DocketNumber: Case No. 16–cv–07230–HSG
Citation Numbers: 291 F. Supp. 3d 1029
Judges: Gilliam
Filed Date: 1/31/2018
Status: Precedential
Modified Date: 7/25/2022
Pending before the Court are the parties' cross-motions to establish the standard *1030of review in this Employee Retirement Income Security Act of 1974 ("ERISA") action. See Dkt. Nos. 27, 29. Defendant Cigna Health & Life Insurance Company ("Cigna") contends that the standard of review should be abuse of discretion. See Dkt. No. 27. Plaintiffs Mahlon and Emily D., on the other hand, contend that the standard of review should be de novo. See Dkt. No. 29. The Court finds this matter appropriate for disposition without oral argument and the matter is deemed submitted. See Civil L.R. 7-1(b). For the reasons detailed below, the Court DENIES Defendant's motion, GRANTS Plaintiffs' motion, and finds that the de novo standard of review applies to this action.
I. BACKGROUND
A. Factual Background
According to the Complaint, Plaintiff Mahlon D. was an employee of RailWorks Corporation ("Company") and participated in the Company's employee welfare benefit plan ("Plan"). See Dkt. No. 1 ("Compl.") ¶ 5. At all relevant times, Plaintiff Emily D. was a dependent of Mahlon D. and covered under the Plan. Compl. ¶ 6. Plaintiffs allege that Emily D. was admitted to Change Academy at Lake of the Ozarks ("CALO"), a residential treatment facility, as part of her mental health care treatment. Id. ¶¶ 14-27. Although she was at CALO for seventeen months, Defendant only approved coverage for seven and a half months. Id. ¶¶ 30-34. Plaintiffs contested Defendant's denial of benefits for the remaining nine and a half months. Id. ¶ 31.
On June 2, 2014, Cigna Behavioral Health Inc., a subsidiary of Defendant, reviewed and denied Plaintiffs' appeal. See id. ¶ 34; see also Dkt. No. 32-1, Ex. A. Plaintiffs appealed again, and on December 4, 2014, Cigna's Appeals Unit upheld the denial of benefits. Dkt. No. 32-1, Ex. B. Accordingly, Plaintiffs filed this action against Defendant seeking to recover health insurance benefits under ERISA,
B. Statutory Background
i. ERISA
In ERISA actions, "[d]e novo is the default standard of review," unless an insurance contract contains a valid discretionary clause. See Abatie v. Alta Health & Life Ins. Co. ,
ii. California Insurance Code
California Insurance Code § 10110.6(a) bans discretionary clauses in certain insurance policies, rendering them void:
If a policy, contract, certificate, or agreement ... that provides or funds life insurance or disability insurance coverage for any California resident contains a provision that reserves discretionary authority to the insurer ... to determine eligibility for benefits or coverage ... that provision is void and unenforceable.
*1031Neither the California Supreme Court nor the Ninth Circuit has directly addressed whether the discretionary ban applies to health insurance such as the Plan at issue in this action.
II. ANALYSIS
Defendant posits that the Plan's discretionary clause is valid because § 10110.6 -and its reference to life and disability insurance-should be read narrowly to exclude health insurance plans. Dkt. No. 27 at 4 ("The express language of Section 10110.6 limits its application to life and disability insurance...."). Defendant urges that the standard of review should shift accordingly to abuse of discretion. Plaintiffs respond that the Plan's discretionary clause is void under § 10110.6, and de novo review applies, because under the California Insurance Code health insurance is included as a form of disability insurance.
When interpreting the meaning of a statute under California law, the Court must first examine the plain meaning of the text. See Martinez v. Combs ,
The Court finds that when read in the appropriate context, health insurance is a form of disability insurance for purposes of the California Insurance Code. Thus, the state ban on discretionary clauses applies to the Plan in this action. Cf. Ticconi v. Blue Shield of California Life & Health Ins. Co. ,
Disability insurance is defined broadly under the Insurance Code to "include[ ] insurance appertaining to injury, disablement or death resulting to the insured from accidents, and appertaining to disablements resulting to the insured from sickness."
Defendant points out that the definition of health insurance also excludes "[d]isability *1032insurance, including hospital indemnity, accident only, and specified disease insurance that pays benefits on a fixed benefit, cash payment only basis." See Dkt. No. 27 at 5 (citing
The Court is not persuaded. Defendant's reading renders meaningless the explicit language in § 106(b) that health insurance is a "disability insurance policy."
This interpretation is further bolstered by how the terms "health insurance" and "disability insurance" are used throughout the Code. At times, health insurance is explicitly carved out from the more general definition of disability insurance. For example, § 10111.2(a) imposes a 30-calendar-day period for payment of benefits "[u]nder a policy of disability insurance other than health insurance, as defined in Section 106...."
Defendant fails to explain its narrow interpretation in the context of the entire Insurance Code, and instead relies heavily on a single district court case, Bain v. United Healthcare Inc. The Court respectfully disagrees with the reasoning in Bain. There, the court did not consider disability or health insurance in the context of the entire Insurance Code. Instead, the court limited the definition of disability insurance to disability income insurance, citing several California state cases. See
Accordingly, the Court finds that the state ban's reference to "disability insurance" encompasses health insurance as a subset of disability insurance.
III. CONCLUSION
Based on a plain reading of the California Insurance Code, the Court finds that § 10110.6's ban on discretionary clauses applies to health insurance and renders any discretionary provision in the Plan void. The default, de novo standard of review therefore applies. Accordingly, Plaintiffs' cross-motion is GRANTED and Defendant's motion is DENIED.
The Court further SETS a case management conference for February 13, 2018, at 2:00 p.m. The parties shall submit a joint case management statement by February 6, 2018, including a proposed expedited briefing schedule for the cross-motions for judgment on the merits.
IT IS SO ORDERED.
The parties agree that the Medical Benefits Plan at issue here is for "health insurance." See Dkt. No. 31 at 1; see also Dkt. No. 32 at 1.
Plaintiffs further argue that even if § 10110.6's ban does not extend to health insurance, the Plan does not adequately delegate authority to Cigna Behavioral Health Inc.-the entity that denied Plaintiffs' claims-to make claim decisions on behalf of Defendant. See Dkt. No. 29 at 10-12. Because the Court finds that the Plan's discretionary clause is void, the Court declines to reach this issue.
Although California Insurance Code §§ 10111.2 and 10123.196 were not effective until after the relevant time period in this case, the Court finds that they nevertheless provide context for the interpretation of "health insurance" at issue here.
In quoting § 106(b)(2), Bain also replaced with an ellipsis the key distinguishing factor discussed above: on the face of the statute, "health insurance" excludes only disability insurance "that pays benefits on a fixed benefit, cash payment only basis." Cf. Bain ,