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William G. v. United Healthcare

United States District Court, D. Utah, Northern Division

June 2, 2017

WILLIAM G., Plaintiff,
v.
UNITED HEALTHCARE, UNITED BEHAVIORAL HEALTH, and the MORGAN STANLEY MEDICAL PLAN, Defendants.

          MEMORANDUM DECISION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS

          David Nuffer District Judge

         Defendants United Healthcare (“UHC”), United Behavioral Health (“UBH”), and the Morgan Stanley Medical Plan (“Plan”), collectively “Defendants, ” filed a Motion for Partial Dismissal[1] (the “Motion to Dismiss”) in response to Plaintiff William G.'s (“Bill”) Complaint.[2]The motion argues that a portion of the relief Bill seeks is barred by the Plan's limitations period for seeking judicial review. Bill responded[3] that the Plan's limitations period is unenforceable because Defendants violated the Employee Retirement Income Security Act of 1974's (“ERISA”) claim procedure regulations by not disclosing the limitations period in their denial letters for his claims. And Defendants replied.[4]

         Because ERISA's claim procedure regulations require plan administrators to disclose plan limitations periods in denial letters, and Defendants failed to do so in their denial letters for Bill's claims, the Plan's limitations period is unenforceable against Bill. Therefore, Bill timely filed his Complaint within the applicable state six-year statute of limitations and Defendants' Motion to Dismiss is DENIED.

         FACTUAL BACKGROUND ......................................................................................................... 2

         Second Nature Treatment ................................................................................................... 3

         Waypoint Treatment ........................................................................................................... 3

         Elevations Treatment .......................................................................................................... 4

         DISCUSSION ................................................................................................................................. 5

         ERISA's claim procedure regulations require denial letters to disclose a plan's limitations period for seeking judicial review ............ 7

         The plain language of Subsection (g)(1)(iv) requires all denial letters to disclose a plan's limitations period for seeking judicial review .................................. 9

         Policy considerations support a reading of Subsection (g)(1)(iv) that requires disclosure of a plan limitations periods in denial letters ........................... 16

         Defendant's failure to disclose the Plan's limitations period in the denial letters is prejudicial and renders the limitations period unenforceable against Bill ........ 18

         ORDER ......................................................................................................................................... 20

         FACTUAL BACKGROUND

         Bill is an employee of Morgan Stanley and a participant in the Plan.[5] The Plan is a “self-funded employee welfare benefit plan” established under ERISA.[6] Beginning in 2013, Bill's son, W.G., received medical treatment for mental health conditions at three treatment centers: Second Nature Uintahs (“Second Nature”), Waypoint Academy (“Waypoint”), and Elevations Residential Treatment Center (“Elevations”).[7]

         Because the dates of the insurance claims arising from these three treatment centers are critical to the analysis that follows, a brief history of W.G.'s connection to each center is provided.

         Second Nature Treatment

         W.G. was admitted to Second Nature, a licensed therapeutic wilderness program for adolescents with mental health conditions, on October 14, 2013.[8] After approximately three months of treatment, W.G. was discharged from Second Nature on January 9, 2014, “with a strong recommendation for placement” at another treatment facility.[9] Sometime after W.G.'s discharge from Second Nature, Bill submitted an insurance claim to UBH, an agent for the Plan, for W.G.'s treatment at Second Nature.[10] UBH denied coverage for the treatment in a letter on October 15, 2014.[11] Bill appealed the denial on December 12, 2014.[12] And UBH maintained its denial of coverage on January 13, 2015.[13]

         Waypoint Treatment

         After being discharged from Second Nature, W.G. was transferred directly to Waypoint and was admitted on January 9, 2014.[14] W.G. spent almost 19 months at Waypoint before being discharged on July 22, 2015.[15] Bill submitted an insurance claim for W.G.'s treatment at Waypoint sometime after W.G.'s admission to the facility, and UBH denied coverage because it had not been “preauthorized by UBH.”[16] Bill appealed the denial on December 12, 2014.[17] UBH responded on December 23, 2014, and again on January 9, 2015, denying the insurance claim.[18] On June 18, 2015, Bill appealed a second time and his claim was denied on July 17, 2015.[19]After both of Bill's appeals were denied, he requested an external review of the denial on February 2, 2016.[20] The reviewing entity, AllMed, upheld UBH's July 17, 2015 denial.[21]

         Elevations Treatment

         W.G. transferred directly from Waypoint to Elevations on July 22, 2015.[22] W.G. was treated at Elevations for almost one year and was discharged on June 2, 2016, because he turned 18 years old and Elevations does not offer treatment programs for adults.[23] At some time after W.G.'s admission to Elevations, Bill submitted an insurance claim for W.G.'s medical expenses.[24] UBH denied the insurance claim on July 28, 2015.[25] Bill appealed the denial on January 20, 2016, and UBH denied the appeal on February 19, 2016.[26] Bill appealed again on June 14, 2016, which UBH denied as untimely on June 20, 2016.[27]

         Following UBH's June 20, 2016 denial, Bill initiated this case against Defendants on September 30, 2016.[28] Bill alleges a single cause of action for benefits under ERISA and asks for review of UBH's denials of coverage for W.G.'s treatment at Second Nature, Waypoint, and Elevations.[29] Defendants challenge the timeliness of Bill's Complaint regarding W.G.'s treatment at Second Nature and Waypoint, but do not challenge the Complaint with regard to W.G.'s treatment at Elevations.[30]

         DISCUSSION

         Defendants seek partial dismissal of Bill's Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure based on the Plan's contractual limitations period.[31] Defendants are entitled to dismissal under Rule 12(b)(6) when the complaint, standing alone, is legally insufficient to state a claim on which relief may be granted.[32] When considering a motion to dismiss for failure to state a claim, the thrust of all well-pleaded facts is presumed, but conclusory allegations need not be considered.[33] And the complaint's legal conclusions and opinions are not accepted, whether or not they are couched as facts.[34]

         When ruling on a motion to dismiss in an ERISA claim under Rule 12(b)(6), documents, such as Summary Plan Descriptions (“SPDs”) and denial letters, may be considered if they are “referred to in the complaint” and are “central to the plaintiff's claim.”[35] Consideration of these documents will not convert the motion into one for summary judgment.[36]

         “ERISA does not contain a [statutory] limitations provision for private enforcement actions under 29 U.S.C. § 1132.”[37] “Thus, [courts] generally apply the most closely analogous statute of limitations under state law.”[38] In Utah, “when dealing with a self-funded ERISA benefit plan, the most analogous statute of limitations is six years[.]”[39] However, when the parties have contractually agreed to a limitations period, “[c]hoosing which state statute to borrow is unnecessary[.]”[40] Rather, the limitations period found in the ERISA plan is enforceable and applied to the claim, so long as it is reasonable.[41]

         Here, the Plan provides:

You may not bring a lawsuit to recover benefits under a benefit plan until you have exhausted the plan's administrative process described in this SPD. If your appeal is denied, you have the right to file a lawsuit under ERISA, if it is within the earliest of:
• Six months following the date your appeal is denied[;]
• Three years following the date the services you are appealing are performed[;] or
• The end of any other applicable statutory limitation period[.][42]

         The allegations in Bill's Complaint demonstrate that he did not file the Complaint within six months of the final denial letters relating to W.G.'s treatment at Second Nature and Waypoint.[43] Yet Bill does not challenge the reasonableness of the Plan's six-month limitations period. Rather, to avoid the partial dismissal of his ERISA claim, Bill argues that Utah's six-year statute of limitations applies to the claim because Defendants failed to provide specific notice of the Plan's limitations period for seeking judicial review in their final denial letters-in violation of ERISA's claim procedure regulations-thus rendering the Plan's limitations period unenforceable.[44] A review of the denial letters[45] shows that they do not disclose the Plan's limitations period for seeking judicial review. Therefore, the resolution of Defendants' Motion to Dismiss turns on whether ERISA's claim procedure regulations required the denial letters to disclose the Plan's limitations period for seeking judicial review.

         ERISA's claim procedure regulations require denial letters to disclose a plan's limitations period for seeking judicial review

         “Congress enacted ERISA to ‘protect … the interests of participants in employee benefit plans and their beneficiaries' by setting out substantive regulatory requirements for employee benefit plans and to ‘provid[e] for appropriate remedies, sanctions, and ready access to the Federal courts.'”[46] Therefore, ERISA provides that:

[E]very employee benefit plan shall-
(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and
(2) afford a reasonable opportunity to any participant whose claim for benefits have been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.[47]

         “The purpose of the[se] requirements … is to ‘enable the claimant to prepare adequately for any further administrative review, as well as appeal to the federal courts.'”[48]

         ERISA also grants the Department of Labor authority to promulgate regulations to govern the ERISA claims procedure process.[49] Two regulatory provisions are relevant to the parties' arguments on Defendants' Motion to Dismiss-29 C.F.R. §§ 2560.503-1(g)(1) and 2560.503-1(j)(4)(i). These regulations require plan administrators to provide information about review procedures in adverse benefit determination letters.[50] Subsection (g)(1)(iv) applies to “any adverse benefit determination” and specifically requires “[a] description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action … following an adverse benefit determination on review[.]”[51] Subsection (j)(4)(i) applies only to “benefit determination[s] on review[, ]” i.e., final adverse benefit determinations, and requires “[a] statement describing any voluntary appeal procedures offered by the plan and the claimant's right to obtain the information about such procedures … and a statement of the claimant's right to bring [a civil] action[.]”[52]

         Bill argues the plain reading of these regulations requires all denial letters to disclose a plan's limitations period for seeking judicial review.[53] On the other hand, Defendants argue that the plain language merely requires disclosure of the right to bring a civil action and not the time limit for filing a civil action in federal court.[54]

         The plain language of Subsection (g)(1)(iv) requires all denial letters to disclose a plan's limitations period for seeking judicial review

         Defendants maintain that a proper reading of Subsection (g)(1)(iv) requires disclosure of only the time limits applicable to internal appeal procedures to be described in a denial letter, and not the limitations period for filing a civil action after the administrative process has been exhausted.[55] In other words:

[T]he two phrases in section 2560.503-1(g)(1)(iv) could be read separately, such that a plan administrator is, first, required to include in its denial letter a “description of the plan's review procedures and the time limits applicable to such procedures, ” and second, required to include “a state of the claimant's right to bring a civil action, ” though not necessarily the time period for filing the action.[56]

         However, reading the regulation in this way-as having two unrelated requirements- necessitates reading the word “including” out of Subsection (g)(1)(iv), and replacing it with the word “and.”[57] Such a reading is improper because the word “including” cannot be easily removed or changed since it “modifies the word ‘description, ' which is followed by a prepositional phrase explaining what must be described-the plan's review procedures and applicable time limits for those procedures.”[58] Therefore, it follows that “[i]f the description of the review procedures must ‘includ[e]' a statement concerning civil actions, then civil actions are logically one of the review procedures envisioned by the Department of Labor[‘s regulation].”[59]

         Accordingly, the only proper reading of Subsection (g)(1)(iv)'s plain language requires a plan administrator to disclose the plan's applicable civil action time limits in any denial letter.

         This reading is further supported by the differing language choices of Subsection (g)(1)(iv) and Subsection (j)(4)(i). Specifically, Subsection (j)(4)(i) uses the phrase “appeal procedures, ” when referring to the requirement that a final denial letter disclose a plan's voluntary internal appeal procedures. Subsection (g)(1)(iv), on the other hand, uses the general phrase “review procedures, ” referring to both the internal appeal procedures of a plan and judicial review. “A familiar principle of statutory construction ... is that a negative inference may be drawn from the exclusion of language from one statutory provision that is included in other provisions of the same statute.”[60] In other words, when particular language is included in one provision but omitted or changed in another, it is generally presumed that the drafter acted intentionally.[61] If the Department of Labor intended that Subsection (g)(1)(iv) require denial letters to disclose only time limits related to internal appeal procedures, it would have used the more narrow phrase-“appeal procedures”-found in Subsection (j)(4)(i) rather than the broader phrase-“review procedures”-when drafting Subsection (g)(1)(iv).

         The three Circuit Courts of Appeals that have addressed this specific issue-the First, Third, and Sixth Circuits-have interpreted Subsection (g)(1)(iv) in this way.[62] Defendants nevertheless cite to cases from two other circuit courts of appeals-the Ninth and Eleventh Circuits-to support their interpretation.[63] However, the cases Defendants rely on are inapplicable and unpersuasive. In Wilson v. Standard Ins. Co., the Eleventh Circuit's analysis did not rely on an interpretation of Subsection (g)(1)(iv).[64] Rather, the court determined Subsection (g)(1)(iv) was ambiguous and simply assumed the regulation required denial letters to “notify the claimant of her time for filling a lawsuit under ERISA[.]”[65] It then decided the case on equitable tolling grounds.[66] Because the Eleventh Circuit does not rely on an interpretation of Subsection (g)(1)(iv) and because a discussion of equitable tolling is unnecessary to the resolution of Defendant's Motion to Dismiss, [67] Wilson is inapplicable and unpersuasive.

         Likewise, the Ninth Circuit's opinion in Scharff v. Raytheon Co. Short Term Disability Plan is inapplicable and unpersuasive because its analysis does not reference or rely on Subsection (g)(1)(iv).[68] In Scharff, after the plaintiff conceded that the plan administrator had met its obligations under ERISA, the Ninth Circuit merely declined to adopt a similar California state regulation that would require plan administrators to disclose civil filing deadlines in denial letters:

Plaintiff concedes that the Plan met all applicable ERISA disclosure requirements and that [Defendant] was not obligated under ERISA to inform her of the deadline. She argues, however, that we should impose an additional “duty to inform” on claims administrators, drawn from a California insurance regulation. We decline to do so.[69]

         Because the Ninth Circuit did not interpret Subsection (g)(1)(iv), Scharff does not persuasively support Defendants' argument.

         In further support of their interpretation of Subsection (g)(1)(iv), Defendants cite a Utah District Court ruling in the case of Michael C.D. v. United Healthcare.[70] In Michael C.D., the court declined to interpret Subsection (g)(1)(iv) to require denial letters to include the contractual imitations period for filing an ERISA claim in federal court.[71] In doing so, the court considered Subsection (j)(4)(i), which applies to only final denial letters, in conjunction with Subsection (g)(1)(iv).[72] Subsection (j)(4)(i) requires final denial letters to disclose information about a plan's voluntary internal appeal procedures, but does not expressly require plan administrators to disclose the time limits for bringing a civil suit.[73] Relying on Michael C.D., Defendants argue that it is counterintuitive for plan administrators to be required to disclose time limitations in previous denial letters, but not in final denial letters-“especially where ERISA's exhaustion of administrative remedies doctrine only allows a plan participant to sue after completing any requisite appeals[.]”[74] This argument is not persuasive in light of subsection (g)(1)(iv)'s plain language.

         Defendants' argument incorrectly assumes that Subsection (j)(4)(i) is the only provision that applies to final denial letters. This reading of Subsection (j)(4)(i), which renders the plain language of Subsection (g)(1)(iv) meaningless, is unacceptable. “A statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant[.]”[75]

         Here, Subsections (g)(1)(iv) and (j)(4)(i) can be reconciled because Subsection (g)(1)(iv) applies to any adverse benefit determination-including final denial letters. Therefore, a final denial letter must meet the requirements of both Subsection (g)(1)(iv) and Subsection (j)(4)(i), thereby giving full effect to both regulations. Reading the regulations together reveals that Subsection (j)(4)(i) expands the requirements of Subsection (g)(1)(iv) for final denial letters-it does not eliminate them. The only language duplicated in the two regulations is the requirement that final denial letters include a statement of the claimant's right to file a civil action.[76] This duplication merely underscores the importance of providing plan participants a fair opportunity for judicial review in accordance with ERISA's purpose.[77]

         A plain reading of both provisions requires that final denial letters provide a description of voluntary internal appeal procedures in addition to the description of review procedures required by Subsection (g)(1)(iv). There is no language in Subsection (j)(4)(i) suggesting that it eliminates the requirements of Subsection (g)(1)(iv). Rather, its language adds to the disclosure requirements of Subsection (g)(1)(iv) to include voluntary internal appeals procedures that have not yet occurred.[78] Reading Subsection (j)(4)(i) to eliminate the disclosure requirements of Subsection (g)(1)(iv) would render meaningless Subsection (g)(1)(iv)'s language requiring the disclosure of a plan's review procedures, including the applicable time limits for filing a civil action, in any adverse determination letter.[79] Subsection (j)(4)(i) may not be read to conflict with Subsection (g)(1)(iv) or render it meaningless.[80] Therefore, reading Subsection (j)(4)(i) in concert with Subsection (g)(1)(iv) requires plan administrators disclose a plan's voluntary internal appeal procedures and the plan's civil action limitations period in final denial letters. This reading also makes practical sense because the voluntary internal appeal procedures and the civil action limitations periods are the only remaining options for a claimant seeking to challenge a denial of coverage following the issuance of a final denial letter.

         Defendants' argument regarding the plain language of Subsection (g)(1)(iv) also relies on the Tenth Circuit's unpublished decision in Young v. United Parcel Servs., Inc.[81]In Young, the court interpreted a contractual provision in the UPS Summary Plan Description.[82] The provision is nearly identical to Subsection (g)(1)(iv), except the UPS plan required disclosure of time limits applicable to “appeal procedures[.]”[83] Subsection (g)(1)(iv) uses the phrase “review procedures.”[84] The plan participant in Young argued that the language of the contractual provision required disclosure of civil action time limits, but the Tenth Circuit disagreed.[85] The court interpreted “appeals procedures” to refer only to the internal appeal procedures required under ERISA, which is not to be confused “with the filing of a legal action after that process has been fully exhausted.”[86]

         Defendants argue that because the language is similar, the Tenth Circuit would find that Subsection (g)(1)(iv) does not require disclosure of civil action time limits.[87] In a recent decision from the District of Utah, District ...


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