Plan In Effect When Claim Is Denied Does Not Always Control
HUSS v. IBM MEDICAL AND DENTAL PLAN (April 13, 2011)
Eileen Huss was an IBM employee and participated in the IBM Medical and Dental Plan. Huss’ son Joseph had a mental disability and was entirely dependent on Huss and her husband for his support. In 2005, Joseph was 24 years old and enrolled in his father's medical plan. But Huss wanted him enrolled in her plan at the time of her anticipated retirement at the end of 2006. Plan representatives told her that her son would be eligible to enroll at that time and that she need not take any additional steps until her retirement. In January of 2007, a month after her retirement, a Plan representative told her that Joseph was ineligible because she had not submitted a written application years earlier (60 days before he turned 23). Huss requested a summary of the plan and any relevant material. A plan representative responded that the 2006 Summary Plan Description (SPD), which Huss already had, was the only relevant document. Huss specifically requested plan language that was in effect in 2004, the year Joseph turned 23. Huss retained a lawyer who asked for reconsideration and again requested plan language and documents from the earlier years. Plan administrator R. A. Barnes denied relief based on language from the 2006 SPD. Barnes did provide some of the earlier language. Huss made her final appeal based on the 2004 SPD language, which did not require a written request. Barnes again denied eligibility. Huss brought suit pursuant to ERISA against both the Plan and Barnes. She sought benefits and statutory damages for failure to provide documents. Judge Zagel (N.D. Ill.) granted summary judgment to Huss on both counts, assessed statutory penalties of over $15,000, and awarded fees and expenses of over $86,000. Defendants appeal.
In their opinion, Judges Kanne, Williams and Tinder vacated and remanded on the claim for benefits, affirmed in part and reversed in part on the statutory penalties, and vacated and remanded the award of fees and expenses. The Court began with the eligibility issue. Since the administrator has discretion under the Plan’s language, Barnes' decision is reviewed under an arbitrary and capricious standard. The Court recognized Hackett's "sweeping language" to the effect that the plan in effect at the time a claim is denied is the plan that controls. But the Court noted that the type of dispute in Hackett was quite different and concluded that the nature of the dispute dictates whether earlier language might control. Here, where the Plan's denial is based on failure to satisfy a condition precedent, the controlling plan language must be that which was in effect when the claimant's ability to satisfy the condition precedent expired. In this case, that is the language in effect in 2004. Barnes' exclusive reliance on the 2006 SPD makes her actions arbitrary and capricious. With respect to eligibility under the earlier language, the Court found the earlier language ambiguous regarding the need for a parent's request for coverage continuation. Because of the ambiguity and the a plan administrator’s broad discretion, the Court concluded that Barnes’ interpretation -- that an employee had to make a request within 60 days of the dependent’s 23rd birthday -- was not unreasonable. A genuine issue of fact existed, however, with respect to whether Huss actually made that request. The Court remanded to the administrator for further development of the record and other proceedings. The Court next addressed the statutory penalty award. It affirmed the penalties associated with the Plan's original failure to send Huss the 2003 plan documents. The Court had already determined that this was the controlling document and the Plan did not produce it within the statutory time period. The district court’s second statutory penalty, however, related to defendant’s failure to produce a number of SPDs published between 2004 and 2007. Although the Court conceded that these documents would show the evolution of the condition precedent language and may have been helpful to Huss, it concluded that they did not fall within the category of documents that ERISA required defendants to produce. The district court therefore abused its discretion in awarding those penalties. Finally, the Court turned to the fee award. It noted that the Supreme Court had recently concluded, contrary to prior Seventh Circuit jurisprudence, that an ERISA plaintiff may still be awarded fees if her case is remanded to the administrator if she shows "some degree of success." The Court expressed its disagreement with some of the district court's findings but ultimately decided simply to vacate the award, given its treatment of the merits. The district court will have another opportunity to consider a fee award after remand.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select