The opinion of the court was delivered by: Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
Plaintiff Kenneth Kieszkowski brought this action pursuant to the Employee Retirement Income Security Act of 1974 (ERISA) seeking reinstatement of his health benefits by Defendant PersonalCare Insurance. 29 U.S.C. § 1132(a)(1)(B).*fn1 The parties filed cross-motions for summary judgment. R. 25, 27. For the reasons discussed below, PersonalCare's motion is granted and Kieszkowski's motion is denied.
In February 2006, Kieszkowski became an employee of E.J. Equipment and enrolled in E.J. Equipment's group health plan. R. 26 , Pl.'s Stmt. of Facts (PSOF) ¶ 7. At the time, the E.J. Plan was administered by Group Administrators, Ltd. Id. In 2007, E.J. Equipment switched health insurance companies and retained PersonalCare as its new administrator for the E.J. Plan. R. 29, Def.'s Stmt. of Facts (DSOF) ¶ 1. To remain an E.J. Plan participant after the transfer of the Plan to PersonalCare, Kieszkowski was required to complete PersonalCare's enrollment application and change form. DSOF ¶ 2. The form required Kieszkowski to disclose his medical history, including whether he had ever received treatment for diabetes, or any kidney or liver disorders. Id. Kieszkowski checked the box marked "no." Id.; R. 29-3, Def.'s Exh. B.
PersonalCare's Evidence of Coverage states that a member's "coverage shall terminate . . . [for] knowingly misrepresenting or giving false information on any enrollment application form that is material to PersonalCare's acceptance of such application." R. 29-2, Def.'s Exh. A § 4.1. The enrollment form requires the member to read and sign that he "understand[s] that [his] membership may be cancelled for . . . fraud or material misrepresentation in enrollment or in the use of services of facilities." Def.'s Exh. B. Kieszkowski completed his enrollment form in October 2007, and his health benefits with PersonalCare went into effect on January 1, 2008. PSOF ¶ 8.
In June 2008, PersonalCare contacted one of Kieszkowski's physicians, Dr. David Sutherland, as part of its monthly audit of all new policies issued by PersonalCare, and requested that Dr. Sutherland send PersonalCare copies of Kieszkowski's medical records from the past year. DSOF ¶ 4. After reviewing Kieszkowski's records, PersonalCare learned that Kieszkowski had been treated for several serious health conditions, including Type II diabetes, hepatitis C, and a renal mass anteriorly within one of his kidneys. Id. On June 27, PersonalCare issued a letter to Kieszkowski, notifying him that his failure to disclose this information on his enrollment form constituted a material misrepresentation. DSOF ¶ 5; R. 29-4, Def.'s Exh. C. As a result, PersonalCare rescinded Kieszkowski's coverage, retroactive to the previous effective date of January 1, 2008. Def.'s Exh. C.
In July 2008, Kieszkowski's attorney contacted PersonalCare and requested that PersonalCare send him a copy of Kieszkowski's claim file. PSOF ¶ 19. Kieszkowski received the file from PersonalCare on August 5. PSOF ¶ 22. Kieszkowski's counsel responded by letter, stating that PersonalCare's decision to terminate his health benefits violated the Health Insurance Portability and Accountability Act of 1996 (HIPAA) because it unlawfully excluded Kieszkowski due to pre-existing conditions and, in any event, PersonalCare was fully aware of Kieszkowski's prior medical treatment. R. 29-6, Def.'s Exh. E. Kieszkowski states that this letter served as his appeal of PersonalCare's decision to terminate his coverage. PSOF ¶ 23. PersonalCare disputes that this letter served as an appeal of its June 2008 determination and, as discussed below, argues that Kieszkowski failed to exhaust his administrative remedies before filing the instant lawsuit on March 30, 2009. R. 34, Def.'s Resp. PSOF ¶ 23.*fn2
During the discovery stage, the district judge previously assigned to this case determined that the abuse of discretion standard of review applies. R. 18; see also R. 32 (Pl.'s Br.) at 1. Kieszkowski urges the Court to reconsider this decision, and use a de novo standard of review when evaluating PersonalCare's termination of benefits.
Pl.'s Br. at 1. "The standard of judicial review in a civil action under 29 U.S.C. § 1132(a)(1)(B) depends upon the discretion granted to the plan administrator in the plan documents." Semien v. Life Ins. Co. of N. Am., 436 F.3d 805, 810 (7th Cir. 2009) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). The Supreme Court has held that "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, 489 U.S. at 115. "The reservation of discretion must be communicated clearly in the language of the plan, but the plan need not use any particular magic words." Gutta v. Standard Select Trust Ins. Plans, 530 F.3d 614, 619 (7th Cir. 2008) (citing Herzberger v. Standard Ins. Co., 205 F.3d 327, 331 (7th Cir. 2000)). The Seventh Circuit has repeatedly emphasized that "the critical question is notice: participants must be able to tell from the plan's language whether the plan is one that reserves discretion for the administrator." Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635, 637 (7th Cir. 2005); see also Gutta, 530 F.3d at 619; Herzberger, 205 F.3d at 332.
Here, the E.J. Plan states that "PersonalCare reserves the right to adopt any and all reasonable policies, procedures, rules and interpretations as may be necessary to promote the uniform, consistent, and efficient administration of this [plan]." Def.'s Exh. A § 15.11. PersonalCare contends that this language "clearly provides that PersonalCare, as the plan administrator, holds broad discretion in administering the E.J. Plan," and therefore the Court's review should be the deferential arbitrary and capricious standard. R. 29 (Def.'s Br.) at 5. Kieszkowski counters that the de novo standard of review is proper because the language in § 15.11 "falls woefully below the necessary wording as set forth by the Seventh Circuit in [Herzberger and Diaz]." R. 32 (Pl.'s Resp. Br.) at 1.
To be sure, if what this Court was reviewing was a denial of benefits based on medical evidence, there is some reason to doubt that the arbitrary and capricious standard of review applies. The Seventh Circuit has admonished employers on how to create deferential review: "[i]f a plan wishes to insulate its decision to deny benefits from plenary review, the surest way to do so . . . is by including language that either mimics or is functionally equivalent to the 'safe harbor' language [suggested by the court]: 'Benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them.'" Diaz, 424 F.3d at 637 (quoting Herzberger, 205 F.3d at 331). Although the Seventh Circuit has "strongly recommended that plans adopt this language, its absence does not compel the conclusion that the administrator does not have discretion." Diaz, 424 F.3d at 637. Thus, Kieszkowski incorrectly characterizes the Seventh Circuit's safe harbor language as "necessary." This exact language is not mandatory. Herzberger, 205 F.3d at 331 ("[T]here are no 'magic words' determining the scope of judicial review of decisions to deny benefits."). Rather, courts must examine the plan's language and determine what message the plan conveys to the employee. Plans without discretion "reflect the fact that the applicant must meet the prescribed requirements of the plan, through appropriate evidence." Diaz, 424 F.3d at 639. Plans with discretion "communicate the idea that the administrator not only has broad-ranging authority to assess compliance with pre-existing criteria, but also has the power to interpret the rules, to implement the rules, and even to change them entirely." Diaz, 424 F.3d at 639.
The language in § 15.11 of the E.J. Plan does not fit neatly into the latter category, as it only states that PersonalCare reserves the right to "adopt" reasonable rules and interpretations that are necessary for the "administration" of the Plan. The word discretion, or some form of the word, is not used; indeed, the provision does not even directly state that it covers decisions on whether an employee is entitled to benefits. The Plan does not clearly vest PersonalCare with discretionary authority to determine whether an employee is entitled to benefits and/or construe any disputed terms of the Plan. Section 15.11 is insufficient to give the employee adequate notice that the plan administrator "has the latitude to shape the application, interpretation, and content of the rules in each case." Diaz, 424 F.3d at 639-40. Thus, if the Court had to decide this issue in the first instance, without the restrictions of law, the proper standard of judicial review in this case would be de novo. Firestone, 489 U.S. at 115.
But the standard of review does not make a difference in this case. As PersonalCare points out, the context of this case is different from the typical benefits denial case. As explained further below, whether the standard is de novo or arbitrary-and-capricious, the Court would not overturn PersonalCare's decision. Kieszkowski's benefits were terminated because he made, PersonalCare argues, a misrepresentation on his enrollment form. Unlike many of the cases that grapple with the standard of review issue, Kieszkowski was not denied benefits based on PersonalCare's review and interpretation of medical evidence. See, e.g., Jenkins v. Price Waterhouse Long Term Disability Plan, 564 F.3d 856, 859 (7th Cir. 2009); Gutta, 530 F.3d at 616; Semien, 436 F.3d at 808; Diaz, 424 F.3d at 636. Rather, PersonalCare terminated Kieszkowski's benefits after discovering that he falsely reported that he had never been treated for diabetes or a kidney or liver disorder. The plain language of the E.J. Plan clearly states that PersonalCare shall terminate coverage in the event a member knowingly misrepresents or gives false information on any enrollment application form that is material to PersonalCare's acceptance of such application. Def.'s Exh. A § 4.1. Thus, the central issue in this case is whether Kieszkowski's misrepresentation -- which he does not dispute making -- was material to PersonalCare's decision to ...