King v. Blue Cross & Blue Shield of Illinois
871 F.3d 730
9th Cir.
2017

Background

  • Linda King, covered as a dependent under UPS’s Retiree Plan, received emergency back surgery in Nov 2012; claims were initially preauthorized but later denied as exceeding a $500,000 lifetime cap.
  • The Retiree Plan is governed by a 2006 Summary Plan Description (SPD) plus a series of noncumulative "summaries of material modifications" (12 notices totaling 25 pages); UPS did not issue an integrated updated SPD every five years.
  • In Sept 2010 UPS issued a multi-page Summary of Modifications that (among other things) announced "Elimination of Lifetime Maximum Benefits" effective Jan 1, 2011; the document used mixed fonts and a single asterisk at the top that said items marked "* do not apply to retirees."
  • Defendants (UPS and Blue Cross) interpreted the 2010 summary to mean the lifetime cap was removed only for the Employee Plan, not the Retiree Plan; the CRC invoked the asterisk/fonte distinctions to exclude retirees.
  • Mrs. King received approval letters certifying care as "medically necessary" that contained disclaimers that approval was not a payment guarantee; an EOB in Feb 2013 said most charges were denied as exceeding the lifetime cap and Mrs. King appealed.
  • District court granted summary judgment for defendants on ERISA and fiduciary claims; Mr. King (executor) appealed after Mrs. King’s death.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether ACA/PHSA’s ban on lifetime dollar limits overrides ERISA’s retiree-only exception King: ACA amendments incorporated PHSA ban into ERISA, effectively removing retiree-plan exception Defs: ERISA §732 preserves an exception for retiree-only plans; no clear congressional intent to impliedly repeal Held: ACA did not impliedly repeal ERISA’s retiree-only exception; PHSA and ERISA can coexist
Whether the 2010 Summary of Modifications satisfied ERISA’s SPD / disclosure rules King: The 2010 notice obscured whether the lifetime cap remained for retirees; thus SPD violated 29 U.S.C. §1022 and 29 C.F.R. §2520.102-2(b) Defs: The notice, read as a whole, showed ACA-driven changes did not apply to retirees; subtle formatting cues suffice Held: The 2010 summary was not "calculated to be understood by the average plan participant" and violated ERISA disclosure rules
Whether Blue Cross is an ERISA fiduciary for purposes of Mrs. King’s claims King: Blue Cross made benefit determinations, processed claims and handled first-level appeals — actions that confer fiduciary status Blue Cross: It performed ministerial/administrative tasks; UPS retained ultimate plan discretion Held: Blue Cross exercises discretion to grant/deny/review claims and therefore can be an ERISA fiduciary
Whether summary judgment was appropriate on breach-of-fiduciary-duty claims King: Defendants misled or failed to disclose material information (ambiguous summary + communications), creating factual disputes Defs: No misrepresentation; plan language and appeals show proper administration Held: Genuine disputes of material fact exist (both re: misleading communications and Blue Cross’s conduct); summary judgment improper; remanded for remedy determination

Key Cases Cited

  • Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282 (9th Cir. 2014) (SPD disclosure rules can render benefit limitations unenforceable)
  • Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899 (9th Cir. 2009) (SPD must reasonably apprise participants of rights, including circumstances leading to loss of benefits)
  • Kyle Railways, Inc. v. Pacific Administration Services, Inc., 990 F.2d 513 (9th Cir. 1993) (insurer is fiduciary if given discretion to determine claims)
  • IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415 (9th Cir. 1997) (look beyond plan labels; duties actually performed determine fiduciary status)
  • Branch v. Smith, 538 U.S. 254 (U.S. 2003) (repeals by implication disfavored; require clear congressional intent)
  • Radzanower v. Touche Ross & Co., 426 U.S. 148 (U.S. 1976) (two statutes imply repeal only when irreconcilable)
  • J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U.S. 124 (U.S. 2001) (overlapping statutes may coexist if each reaches distinct cases)
  • Farr v. U.S. W. Commc’ns, Inc., 151 F.3d 908 (9th Cir. 1998) (standard for reviewing fiduciary breach at summary judgment)
  • Barker v. Am. Mobil Power Corp., 64 F.3d 1397 (9th Cir. 1995) (fiduciary duty includes duty to disclose material information)
  • Washington v. Bert Bell/Pete Rozelle NFL Ret. Plan, 504 F.3d 818 (9th Cir. 2007) (duty of loyalty includes duty to disclose)
  • Estate of Shockley v. Alyeska Pipeline Serv. Co., 130 F.3d 403 (9th Cir. 1997) (displaying distinction between disclosure inquiry and other plan-interpretation doctrines)
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