-administered health care plan. If the PPACA provisions requiring these Plan changes are ever repealed, the changes made solely as a result of PPACA will be terminated and the provisions of the Plan modified by PPACA will be reinstated effective the date the law is repealed.

         Immediately below this paragraph is another bold heading, which states "Grandfather Plan Status, " followed by two paragraphs of single-spaced text. After these two paragraphs, there is a third bold heading in the left column, which states "Dependent Children Under Age 26, " followed by five paragraphs of single-spaced text. The text under this heading continues from the bottom of the column on the left-hand side of the first page to the column on the right-hand side of the first page, and onto the second page. On the second page, approximately one-third of the way down the left column, there is a fourth bold heading, which states "Elimination of Lifetime Maximum Benefits." This section contains one paragraph of single-spaced text:

Lifetime dollar limits on aggregate benefits will be eliminated from your Plan effective January 1, 2011. If you are an otherwise eligible employee whose coverage previously ended upon reaching your lifetime maximum benefit under the Plan, you will have 30 days, beginning the first day of the annual enrollment period, to re-enroll in the Plan. If you choose to enroll, your coverage is effective January 1, 2011 (as long as you continue to meet the Plan's eligibility requirements). You may also enroll any dependents whose coverage ended upon reaching their lifetime maximum.

         Upon very close inspection, one can discern that the "Health Care Reform*" heading at the top of the first page is in a different font type than the three headings that follow, including "Elimination of Lifetime Maximum Benefits." According to the defendants, the "Health Care Reform*" heading is in Arial font, while the other headings are in Times New Roman, and the Arial heading is in ...


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