Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

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MONDRY V. AMERICAN FAMILY MUTUAL INSURANCE COMPANY (March 5, 2009)

Sharon Mondry was an employee of American Family Mutual Insurance Company ("American Family") and participated in its health insurance plan. When her son needed speech therapy, she contacted the company to ascertain the extent of her benefits. After being referred to the Summary Plan Description ("SPD"), she enrolled her son in speech therapy in January 2003. In June 2003, CIGNA, the claims administrator, denied coverage. The letter indicated that the denial was based on CIGNA’s “Benefit Resource Tools guidelines” (“BRT”). The language used in the denial letter and the BRT was not consistent with the SPD, The SPD indicated that speech therapy is typically covered if performed by a certified therapist. Mondry began an effort that lasted over a year to get the documentation that was used by CIGNA to deny the coverage. For months, CIGNA and American Family either ignored or denied her requests. Mondry’s appeal of the denial was upheld in July of 2003. The letter upholding the denial again referenced a document that Mondry had never seen -- the Clinical Resource Tool (“CRT”). Mondry added the CRT to her document request. Her requests continued to go unanswered or denied. In September 2003, Mondry left her employment with American Family and elected not to continue her health coverage. She did continue her efforts to receive a complete set of plan documents and to reverse the denial of coverage. Mondry finally obtained copies of the CRT in July of 2004 in the BRT in October 2004. It became clear that the criteria contained in the CRT and the BRT were different from the criteria contained in the SPD. CIGNA reversed its position and authorized coverage of the speech therapy. Ten months later, CIGNA reimbursed Mondry for most of her out-of-pocket therapy expenses. Mondry filed suit against American Family and CIGNA pursuant to ERISA. She alleged that American Family and CIGNA failed to produce documents as required by the statute and that they both breached fiduciary duties owed to her. The district court dismissed the claims against CIGNA and entered summary judgment for American Family. Mondry appeals.

In their opinion, Judges Flaum, Kanne and Rovner affirmed in part and reversed in part. The court first addressed the failure to produce documents. ERISA requires a plan administrator to produce to a plan participant the Summary Plan Description and other documents, including "other instruments under which the plan is established or operated." The court affirmed the district court's dismissal of CIGNA with respect to this count because CIGNA is not the plan administrator. As the claims administrator, it is not subject to the requirement. The Court reversed, however, with respect to American Family. It held that American Family was required to produce the claims administration agreement as well as the BRT in the CRT. The Court had little problem in requiring the production of the claims administration agreement. Since it established the respective authorities and obligations of a plan administrator and claims administrator, it was a document on which the plan was operated. The Court found the BRT and the CRT closer questions. The Court stated that the catchall language should be narrowly construed to reach only documents that formally govern the establishment or operation of the plan. Since CIGNA treated the documents as authoritative sources -- in fact, the bases for their decision to deny the claim -- they are more than simply private guidelines. The Court emphasized the narrowness of its holding, only to apply to documents that are treated by the claims administrator as the equivalent of plan language. Finally, the Court held that the fact that American Family was not in possession of the documents was not relevant to its liability. If American Family did not have the right to obtain the documents from CIGNA, they certainly should have bargained for that right. The Court remanded to the district court for determination of the appropriate penalty.

The Court went on to address Mondry's claim that both American Family and CIGNA violated their fiduciary duties. Before addressing the existence of a fiduciary duty, the Court considered whether Mondry qualified for one of the statute’s limited range of remedies. The section of the statute upon which Mondry relies authorizes only equitable relief. The Court concluded that her claims for unreimbursed expenses and the expense she incurred as a result of her decision not to participate in COBRA were not authorized remedies. The Court did, however, concluded that Mondry had a viable claim for the time-value of the money she spent on the speech therapy. The Court noted that this was a restitutionary remedy -- sometimes considered a legal remedy and sometimes an equitable one. Restitution is equitable when it is sought as a result of a breach of fiduciary duty. Here, American Family had the interest-free use of the money and restitution by Mondry negate its gain. Having found relief to which Mondry may be entitled, the Court proceeded to address the fiduciary duty issue. ERISA imposes a duty of loyalty like that of a trustee and it creates a duty of care in executing that duty. The Court looked to a Fourth Circuit decision that concluded that a fiduciary breaches its fiduciary obligation when it fails to make the disclosures required by the statute. The Court concluded that there was sufficient evidence from which a fact-finder could determine that American Family breached its fiduciary duty to Mondry. With respect to CIGNA, however, the Court found so no such duty. CIGNA did not have the same obligation to produce documents, nor did profit from a refusal to do so. The Court affirmed the lower court's dismissal of all counts as against CIGNA and reversed with respect to both counts as against American Family. It remanded the claim for penalties for a determination of the appropriate amount and reversed the summary judgment on the fiduciary duty count and remanded for further proceedings.