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Killian v. Concert Health Plan

August 27, 2009


The opinion of the court was delivered by: Marvin E. Aspen, District Judge


On March 2, 2009, Plaintiff James E. Killian ("Killian") filed his four-count Second Amended Complaint ("Amended Complaint") against Defendants Concert Health Plan ("CHP"), Concert Health Plan Insurance Company ("CHPIC"), Royal Management Corporation Health Insurance Plan ("Royal Plan") and Royal Management Corporation ("Royal Management") (collectively, "Defendants"). Killian filed suit under the Employee Retirement Income Security Act ("ERISA") after Susan's*fn1 insurance provider failed to cover certain medical expenses incurred prior to her death in August 2006. Presently before us are several pending motions, including: (1) CHP's motion to dismiss, based on the grounds that Killian sued the wrong entity (Dkt. No. 138 ("CHP MTD")); (2) a motion for summary judgment filed by CHP and later adopted by CHPIC (Dkt. No. 81 ("MSJ")); and (3) Royal Management's motion to dismiss Count III (Dkt. No. 166). For the reasons discussed below, we: (1) convert CHP's motion to dismiss to a Rule 56 motion and order further briefing; (2) grant in part, and deny in part, CHPIC's motion for summary judgment; and (3) grant in part, and deny in part, Royal Management's motion to dismiss. We also request full briefing on two pending motions for sanctions (Dkt. Nos. 200, 203) and deny as moot Killian's pending motion to strike the answer filed by the Royal Plan (Dkt. No. 171).


In its motion to dismiss, CHP argues that Killian mistakenly included it as a defendant in his Amended Complaint. (CHP MTD at 1-3.) CHP contends that it is not a real party in interest but, rather, "is a non-for-profit corporation whose purpose is to provide plan administration for health insurance plans issued by [CHPIC] to companies with 50 or fewer employees." (Id. at 1, 3.) In support of its motion, CHP attached an affidavit from Johny Antony, CHPIC's Vice President of Operations. (Id., Ex. B.) In that affidavit, Antony attempts to clarify that CHP did not issue a health insurance policy to Royal Management, but that CHPIC provided "health insurance coverage through a plan presented by Royal Management." (Id., Ex. B. ¶¶ 3-4.) Thus, according to CHP, Killian intended to sue CHPIC but erroneously included CHP in his Amended Complaint as well. (Id. at 3.) CHP also notes that defendant Royal Plan admitted, in its answer, that it is the plan in which Susan participated, not CHP. (CHP MTD Reply at 1.)

Killian, however, responds that he "did intend to sue an ERISA plan known as Concert Health Plan" and included CHP as a party because the precise legal name of that plan remains uncertain. (Resp. to CHP MTD at 2-3.) He concedes that he is not seeking relief from the "Concert Health Plan, the non-profit Illinois corporation." (Id. at 3.)

We are befuddled by the parties' inability to work out this essential identity issue, which has plagued this case since its inception. Basic discovery and full, frank disclosure by both parties should have resolved this question years ago. Instead, Killian and CHP (who was originally the only defendant) continue to point fingers at each other. While CHP and CHPIC argue with conviction that Killian knowingly has no basis for an action against CHP, Killian convincingly describes CHP's many inconsistent and/or undefined references to "Concert Health Plan" or the "Plan" in documents and throughout these proceedings, which may have created confusion as to the real parties in interest.

While we would like to bring this vexing issue to a close, we cannot do so today. As Killian correctly states -- and as we previously instructed CHP -- we cannot consider material outside the complaint when deciding a Rule 12(b)(6)*fn3 motion to dismiss. Killian v. CHP, No. 07 C 4755, 2008 WL 2561218, at *2 n.2 (N.D. Ill. June 24, 2008); see Fed. R. Civ. P. 12(d). "If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Fed. R. Civ. P. 12(d). Both parties argue facts with respect to this issue, and CHP attached evidentiary material in the form of Antony's affidavit. (CHP MTD at 1-3 & Ex. B; Resp. to CHP MTD at 2-4; CHP MTD Reply at 2-3.) Rather than simply deny the motion, we convert it sua sponte to a Rule 56 motion and order additional, limited briefing on this point. Fed. R. Civ. P. 12(d). We expect the parties to provide a succinct, straightforward explanation -- with supporting evidence -- of whether CHP belongs in this litigation, and if so, in what capacity. Killian may file any material pertinent to this question, if he chooses, by September 10, 2009. CHP may then reply, if necessary, by September 17, 2009.


We turn next to CHPIC's motion for summary judgment.*fn4 Killian generally alleges that CHP made an adverse benefit determination when denying certain benefits claims for Susan's medical care and that, moreover, it failed to comply with regulations governing notification of such determinations. (Am. Compl. at 1-4, 9-13.)*fn5 CHPIC contends that it properly paid all claims pursuant to Susan's plan of coverage and substantially complied with all notification and plan documentationrequirements. It also argues that, even if it committed the alleged violations, Killian is not entitled to the remedies he seeks.(MSJ Mem. at 8-13; MSJ Reply at 2-5, 6-12, 14-18.)

A. Summary of Facts*fn6

Killian is the administrator for the estate of his wife, Susan, who prior to her death was a Royal Management employee. (Def.'s Facts ¶ 1; Pl.'s SOF ¶¶ 1, 16.) CHPIC entered into an agreement with Royal Management to provide health insurance coverage to its employees, effective July 1, 2005. (Def.'s Facts ¶ 2.) Susan enrolled in a medical insurance plan offered by Royal Management, referred to as the "SO35" plan. (Id. ¶¶ 2, 8, 12.) Killian was not present when, and does not know why, Susan elected that particular plan. (Id. ¶ 12.) Susan received copies of a CHPIC Certificate of Insurance and the Royal Management Employee Benefit Summary. (Id. ¶¶ 8, 14, 25; Def.'s Exs. H1, H6.)

In February 2006, Susan visited a doctor after suffering from a cold and persistent headaches. (Pl.'s Facts ¶ 3.) A CAT scan revealed three tumors in her brain, and Susan was eventually diagnosed with metastasized lung cancer. (Id. ¶¶ 4-5.) Susan's doctor sent her to Delnor Community Hospital for further diagnosis. (Id. ¶ 6.) After the doctors at Delnor informed Susan that they could not operate on her brain tumors, she desired a second opinion. (Id. ¶ 8.) The Killians then contacted Drs. Barnes and Bonami at Rush University hospital. (Id. ¶ 9.)

Upon arriving at Rush for Susan's appointment with Dr. Bonami, Killian called an 800 number on the back of Susan's insurance card and told an unknown representative that they were getting a second opinion. (Id. ¶ 10.) The representative then asked where the Killians were, and Killian informed her that they were at St. Luke's. (Id.) Although the representative could not locate a listing for St. Luke's, she told Killian to proceed with whatever had to be done. (Id.) He called another number on Susan's insurance card later that same day and spoke with a representative named Maria. (Id. ¶ 11.) Maria told Killian that he was at Rush, not St. Luke's, but never said that Rush was out of the network or that Susan would have only limited benefits or coverage for treatment there. (Id.) Neither representative mentioned the PHCS network, the SELECT network, or maximum allowable amounts or fees. (Id.)

Dr. Barnes informed Susan that one of her tumors should be removed immediately and she underwent surgery shortly thereafter. (Id. ¶¶ 9, 12.) Susan saw Dr. Barnes one or two more times as an outpatient. (Id. ¶ 13.) Several months later, in June 2006, Dr. Bonami instructed Susan to go to Rush's emergency room because of her coughing. (Id. ¶ 14.) She was then admitted to Rush for nine days. (Id. ¶ 15.) After her discharge, she was unable to tolerate chemotherapy and subsequently died in August 2006. (Id. ¶¶ 15-16.)

On July 31, 2006, Killian wrote the claims department, requesting an immediate review of several unpaid claims. (Def.'s Facts ¶ 28; see Def.'s Ex. L.) In his letter, Killian stated that the disputed "invoices were refused and the reasons given were over maximum allowable or out of network coverage." (Def.'s Ex. L.) CHP's appeals department responded on September 19 and 20, 2006, informing Killian that no additional benefits were payable under Susan's plan because the services at issue were delivered by an out-of-network provider.*fn7 (Def.'s Facts ¶ 29; Def.'s Exs. H2-H3.) That letter explained that because Rush did not fall within the PHCS (Open Access) network, claims from Rush were processed at the out-of-network level, which were subject to a maximum allowable fee. (Def.'s Exs. H2-H3.) On October 25, 2006, CHP's Appeals Committee again informed Killian that no additional benefits were payable. (Def.'s Facts ¶ 30; Def.'s Ex. H4.) That letter stated that some of the claims (apparently emergency services) were processed at the in-network level. (Def.'s Ex. H4.) Nonetheless, CHP indicated that the maximum allowable fee would still apply for those certain claims being processed in-network. (Id. ("Your claims were processed using the maximum allowable fee and processed at the in-network level.").) CHP noted that because "medical providers are not required to write-off the ...

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