Eric P. v. Directors Guild of America

Background

Eric P. and his dependent daughter were covered by the Directors Guild of America-Producer Health Plan. Eric P. sought reimbursement and coverage for expenses from his daughter’s stay at a residential mental-health facility. Anthem Blue Cross, the Plan’s Claims Administrator, initially denied the claim as not medically necessary and later denied Eric P.’s first-level appeal. The Plan’s Benefits Committee denied his second-level appeal at its February 19, 2019 meeting.

This order addressed only the standard of review for the Plan’s denial. It did not decide whether the treatment was medically necessary or whether the Plan ultimately owed benefits.

Arguments

Eric P. sought de novo review, meaning the court would independently decide whether the Plan correctly denied benefits. He argued that the Plan documents did not clearly and unambiguously give the Benefits Committee discretionary authority; that the Trust documents did not properly delegate that authority to the committee; and that the committee’s decision was untimely under the Plan’s procedures and the Employee Retirement Income Security Act.

The defendants argued that the Plan documents clearly gave the Trustees discretionary authority over claims and allowed them to delegate final decision-making authority to the Benefits Committee. They also argued that any delay was only a technical procedural violation that did not cause Eric P. substantive harm.

Court’s analysis

The court explained that an ERISA benefit denial is ordinarily reviewed de novo. But when the plan clearly gives its administrator or fiduciary discretion to determine eligibility or interpret the plan, the court applies abuse-of-discretion review, which allows the decision to be set aside only if it was arbitrary and capricious.

The court found that the Plan’s Summary Plan Description and Trust Agreement clearly authorized the Benefits Committee to take final action on specified matters, including claims appeals, with the same binding effect as action by the full Board of Trustees. The court concluded that the Trustees’ own “sole” discretionary authority did not prevent them from delegating that authority to the Benefits Committee.

The court also considered the delay in deciding Eric P.’s appeal. The appeal was considered at the February 2019 meeting rather than the November 2018 meeting, and the notice of the delay was misaddressed and sent after the November meeting. The court assumed that the Plan may have failed to comply with its own notice requirements and ERISA’s timing requirements, but found that any violation was technical. Eric P. did not identify substantive harm, and the record showed that the Plan reviewed more than 2,000 pages, obtained an outside medical review, and gave him an opportunity to respond before the February meeting.

Disposition

Judge William H. Orrick ordered that the abuse-of-discretion standard would apply to the court’s review of the Plan’s denial. The order did not rule on the underlying coverage claim.