Shannon v. Eckerd Corporation

United States Court of Appeals,
Eleventh Circuit.
No. 96-4291.
Thomas SHANNON, Plaintiff-Appellee,
v.
JACK ECKERD CORPORATION, a Delaware Corporation, Defendant-Third
Party Plaintiff-Appellant,
Cost Care, Inc., a California Corporation, Third-Party Defendant.
May 29, 1997.
Appeal from the United States District Court for the Southern
District of Florida. (91-271-CIV-LCN), Lenore Carrero Nesbitt,
Judge.
Before HATCHETT, Chief Judge, BARKETT, Circuit Judge, and RONEY,
Senior Circuit Judge.
BARKETT, Circuit Judge:
Thomas Shannon filed this action after Jack Eckerd Corporation
denied his request for preauthorization of benefits under an
employee group health plan. Eckerd is appealing the district
court's judgment awarding Shannon $70,714.35. Eckerd argues on
appeal that the district court erred in denying its motion for
summary judgment and in finding that the Plan's original denial of
benefits was arbitrary and capricious. Eckerd also contends that
the district court erred in directing the Plan administrator on
remand to consider evidence available subsequent to the initial
determination.
Thomas Shannon is a beneficiary under the Jack Eckerd
Corporation Health Benefits Plan ("the Plan"), a self-funded plan
governed by the Employee Retirement Income Security Act ("ERISA").
Shannon suffers from long-term diabetes mellitus Type I, which has
resulted in severe renal disease and kidney failure. Due to these
complications, Shannon's doctor advised Shannon to undergo a kidney
transplant. After further consultation with other physicians,
Shannon decided to undergo a simultaneous kidney/pancreas
transplant at the University of Minnesota. The University of
Minnesota requires either advance payment or verification of
insurance coverage before a patient can be placed on the cadaveric
pancreas transplant list. Accordingly, Shannon's surgeon requested
preauthorization of benefits for the procedure from the Plan. At
the time Shannon sought benefits for his transplant, the Plan
excluded coverage for experimental or investigational human organ
transplants. The Plan administrator rejected the claim for those
benefits, informing Shannon and his surgeon that although the Plan
would cover expenses associated with the kidney transplant, it
could not cover expenses associated with the pancreas transplant
because it was medically experimental or investigational and the
Plan excluded coverage for experimental or investigational human
organ transplants. Shannon's surgeon filed a formal appeal but the
Plan administrator continued to deny coverage for the pancreas
portion of the transplant. Shannon went forward with the
transplant using other funding, but the pancreas graft failed.
Shannon then sued under ERISA, 29 U.S.C. § 1132(a)(1)(B)1 to
recover the benefits denied by the Plan administrator. After a
bench trial, the district court found that in rejecting the claim
1
"A civil action may be brought by a participant or
beneficiary ... to recover benefits due to him under the terms of
his plan, to enforce his rights under the terms of the plan, or
to clarify his rights to future benefits under the terms of the
plan." 29 U.S.C.A. § 1132(a)(1)(B) (West 1985).
as investigational, the Plan administrator had failed to consider
all of the relevant evidence available and concluded that this
failure rendered the Plan administrator's denial of benefits for
the pancreas portion of the transplant arbitrary and capricious.
The district court remanded the matter to the Plan administrator
for a new determination based upon all relevant evidence including
subsequently available evidence.2 On remand, the Plan
administrator determined that the pancreas operation was covered
under current standards. However, the Plan refused to pay Shannon
any benefits, arguing that at the time Shannon made his claim the
procedure was experimental/investigational. Shannon again sought
relief in the district court and the district court entered final
judgment for the benefits in accordance with the Plan
administrator's conclusion that the pancreas procedure was covered.
We review a district court's grant of summary judgment de
novo applying the same legal standards that control the district
court's determination. Jones v. Firestone Tire & Rubber Co., 977
F.2d 527 (11th Cir.1992). Denial of benefits under an ERISA plan
that gives the plan administrator discretionary authority to
determine eligibility for benefits or to construe the terms of the
plan is reviewed by the district court for abuse of that
discretion. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,
115, 109 S. Ct. 948, 956, 103 L. Ed. 2d 80 (1989); Jett v. Blue Cross
and Blue Shield of Alabama, Inc., 890 F.2d 1137, 1138-39 (11th
Cir.1989). There is no dispute that the Eckerd Plan gives its
2
Eckerd's appeal to this Court of the remand order was
dismissed for want of jurisdiction.
administrator discretionary authority to determine eligibility for
benefits. Therefore, we must determine whether the Plan
administrator's decision was arbitrary and capricious. Jett, 890
F.2d at 1139. A decision to deny benefits is arbitrary and
capricious if no reasonable basis exists for the decision. Id. In
this case the district court found that in evaluating whether the
proposed procedure was experimental or investigational, the Plan
administrator relied only on Medicare's denial of coverage, a
conclusory recommendation of denial from Cost Care, the Plan's
medical consultant, and the statements of several insurance
companies that pancreas transplants were "investigational." The
court concluded that this was an insufficient basis to support the
denial. Simply accepting the bald assertions of Cost Care and the
denial of other insurance companies without examining or evaluating
their underlying bases and failing to obtain additional relevant
information was arbitrary and capricious. We cannot say that the
district court erred in remanding for the Plan administrator to
make a reasonably relevant inquiry.
Nor can we say that the district court erred in directing the
Plan administrator to consider subsequently available evidence.
The district court relied on Bucci v. Blue Cross-Blue Shield of
Conn., 764 F. Supp. 728, 732 (D.Conn.1991), holding that since a
defendant's duty to provide benefits "is a continuing one, its
refusal to provide benefits is thus a continuing denial, the
propriety of which is measured against the information available
from time to time." Eckerd's Plan administrator had an obligation
to make a reasonably relevant inquiry and failed to do so at the
time of the original determination. The district court did not err
in directing that the Plan administrator consider all available
evidence. As we stated in Jett, "Should [the beneficiary] wish to
present additional information that might affect the determination
of eligibility for benefits, the proper course would be to remand
to [the plan administrator] for a new determination." 890 F.2d at
1140. Accordingly, we AFFIRM.