Court Permits ERISA Breach-of-Fiduciary Claims to Proceed
This case stems from a denial of coverage for a gastric bypass surgery under an ERISA-governed health plan. The plaintiff, Lynda Hilton, underwent the procedure in 2002 and incurred medical bills of over $30,000. The claims administrator for the plan refused to pay the bills, contending that the surgery was specifically excluded from coverage.
Hilton sued the plan administrator and claims administrator, arguing that the claims administrator had “pre-certified” the surgery by representing to herself and her physician that the surgery was covered and would be paid. She asserted a cause of action under 29 U.S.C. § 1132(a)(1)(B) to recover the denied benefits. She also asserted a claim under 29 U.S.C. § 1002(21), stating that one or both of the defendants breached their fiduciary duties by intentionally or negligently misleading her regarding coverage for the surgery. She also sought statutory penalties and damages for breach of contract and common law fraud.
The defendants moved to dismiss the lawsuit, arguing that the surgery was explicitly excluded from coverage under the plan; that Hilton did not exhaust her administrative remedies; and that her breach-of-fiduciary claims must fails because the recovery of damages “is not a right reserved exclusively to an ERISA plan, not individual plan participants.”
The district dismissed the claims for statutory penalties and stated that the state-law claims were preempted by ERISA. However, the court denied the motion to dismiss as to the ERISA-based claims. Without ruling on the merits, the court found that there was “evidence that some entity on behalf of the plan administrator pre-certified the plaintiff’s gastric bypass surgery, even though the Plan itself explicitly excluded such a procedure.” The court stated that a “fiduciary must give complete and accurate information in response to participants’ questions” and that “misleading communications to plan participants ‘regarding plan administration (for example, eligibility under a plan, the extent of benefits under a plan) will support a claim for breach of fiduciary duty.’” (citations omitted.) The court acknowledged that pretrial discovery would be needed to flesh out the facts on these points.
The cite is Hilton v. King Pharmaceuticals, Inc., 2006 WL 2442925 (E.D. Tenn. Aug. 22, 2006). I will follow this case and report on the outcome.