Opinion
Case No. 2:20-cv-10573-SVW-AS
08-02-2022
Henry W. FOOTE v. The BEVERLY HILLS HOTEL & BUNGALOWS EMPLOYEE BENEFIT EMPLOYEE WELFARE PLAN
Russell G. Petti, Law Offices of Russell G. Petti, La Canada, CA, for Henry W. Foote. Diana Lerma, Stokes Wagner ALC, Sherman Oaks, CA, Jason H. Ehrenberg, Pro Hac Vice, Ehrenberg Legal and Higher Ed Solutions PLLC, Washington, DC, Jordan A. Fishman, Pro Hac Vice, Stokes Wagner ALC, Atlanta, GA, Peter Maretz, Stokes Wagner ALC, San Diego, CA, for The Beverly Hills Hotel & Bungalows Employee Benefit Employee Welfare Plan.
Russell G. Petti, Law Offices of Russell G. Petti, La Canada, CA, for Henry W. Foote.
Diana Lerma, Stokes Wagner ALC, Sherman Oaks, CA, Jason H. Ehrenberg, Pro Hac Vice, Ehrenberg Legal and Higher Ed Solutions PLLC, Washington, DC, Jordan A. Fishman, Pro Hac Vice, Stokes Wagner ALC, Atlanta, GA, Peter Maretz, Stokes Wagner ALC, San Diego, CA, for The Beverly Hills Hotel & Bungalows Employee Benefit Employee Welfare Plan.
Proceedings: ORDER GRANTING VERDICT IN PLAINTIFF'S FAVOR
STEPHEN V. WILSON, UNITED STATES DISTRICT JUDGE I. Introduction
Plaintiff Henry W. Foote brings this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 42 U.S.C. § 1132(a)(1)(B), challenging Defendant's denial of health insurance coverage for injuries arising out of a scooter accident. Pending before the Court is a trial on the administrative record, pursuant to Kearney v. Standard Ins. Co. , 175 F.3d 1084 (9th Cir. 1999) (en banc). This order constitutes the Court's findings of fact and conclusions of law.
The Court finds in Plaintiff's favor and concludes that Defendant erroneously denied coverage for Plaintiff's injuries. Plaintiff is therefore entitled to recover the benefits due to him under the terms of his plan.
The Court previously provided a thorough recitation of the factual background of this case in a prior order, Dkt. 27, thus this section is largely adapted from the facts detailed there, supplemented with further developments to the record since that order was issued.
a. Plaintiff's Accident
Plaintiff was employed as a pastry chef at the Beverly Hills Hotel ("BHH") between 1995 and 2019. Administrative Record ("AR") 1524. On November 1, 2019 at 12:30 p.m., Plaintiff was riding a Genuine motor scooter on Sunset Boulevard in Los Angeles when he collided with an SUV turning left onto Foothill Road. AR 1524, 1684-88. A police report determined that the driver of the SUV was at fault for failing to yield to Plaintiff, who had the right of way. AR 1687. The police report also indicates that Plaintiff only had a "class C license" without the "M-1 endorsement which was required for him to drive [the scooter]." AR 1683, 1692.
Plaintiff was unconscious at the scene and was transported to Cedars-Sinai Medical Center. AR 1527, 1685-86.
Plaintiff suffered catastrophic, life-threatening injuries. Plaintiff had blood pooling between his brain and the surrounding membrane, blood in his chest cavities, and lacerations to his spleen and liver. He had multiple fractures to his sternum, ribs, clavicle, pelvis, legs, and left foot. He underwent numerous procedures and ultimately had part of his left leg amputated. AR 1524-25.
After 56 days in the hospital, Plaintiff was discharged. AR 2941. Plaintiff's recovery was miraculous, but it did not come cheap. Indeed, before Plaintiff had even been discharged, the hospital bill alone already exceeded $4 million. AR 2296.
b. BHH Plan
Plaintiff was insured through the Beverly Hills Hotel and Bungalows Employee Benefit Employee Welfare Plan ("the Plan"). The Plan is "self-funded," which means that "[t]he funding for the benefits is derived from the funds of the employer and contributions made by covered employees." AR 1805. The Plan is not insured, and BHH is the Plan's fiduciary and Administrator. AR 1806.
In the version of the Plan in effect in 2019 ("the AmeriBen Plan"), AmeriBen was appointed as the Plan's Third Party Administrator. AR 1803. AmeriBen's duty was "to assist the Plan Administrator with claims adjudication." AR 1807. The Plan provided that AmeriBen "is not a fiduciary of the Plan, [and] does not exercise any of the discretionary authority and responsibility granted to the Plan Administrator." AR 1917.
Regarding BHH's discretion as Administrator, the AmeriBen Plan included the following provision:
It is the express intent of this Plan that the Plan Administrator shall have maximum legal discretionary authority to construe and interpret the terms and provisions of the Plan, to make determinations regarding issues which relate to eligibility for benefits ..., to decide disputes which may arise relative to a plan participant's rights, and to decide questions of Plan interpretation and those of fact relating to the Plan. The decisions of the Plan Administrator as to the facts related to any claim for benefits and the meaning and intent of any provision of the Plan, or its application to any claim, shall receive the maximum deference provided by law and will be final and binding on all interested parties. Benefits under this Plan will be paid only if the Plan Administrator decides, in its discretion, that the plan participant is entitled to them.
AR 1804.
The AmeriBen Plan also contained numerous exclusions, including, as relevant to this case, an Illegal Acts Exclusion, which reads as follows:
Illegal Acts. Any charges for care, supplies, treatment, and/or services for any injury or illness which is incurred while taking part or attempting to take part in an illegal activity, including but not limited to misdemeanors and felonies. It is not necessary that an arrest occur, criminal charges be filed, or, if filed, that a conviction result. Proof beyond a reasonable doubt is not required to be deemed an illegal act. This exclusion does not apply if the injury resulted from being the victim of an act of domestic violence or a medical (including both physical and mental health) condition.
AR 1835-36.
On January 1, 2020, a new version of the Plan went into effect. AR 7818. In this version of the Plan ("the Cigna Plan") , Cigna replaced AmeriBen as the third-party administrator. AR 7822. The Cigna Plan also delegated discretion to Cigna to interpret plan terms and determine claims eligibility, rather than vesting such discretion with BHH, as the AmeriBen plan had done. AR 1804, 7879. And, crucially, unlike the AmeriBen Plan, the Cigna Plan did not contain an Illegal Acts Exclusion. See AR 7818-7891.
To be clear, during the entirety of the period relevant to this case, the Plan was BHH's self-funded employee benefit and welfare plan. The Court uses the terms "AmeriBen Plan" and "Cigna Plan" to refer to the operative version of the Plan's governing documents at different times. The "AmeriBen Plan" refers to the version of the Plan's governing documents that were in effect in 2019, in which AmeriBen was the Third Party Administrator. The "Cigna Plan" refers to the version of the Plan's governing documents that went into effect on January 1, 2020, when Cigna was the Third Party Administrator.
The Cigna Plan does contain a somewhat similar, albeit much narrower provision excluding coverage for "charges arising out of or relating to any violation of a healthcare-related state or federal law." AR 7861 (emphasis added). Defendant has never remotely suggested that this exclusion would be relevant here, and for good reason – it is rather obvious that driving a scooter without the appropriate licensure is not a violation of a healthcare-related law, under any reasonable interpretation of that phrase.
c. Initial Claims Process
Just five days after the accident, an AmeriBen representative emailed Rudy Blanco, BHH's Area Director of Finance, informing him about a "high dollar claimant," who had already incurred charges of $1.6 million from Cedars-Sinai. AR 2364-66.
On December 18, 2019, AmeriBen contacted Blanco again, seeking an "urgent decision" and direction from the Plan. AR 1784. AmeriBen explained that it had $5 million in claims pending. Id. The matter was forwarded up the chain at BHH. The CFO of Dorchester Collection, which appears to be BHH's parent company, stated that, "[w]e do not see this as a company cost." AR 1781. This was echoed by BHH's Controller who said, "[p]er our conversations with our legal and corporate office, please do not pay any portion of the claim for [Plaintiff]." AR 4393. Blanco confirmed to AmeriBen that BHH would keep the claims on hold pending the police report. AR 4389-90.
The police report is dated January 29, 2020, and it was supplemented on February 27, 2020. AR 1678, 1692. No later than March 2, 2020, BHH was aware that Plaintiff did not have the M-1 endorsement required to drive a motor scooter. BHH's counsel contacted Plaintiff's counsel regarding Plaintiff's license to operate the scooter. AR 1668-69. Plaintiff's counsel responded to BHH's counsel that Plaintiff had a learner's permit and that he was working on getting a copy or confirmation. AR 4586. BHH's counsel followed up a week and a half later, but Plaintiff's counsel said he had requested the permit info from the DMV and would know soon. AR 4639. There is no indication in the record whether Plaintiff's counsel provided any documents.
This correspondence explains that the Plan believed through its own investigation that Plaintiff had failed his test to receive the M-1 endorsement in March 2020 and that learner's permits expire within 6 months. However, because no evidence is submitted on this point beyond this correspondence of counsel, the Court cannot credit these statements.
Blanco sent an email on March 26 to AmeriBen and others involved in the claims process informing them of BHH's "decision not to approve payment on claims related to Henry Foote's accident, based on exclusions contained in our plan document." AR 1965. AmeriBen understood Blanco's message to mean that BHH was denying Plaintiff's claims "based on the Illegal Acts exclusion." AR 2008.
However, no formal denial of coverage letter was issued from BHH or AmeriBen at that point. Indeed, during this period, it seems that the only information Plaintiff received regarding his claims was (a) the request, through Plaintiff's counsel, for information about the M-1 endorsement or learner's permit, and (b) form explanations of benefits ("EOBs"). These EOBs were terse, to say the least. For example, some from December 2019 say, "CHARGE WILL BE CONSIDERED UPON RECEIPT OF ACCIDENT DETAILS." See, e.g. , AR 6218. Others from February 2020 reference the absence of a police report. See, e.g. , AR 5086. Around the end of March, the record contains EOBs with the following explanation for a denial, "REFER TO THE LIMITATIONS AND EXCLUSIONS IN YOUR BROCHURE OR SUMMARY OF PLAN DESCRIPTION FOR NON COVERED SERVICES, SUPPLIES AND OR PROVIDERS." See, e.g. , AR 4884.
On June 23, 2020, Plaintiff retained new counsel, who mailed, faxed, and called AmeriBen in an effort to obtain a formal denial letter complying with ERISA and to obtain documents relevant to the coverage determination. AR 1733-49. Plaintiff ultimately received a formal denial letter on July 22, 2020, although the letter was dated July 1, 2020. AR 1748.
The letter provided the following explanation for denying coverage:
Upon receipt of medical claims related to Mr. Foote's injuries resulting from a scooter/car collision, an investigation into the accident details was initiated. Our review determined the services related to this accident are an excluded benefit due to an illegal act by Mr. Foote. The police report documents Mr. Foote did not have an M-1 endorsement which was required for him to drive the scooter. Therefore, all services related to his injuries will not be covered.
AR 1756.
Plaintiff initiated his appeal on July 24, 2020 and provided supporting documents on September 23, 2020. AR 1767. The appeal included three significant pieces of new evidence relevant to the Plan's position that Plaintiff was unlawfully riding a motor scooter at the time of the accident. First, Plaintiff provided a declaration explaining that he received a learner's permit for the scooter on March 3, 2019, and was told by the DMV that the permit would last for one year. AR 1526. Plaintiff's declaration also stated that he kept the permit in his wallet, but both the hospital and the police said they did not have the wallet. Id.
Second, Plaintiff's husband, Philip Hopbell, provided a declaration. AR 1527. Hopbell testified that Plaintiff showed him a copy of the learner's permit and that Hopbell was aware that Plaintiff kept the permit in his wallet. AR 1528. Hopbell also explained that, on the day of the accident, a police officer had given him a plastic bag with Plaintiff's mobile phone, eyeglasses, house keys, and a backpack with biscuits he had taken home from his bakery. AR 1527. The wallet was not in that plastic bag, and the officer told Hopbell it may have been with the trauma team. Id. However, when Hopbell asked at the ICU, one of the trauma nurses said it had been turned over to a police officer. AR 1528.
Third, Plaintiff provided an application that was submitted to the DMV for a class M driver's license on March 4, 2019. AR 1529-30. That document did not reflect whether Plaintiff received a learner's permit. Id. Another document obtained from the DMV was a "Driver License/Identification Card Information Request." AR 1531. It contained basic identifying information that would go on a driver's license, and confirms that Plaintiff only had a Class C license and did not have an M-1 endorsement. Id. However, that document does not say one way or the other whether Plaintiff ever had a valid learner's permit.
BHH had 30 days to decide the appeal under the Plan, AR 1863, and under ERISA regulations, 29 C.F.R. 2560.503-1(i)(2)(iii)(A). By October 30, 2020, no decision had been rendered. AR 1767. Plaintiff sent two letters which received no response and tried calling the customer service line without being able to speak to a live representative. Id. ; AR 1764.
A denial letter finally issued in late November. The denial letter was dated November 20, 2020, which was a day after this lawsuit was filed. Dkt. 1, AR 1760. The envelope reflects that the denial letter was not postmarked until November 24, 2020. AR 1763.
The appeal denial simply reiterated the initial decision. In relevant part, it reads:
Our investigation determined Mr. Foote did not have an M-1 endorsement required to operate a scooter/motorcycle in the state of California. Based on this information, it has been determined the services are related to an illegal act and therefore a plan exclusion.
AR 1760.
The appeal denial letter did not put forth any evidence that Plaintiff lacked a valid learner's permit. It did not discuss the evidence Plaintiff had recently submitted to prove that he had a valid learner's permit. In fact, the appeal denial letter did not discuss one way or another the learner's permit issue. AR 1760.
BHH remained involved in monitoring Plaintiff's appeal process. On June 24, 2020, Blanco noted that an appeal deadline was approaching and asked if Plaintiff had filed an appeal. AR 2214. BHH requested to have their attorney copied on all communication related to Plaintiff's appeal. AR 2154. BHH actively sought updates on the appeal throughout July. AR 1986, 1989-91. Into October 2020, the record reflects that BHH representatives were corresponding with AmeriBen regarding the status of Plaintiff's claim, and prepared at least one response to an inquiry from AmeriBen regarding Plaintiff's claim while Plaintiff's appeal was pending. AR 1958.
On November 18, 2020, two days before the date of the appeal denial letter, an AmeriBen employee wrote to a supervisor regarding Plaintiff's counsel's letter. AR 1977. She said that "[i]t appears the client does not want to be involved in this or overturn the decision," and she resolved to send a draft letter denying the appeal. Id. She also asked whether the appeal should be handled as a first-level appeal, as opposed to a second-level appeal. Id. Her supervisor wrote back later that day that she had not yet received a response from the client but agreed it made sense to handle as a first level appeal. Id.
d. This Court's Prior Order Remanding to BHH
Plaintiff filed this suit on November 19, 2020, challenging the denial of his claim. See Dkt. 1. After the parties filed cross-briefs based upon the Administrative Record, the Court issued an order on August 12, 2021, concluding that BHH had abused its discretion in adjudicating Plaintiff's claim. AR 7717; Dkt. 27 at 15.
The Court explained that BHH abused its discretion by failing to address Plaintiff's contention that he held a valid motorcycle learner's permit at the time of the accident. AR 7717-18; Dkt. 27 at 15-16. The Court reasoned that because the learner's permit issue was significant to whether the Illegal Acts Exclusion applied, BHH abused its discretion in failing to consider it whatsoever – both originally and on appeal – even though Plaintiff had submitted evidence supporting the contention that he held a valid learner's permit. AR 7718-19; Dkt. 27 at 16-17.
However, the Court also concluded that remand to BHH was the appropriate remedy, rather than an outright award of benefits. AR 7719-20; Dkt. 27 at 17-18. In the Court's view, it was simply unclear whether Plaintiff was entitled to benefits, thus remand was appropriate for BHH to consider in the first instance whether or not Plaintiff possessed a valid learner's permit and, accordingly, whether or not his claim should have been covered. AR 7720; Dkt. 27 at 18.
e. Administrator's Decision on Remand
Upon remand, the Plan again denied Plaintiff's claim on October 26, 2021. AR 7721, 7752. In the denial letter to Plaintiff, BHH stated that its investigation upon remand "found no support for [Plaintiff's] attestations" that he had a valid learner's permit at the time of the accident. AR 7722. Specifically, the letter indicated that BHH had subpoenaed DMV records, and the DMV's production "yielded no evidence of a valid learner's permit at the time of the subject accident." AR 7722. The DMV production seems to have turned up no new information. It merely contained a document indicating that Plaintiff had never actually obtained the full M-1 licensure endorsement, AR 7741, as well as a document (which Plaintiff had already submitted with his original claim, see AR 1529-30) that indicated that Plaintiff had applied for a class M driver's license on March 4, 2019 but did not indicate whether or not he actually received a learner's permit. AR 7750-51.
In response, Plaintiff submitted supplemental documents, including (a) a supplemental declaration from Plaintiff insisting that he had been issued a learner's permit, and (b) declarations from Plaintiff's cousin and Plaintiff's friend, stating that Plaintiff had shown them the permit at various points in March and April 2019. AR 7756-71.
On January 29, 2022, the Plan responded with a supplemental denial letter reaffirming its denial of benefits. AR 7815-17. The letter acknowledged the supplemental documents submitted by Plaintiff but indicated that it "[did] not change the Plan's prior determination" since the absence of any DMV record confirming the existence of a learner's permit "most strongly supports that there was no valid permit at the time of the accident." AR 7816-17.
It appears that Defendant's litigation counsel emailed a draft supplemental denial letter to a BHH representative and, after receiving her approval, forwarded the draft letter to a Cigna representative and requested that Cigna communicate the letter to Plaintiff on BHH's behalf. AR 7806-11.
f. The Bench Trial
On March 8, 2022, the Court held a bench trial. See Dkt. 45. The parties briefed their positions in advance of the trial based on the administrative record, see Dkt. 34-39, and delivered oral argument.
During argument at the bench trial, Plaintiff's counsel contended that the Cigna Plan went into effect on January 1, 2020 and was thus in effect at the time of original denial of Plaintiff's claim. See Dkt. 46. This was significant, as the previous submissions of the parties suggested that the Cigna Plan had not gone into effect until 2021. See Dkt. 37 ("... the CIGNA Plan, which went into effect in January 2021, months after Plaintiff's claim was denied and after Plaintiff initiated this litigation ..."). Accordingly, the Court requested supplemental briefing from both parties regarding when the Cigna Plan went into effect. Id.
In response, after reviewing the issue and conferring, both parties agreed that the Cigna Plan went into effect on January 1, 2020. See Dkt. 47. In their response, the parties stipulated that the 2020 Cigna Plan document should be included as part of the Administrative Record, as it had not previously been included (though the 2021 Cigna Plan document had been included). See Dkt. 47. This stipulation is granted, and the Administrative Record is so amended.
III. Analysis
There are two inter-related threshold questions in analyzing the denial of Plaintiff's claim. The first issue is what standard of review applies to the Court's evaluation of the claims denials here. And because the standard of review largely hinges on the terms of the plan, see Abatie v. Alta Health & Life Ins. Co. , 458 F.3d 955, 963 (2006) (en banc), the second question is which plan governs here – the AmeriBen Plan or the Cigna Plan.
a. Standard of Review
"[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire and Rubber Co. v. Bruch , 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). When a plan unambiguously provides discretion to the administrator, then abuse of discretion review applies. See Abatie , 458 F.3d at 963 (2006) ("[F]or a plan to alter the standard of review from the default of de novo to the more lenient abuse of discretion, the plan must unambiguously provide discretion to the administrator." (citation omitted)).
Under the abuse of discretion standard of review, a district court must affirm the decision to deny benefits unless it is "left with a definite and firm conviction that a mistake has been committed." Salomaa v. Honda Long Term Disability Plan , 642 F.3d 666, 676 (9th Cir. 2011) (quoting United States v. Hinkson , 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)). "A plan administrator abuses its discretion if it renders a decision without any explanation, construes provisions of the plan in a way that conflicts with the plain language of the plan, or fails to develop facts necessary to its determination." Pacific Shores Hosp. v. United Behavioral Health , 764 F.3d 1030, 1042 (9th Cir. 2014) (citation omitted). "[A]n administrator ... abuses its discretion if it relies on clearly erroneous findings of fact in making benefit determinations." Id. (citation omitted).
As the Court concluded in its previous order, the AmeriBen Plan is reviewable under an abuse of discretion standard. Dkt. 27 at 8-13; AR 7710-15. The AmeriBen plan unambiguously provided that BHH, the Plan Administrator, had discretion to decide claims, construe the language of the Plan, and make factual findings. AR 1804.
The Cigna Plan also contained a similar grant of discretion. Specifically, the Cigna Plan provided that:
The Plan Administrator delegates to Cigna the discretionary authority to interpret and apply plan terms and to make factual determinations in connection with its review of claims under the plan. Such discretionary authority is intended to include, but not limited to, the determination of the eligibility of persons desiring to enroll in or claim benefits under the plan, the determination of whether a person is entitled to benefits under the plan, and the computation of any and all benefit payments. The Plan Administrator also delegates to Cigna the discretionary authority to perform a full and fair review, as required by ERISA, of each claim denial which has been appealed by the claimant or his duly authorized representative.
AR 7879-80.
Plaintiff argues that despite this language, the claims decisions here should nonetheless be reviewed de novo because the grant of discretion was to Cigna , but the denial of claims here – originally in July 2020, on administrative appeal in November 2020, and upon remand by this Court in October 2021 – were all decisions ultimately made by BHH and not Cigna. See Dkt. 37 at 17.
It is true that where a plan provides for delegation of discretion, a failure to delegate as required can amount to a failure to exercise the granted discretion, triggering de novo review. See Shane v. Albertson's Inc. , 504 F.3d 1166, 1171-72 (9th Cir. 2007). However, the Court declines to definitively resolve whether BHH's involvement here would trigger de novo review because, as discussed further below, if the Cigna Plan applies here, Defendant's denial of Plaintiff's claim would have constituted an abuse of discretion and, by logical extension, would also have been erroneous under the less deferential de novo review standard.
b. Governing Plan
The crucial question in this case is whether the AmeriBen Plan or the Cigna Plan governs here. At every turn, BHH has relied – exclusively – on the Illegal Acts Exclusion as the justification for the denial of Plaintiff's claim. AR 1756, 1760, 7721-22, 7815-16. But, the Cigna Plan contains no such Illegal Acts Exclusion; it was only a term of the AmeriBen Plan. See AR 7818-91. Thus, if the Cigna Plan applies, it is clear that there would be no justification to deny Plaintiff's claim based on a provision that does not appear in the Cigna Plan whatsoever.
Ninth Circuit caselaw squarely answers this question: the Cigna Plan is controlling.
In Grosz-Salomon v. Paul Revere Life Ins. Co. , 237 F.3d 1154 (9th Cir. 2001), a law firm purchased and issued a long-term disability policy for its employees, administered by the defendant, in August 1992. Id. at 1157. In October 1993, the defendant issued an amended version of the policy. Id. In between the original issuance and the amendment, the plaintiff, one of the firm's attorney's, became disabled and filed a claim for benefits. Id. The defendant plan administrator initially accepted the plaintiff's claim and paid benefits, but in 1997, the defendant concluded that the plaintiff was no longer disabled and stopped paying benefits, issuing a final denial in 1998. Id. at 1157-58.
When the plaintiff filed suit challenging the denial of benefits, to determine the appropriate standard of review, the Ninth Circuit "had to decide which plan governed" the case – the version in effect when the plaintiff became disabled and filed her claim for benefits or the version in effect when the administrator later denied her claim. Id. at 1159. The court concluded that the terms of the amended plan – the one in effect when the administrator denied the claim – governed the analysis. Id. at 1160-61 ("this court must look to the revised plan").
The reasoning for this, as the court explained, was a synthesis of two principles of ERISA. First, "an ERISA cause of action based on a denial of benefits accrues at the time the benefits are denied." Id. at 1159 ; see also Menhorn v. Firestone Tire & Rubber Co. , 738 F.2d 1496, 1501 (9th Cir. 1984). Second, rights to benefits under an ERISA welfare plan do not vest "unless and until the employer says they do." Grosz-Salomon , 237 F.3d at 1160. And in Grosz-Salomon , nothing in the original plan provided a vested right; in fact, it expressly provided that the defendant was free to amend the policy without the consent of the employees. Id.
Thus, the fact that the plaintiff "became permanently disabled and filed her disability claim while the first policy was in effect is irrelevant; it does not entitle her to invoke that plan's provision in perpetuity." Id. Accordingly, absent any vested right to invoke a prior version of the plan, a cause of action for denial of benefits is governed by the terms of the plan in effect when that cause of action arose – when the claim for benefits was denied. See id. at 1159-61 ;
Grosz-Salomon relied on several other cases which reached the same conclusion for similar reasons, all of which "focus on when the plan administrator denied the claim rather than on when the claimant filed it, or when the event triggering coverage occurred" to identify the controlling version of a plan. Id. at 1160.
And courts in this circuit have recognized the clear holding of Grosz-Salomon . For instance, in Polnicky v. Liberty Life Assurance Co. of Boston , 999 F.Supp.2d 1144, (N.D. Cal. 2013), in a dispute over whether the controlling version of a disability plan was the 2011 version, in effect when the plaintiff became disabled, or the 2013 version, in effect when the defendant denied his benefits claim, the court noted that Grosz-Salomon "addressed this precise issue." Id. at 1148. Thus, the court applied Grosz-Salomon and rejected the defendant's argument that the 2011 version governed, concluding that "the controlling plan in this action is the plan that existed at the time plaintiff's benefits were denied, the Plan as it existed in 2013." Id. at 1148-49. Turning to the case at hand, Grosz-Salomon makes plain that the Cigna Plan governs here. Like the plans in Grosz-Salomon and Polnicky , the terms of the prior AmeriBen Plan did not confer any vested right. See 237 F.3d at 1160 ; 999 F.Supp.2d at 1149-50 ; AR 1807. Thus, once the AmeriBen Plan was no longer in effect, just as Plaintiff could not have invoked its terms, neither could BHH. See Grosz-Salomon , 237 F.3d at 1160.
And here, the Cigna Plan went into effect on January 1, 2020; it was in effect when BHH issued its initial denial of Plaintiff's claim for benefits on July 1, 2020 and when BHH issued its post-appeal, final denial on November 20, 2020. AR 1748, 1760, 7818. Accordingly, since Plaintiff's ERISA cause of action accrued upon the denial of his benefits in 2020, the operative plan that controls here is the Cigna Plan. See Grosz-Salomon , 237 F.3d at 1160-61 ; Polnicky , 999 F.Supp.2d at 1149-50.
Defendant's trial brief even acknowledges this rule, noting that "it is well established law in the Ninth Circuit that the plan in place at the time that a cause of action accrues is the governing plan" and "the operative version of the Plan is the version that was in effect at the time Plaintiff's claim was denied." Dkt. 37 at 2, 4. Of course, at the time its trial brief was filed, Defendant was apparently under the impression that the AmeriBen Plan was in effect when Plaintiff's claim was denied and that the Cigna Plan did not become effective until 2021. Id. at 2-4 ("... the Cigna Plan, which went into effect in January 2021 ...").
Now, after this issue was ventilated at the bench trial and the Court requested further briefing, Defendant concedes that the Cigna Plan went into effect in January 2020. Dkt. 47. The conclusion is inescapable: the Cigna Plan – which lacks the Illegal Acts Exclusion – governs this case.
c. Application
Having determined that the terms of the Cigna Plan control, the ultimate conclusion that Defendant's denial of Plaintiff's claim was unjustified easily follows.
To deny benefits on the basis of a Plan exclusion, Defendant has the burden to prove the applicability of the exclusion. See Dowdy v. Metropolitan Life Ins. Co. , 890 F.3d 802, 810 (9th Cir. 2018) (ERISA defendant has burden to show exclusion applies). In determining that an exclusion applies, a plan administrator abuses its discretion if it relies on an interpretation of the plan that is "unreasonable" or "arbitrary and capricious." Sluimer v. Verity, Inc. , 606 F.3d 584, 590 (9th Cir. 2010) (quoting Canseco v. Const. Laborers Pension Trust , 93 F.3d 600, 609 (9th Cir. 1996) ).
One can hardly imagine a more unreasonable interpretation of a plan than one that relies on an outdated exclusion that is no longer in the terms of the operative plan. See id. Yet that is exactly what happened here. It was clearly arbitrary and capricious to deny Plaintiff's claim for benefits on the basis of the Illegal Acts Exclusion when that exclusion is simply not found in the terms of the governing Cigna Plan whatsoever. See id.
Accordingly, the Court concludes that Defendant abused its discretion in denying Plaintiff's claim for benefits. d. Remedies
It follows from the fact that Defendant's denial cannot survive abuse of discretion review that Defendant's denial would also be erroneous under the more exacting de novo review, in which the Court would accord no deference to Defendant's interpretation of the Plan. Thus, even if de novo review applied here, it would only reinforce the conclusion that Defendant's claims decision was in error.
"[R]etroactive reinstatement of benefits is appropriate in ERISA cases where ... ‘but for [the insurer's] arbitrary and capricious conduct, [the insured] would have receive[d] benefits’ or where ‘there [was] no evidence in the record to support a ... denial of benefits.’ " Grosz-Salomon , 237 F.3d at 1163 (citation omitted). A plan administrator "will not get a second bite at the apple when the first decision was simply contrary to facts." Id. at 1163 ; see also Martinez v. Beverly Hills Hotel and Bungalows Empl. Ben. Trust Emp. Welfare Plan , 538 F. Appx 778 (9th Cir. 2013) (holding that remand to the plan is inappropriate where "[n]o factual determinations remained to be made," and citing Canseco , 93 F.3d 600, 609 (9th Cir. 1996) ).
Here, at every stage of the administrative process, Defendant's sole basis for denying Plaintiff's claim was the Illegal Acts Exclusion that was in the AmeriBen Plan but not the operative Cigna Plan. AR 1756, 1760, 7721-22, 7815-16. Thus, but for the arbitrary and capricious denial of Plaintiff's claim based upon an exclusion that was no longer included in the terms of the controlling Plan, Plaintiff would have received benefits. See Grosz-Salomon , 237 F.3d at 1163. No remaining factual determinations need be made, see Martinez , 538 F. Appx at 778 ; indeed, for all the parties’ focus on whether Plaintiff had a valid learner's permit, that factual determination is ultimately irrelevant since the Illegal Acts Exclusion is not applicable here. There is no warrant to give Defendant a "second bite at the apple" (or in this case, a third bite at the apple) when its first decision was clearly erroneous in relying on an exclusion that was no longer in effect. See Grosz-Salomon , 237 F.3d at 1163.
Further, any other reason Defendant may have had to deny Plaintiff's claim is waived because Defendant relied solely on the Illegal Acts Exclusion and failed to assert any other reason during the administrative adjudication of Plaintiff's claim. See Harlick v. Blue Shield of California , 686 F.3d 699, 719-20 (9th Cir. 2012) ("a court will not allow an ERISA plan administrator to assert a reason for denial of benefits that it had not given during the administrative process").
Accordingly, the proper remedy here is an order permitting Plaintiff "to recover benefits due to him under the terms of his plan." See 29 U.S.C. § 1132(a)(1)(B).
IV. Conclusion
For the foregoing reasons, the Court concludes that Defendant abused its discretion in denying coverage. Plaintiff is entitled to recover the benefits due to him under the terms of his plan.
Plaintiff is ordered to lodge a proposed judgment consistent with this order for the Court's consideration within 7 days.