Kazda v. Aetna Life Insurance Company

Background

Michala Kazda alleged that Aetna denied coverage for tumescent liposuction to treat her Stage 3 lipedema. She alleged that lipedema causes pain, mobility problems, and other physical difficulties, and that the surgery was medically necessary to address those problems. Aetna denied coverage in 2018 based on its Clinical Policy Bulletins, internal written guidelines concerning coverage, and characterized the procedure as cosmetic.

Kazda brought claims under the Employee Retirement Income Security Act (ERISA), including a claim for benefits under 29 U.S.C. § 1132(a)(1)(B) and a claim under § 1132(a)(3) alleging breach of fiduciary duty. The court had previously dismissed both claims from her original complaint without prejudice and allowed her to amend. In her First Amended Complaint, Kazda alleged that Aetna, acting as the plan’s claims administrator, developed and applied coverage guidelines inconsistently with the plan and used them to systematically deny claims for liposuction treatment for advanced lipedema.

Aetna’s Motion

Aetna moved to dismiss the § 1132(a)(3) claim for failure to state a claim. Aetna argued that Kazda had not alleged sufficient facts, that the claim duplicated her claim for benefits, and that allowing it would undermine ERISA’s enforcement scheme. The court also granted Aetna’s request for judicial notice of Clinical Policy Bulletins 0031 and 0211 because Kazda’s allegations relied on those documents.

Court’s Analysis

The court explained that an ERISA fiduciary-duty claim for equitable relief requires allegations that the defendant was an ERISA fiduciary acting in that capacity and violated an ERISA fiduciary obligation. A person may be a fiduciary when exercising discretionary authority or responsibility in administering a plan. The court noted that claims administrators may be fiduciaries, particularly when they exercise discretion in deciding claims or creating internal guidelines.

The court held that Kazda’s amended allegations were sufficient at the pleading stage. She identified the relevant plan provisions, including coverage for surgery needed to improve significant functional impairment and an exclusion for services that alter, improve, or enhance appearance. She alleged that Aetna’s Clinical Policy Bulletins interpreted the cosmetic exclusion inconsistently with those provisions and were used to deny similar liposuction claims. The court concluded that these allegations were enough to support a possible fiduciary-duty claim based on Aetna’s adoption of the guidelines.

The court also rejected Aetna’s argument that the fiduciary-duty claim duplicated the benefits claim. It explained that ERISA permits alternate theories of relief so long as a plaintiff does not obtain duplicate recoveries. Kazda sought a declaration that Aetna’s prior denials were improper, an injunction requiring Aetna to retract or reform its guidelines and reprocess prior denials, and an accounting and repayment of profits. The court found that these requested forms of relief were distinct from the relief available on her benefits claim, at least at the pleading stage.

Disposition

Judge William H. Orrick denied Aetna’s motion to dismiss Kazda’s claim under 29 U.S.C. § 1132(a)(3). The ruling allowed that claim to proceed; it did not decide whether Aetna actually breached its fiduciary duty or whether Kazda was entitled to coverage.