Connecticut General Life Insurance Co. v. Humble Surgical Hospital, L.L.C.
878 F.3d 478
| 5th Cir. | 2017Background
- Humble Surgical Hospital (out-of-network provider) treated Cigna members and required patients to sign irrevocable assignments of benefits and personal payment guarantees.
- Cigna processed Humble’s claims initially but, after investigating suspected “fee-forgiving” (waiving patient cost-shares) and inflated billing, began withholding full payments and paid only a "proportionate share" when members had not paid cost-shares.
- Cigna investigated via member surveys and review of patient ledgers; some members reported being told they owed little or nothing despite large billed charges.
- Cigna sued Humble for alleged overpayments; Humble counterclaimed under ERISA (benefits under §502(a)(1)(B), equitable relief §502(a)(3)), fiduciary breach, and failure to provide plan documents; district court granted Humble judgment on partial findings and awarded damages and ERISA penalties.
- On appeal, Fifth Circuit held the district court erred by not applying abuse-of-discretion review to Cigna’s plan-interpretation defense, reversed the judgment for Humble on that ground, vacated the ERISA penalty award (Cigna not named plan administrator), vacated in part dismissal of Cigna’s fraud-related claims, and remanded the attorneys’ fees award for reconsideration.
Issues
| Issue | Humble's Argument | Cigna's Argument | Held |
|---|---|---|---|
| Whether Cigna’s interpretation of plan exclusion (no payment for charges member not obligated to pay) was lawful and whether district court erred | Cigna underpaid and abused discretion; plan does not allow Cigna’s offset | Cigna: plan permits denying payment where member not obligated to pay; administrator discretion supports its interpretation | Reversed district court; Cigna’s interpretation falls within its discretion and was supported by substantial evidence of fee-forgiving |
| Whether Cigna abused fiduciary duties under ERISA §502(a)(3) | Cigna’s conduct breached fiduciary duties | Cigna: same plan-language defense applies; no breach if interpretation permitted | Reversed district court; fiduciary claim succeeds or fails with §502(a)(1)(B) (Cigna prevails) |
| Whether ERISA §502(c) penalties were properly assessed against Cigna for failure to produce plan information | Cigna functioned as de facto plan administrator; penalties appropriate | Cigna: not a named plan administrator or sponsor; de facto administrator theory unavailable | Reversed: Fifth Circuit declined to adopt de facto administrator doctrine; Cigna not liable for §502(c) penalties |
| Whether district court properly dismissed Cigna’s fraud and overpayment claims | Cigna proffered fraud by overbilling and misrepresenting charges; evidence supports claim | Humble argued no duty/disclosure; district court limited fraud theory and dismissed | Vacated in part and remanded: district court failed to consider Cigna’s alternative fraud theory (misrepresentation of charges); further factual findings required |
Key Cases Cited
- George v. Reliance Standard Life Ins. Co., 776 F.3d 349 (5th Cir.) (standard of review on appeal from bench trial)
- North Cypress Medical Center Operating Co. v. Cigna Healthcare, 781 F.3d 182 (5th Cir.) (discusses administrator discretion and similar plan-language interpretation)
- Vega v. National Life Ins. Servs., Inc., 188 F.3d 287 (5th Cir.) (abuse-of-discretion standard when administrator has discretionary authority)
- Conkright v. Frommert, 559 U.S. 506 (U.S.) (deference to plan administrators promotes uniformity)
- Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir.) (upheld similar exclusionary provision interpretation)
- Meditrust Financial Services Corp. v. Sterling Chemicals, Inc., 168 F.3d 211 (5th Cir.) (arbitrary and capricious / abuse of discretion discussion)