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Kenseth v. Dean Health Plan, Inc.

United States Court of Appeals, Seventh Circuit

June 13, 2013

Deborah A. Kenseth, Plaintiff-Appellant,
Dean Health Plan, Inc., Defendant-Appellee.

Argued December 8, 2011.

Appeal from the United States District Court for the Western District of Wisconsin. No. 08-cv-1-bbc—Barbara B. Crabb, Judge.

Before Manion, Rovner and Tinder, Circuit Judges.

ROVNER, Circuit Judge.

This is Deborah A. Kenseth's second appeal in a lawsuit she filed against Dean Health Plan, Inc., her health insurer, seeking a remedy for an asserted breach of fiduciary duty. The district court has twice granted summary judgment in favor of Dean, and has denied Kenseth's cross-motion for summary judgment. After the district court ruled against Kenseth for the second time, but before Kenseth briefed this appeal, the Supreme Court issued its opinion in Cigna Corp. v. Amara, 131 S.Ct. 1866 (2011), clarifying the relief available for a breach of fiduciary duty in an action under the Employment Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq. ("ERISA"). Because Kenseth has a viable claim for equitable relief, we once again vacate and remand to the district court for further proceedings.


We will assume familiarity with our prior opinion in this matter, Kenseth v. Dean Health Plan, Inc., 610 F.3d 452 (7th Cir. 2010) ("Kenseth I"). We will review only those facts necessary to the disposition of the current appeal. In 1987, Deborah Kenseth underwent vertical gastric banding, a surgical procedure intended to facilitate significant weight loss in obese patients. The procedure was covered by her insurer at that time. Approximately eighteen years later, her doctor, Dr. Paul Huepenbecker, advised her to have a second operation to resolve severe acid reflux and other serious health problems that were the result of complications from the first surgery.

At the time of the second surgery, Kenseth worked for Highsmith, Inc., a company that provided group health insurance benefits to its employees through Dean Health Plan ("Dean"). Dean is the insurance services subsidiary of Dean Health Systems, Inc., a large, physician-owned and physician-governed integrated healthcare delivery system headquartered in Madison, Wisconsin.[1]The benefits available to Highsmith employees through the Dean plan are set forth in a "Group Member Certificate and Benefit Summary" ("Certificate"). The Certificate excludes coverage for "surgical treatment or hospitalization for the treatment of morbid obesity." The Certificate also excludes "[s]ervices and/or supplies related to a non-covered benefit or service, denied referral or prior authorization, or denied admission." Kenseth I, 610 F.3d at 457. The Certificate directs plan participants with questions about its provisions to call Dean's customer service department. As we noted in our earlier opinion:

On the third page of the 2005 Certificate, under the heading "Important Information, " the reader is advised to make such a call "[f]or detailed information about the Dean Health Plan." Eight pages later, at the outset of the Certificate's summary of "Specific Benefit Provisions, " a text box in bold lettering states, "If you are unsure if a service will be covered, please call the Customer Service Department at 1-608-828-1301 or 1-800-279-1301 prior to having the service performed." No other means of ascertaining coverage is identified for services rendered by an in-plan provider.

Kenseth I, 610 F.3d at 457-58 (internal record cites omitted). The Certificate identifies Dean as the claims administrator and specifies that Dean has the discretion to determine eligibility for benefits and to construe the terms of the Certificate.

On November 9, 2005, Dr. Huepenbecker advised Kenseth to undergo a Roux-en-Y gastric bypass procedure in order to remedy the many problems caused by the earlier surgery. Dr. Huepenbecker worked at a Dean-owned clinic, and he scheduled Kenseth for surgery at St. Mary's Hospital in Madison, a Dean-affiliated hospital.[2] In anticipation of the surgery, Dr. Huepenbecker provided Kenseth with a standard set of pre-printed instructions that advised her to call her insurance company regarding the type of surgery and the scheduled date. Kenseth called Dean's customer service number and spoke with Maureen Detmer, a customer service representative. We refer the reader to our earlier opinion for the details of this call. See Kenseth I, 610 F.3d at 459-60. After a brief conversation, Detmer told Kenseth that Dean would cover the procedure subject to a $300 co-payment. Detmer did not ask whether the surgery was related to an earlier surgery for the treatment of morbid obesity, and Kenseth did not volunteer that information. Detmer did not warn Kenseth that she could not rely on Detmer's assessment regarding coverage. Kenseth did not review the Certificate before her surgery, although she had reviewed it in the past. She instead relied on Detmer's oral representation. Dean provided no process other than calling customer service for a plan participant to determine if a particular service or procedure would be covered.

Dr. Huepenbecker performed the surgery on December 6, 2005. On the next day, Dean decided to deny coverage for the surgery and all associated services based on the exclusion for services related to a non-covered benefit or service, namely, surgical treatment of morbid obesity. Kenseth was discharged from the hospital on December 10, 2005, but was readmitted from January 14 through January 30, 2006, for complications from the surgery, including an infection. Dean denied coverage for the second hospitalization as well, and the Dean-affiliated doctors and hospitals sent Kenseth a bill for $77, 974. Kenseth pursued all available internal appeals to Dean, asking for reconsideration of the denial, and Dean refused to change its position. Kenseth then filed suit against Dean, asserting two claims under ERISA, and one claim under Wisconsin law. Specifically, Kenseth asserted that Dean had breached its fiduciary duty by providing a Certificate that was unclear regarding coverage and misleading as to the process to follow to determine whether her surgery would be covered. She also alleged that Dean breached its fiduciary duty when it failed to provide her with a procedure through which she could obtain authoritative preapproval of her surgery. Kenseth asserted that Dean was equitably estopped from denying coverage because she relied on information provided by Dean's customer service representative that the surgery would be covered. In her state law claim, Kenseth asserted that Dean's reliance on the non-covered nature of her 1987 weight-loss surgery to deny coverage for treatment of later complications ran afoul of a Wisconsin statute regarding coverage for pre-existing conditions.

The district court granted summary judgment in favor of Dean on all of Kenseth's claims. We affirmed summary judgment as to the estoppel claim and the Wisconsin pre-existing condition claim, but we vacated and remanded for further proceedings on Kenseth's claim that Dean breached its fiduciary duty to her. Kenseth I, 610 F.3d at 462. We found that the facts (construed in favor of Kenseth as the party opposing summary judgment) would support a finding that Dean breached its fiduciary duty to Kenseth. First, we noted that fiduciaries have a duty to disclose material information to beneficiaries of trusts, in this case the plan participants. Kenseth I, 610 F.3d at 466. That duty encompasses both an obligation not to mislead the participant of an ERISA plan, and also an affirmative obligation to communicate material facts affecting the interests of plan participants. Kenseth I, 610 F.3d at 466. In this instance:

Dean not only permitted but encouraged participants to call its customer service line with questions about whether particular medical services were covered by the Dean plan. One can readily infer that Dean understood that callers like Kenseth were seeking to determine in advance whether forthcoming medical treatments would or would not be paid for by Dean, and to plan accordingly. Yet callers were not warned that they could not rely on the advice that they were given by Dean's customer service representatives and that Dean might later deny claims for services that callers had been told would be covered. Nor were callers advised of a process by which they could obtain a binding determination as to whether forthcoming services would be covered. The factfinder could conclude that Dean had a duty to make these disclosures so that participants could make appropriate decisions about their medical treatment.

Kenseth I, 610 F.3d at 469.

Although "mistakes in the advice given to an insured which are attributable to the negligence of the individual supplying that advice are not actionable as a breach of fiduciary duty, " a fiduciary may be liable for failing "to take reasonable steps in furtherance of an insured's right to accurate and complete information." Kenseth I, 610 F.3d at 470. A fiduciary could comply with this duty by providing accurate and complete written explanations of the benefits available to plan participants. 610 F.3d at 471. Nevertheless:

because it is foreseeable if not inevitable that participants and beneficiaries will have questions for plan representatives about their benefits, our cases also recognize an obligation on the part of plan fiduciaries to anticipate such inquiries and to select and train personnel accordingly. The fiduciary satisfies that aspect of its duty of care by exercising appropriate caution in hiring, training, and supervising the types of employees (e.g., benefits staff) whose job it is to field questions from plan participants and beneficiaries about their benefits.

Kenseth I, 610 F.3d at 471-72. We noted that we were not called upon to decide in this case whether a plan administrator like Dean has a duty to give its insured binding determinations of coverage before a medical service is rendered. Because Dean had not denied that Kenseth could obtain a definitive decision in advance of her surgery, and because the Certificate itself encouraged plan participants with questions about coverage to call customer service prior to having the service performed, we found that availability of definitive determinations was irrelevant in this instance. Rather, the critical omission on Dean's part was its failure to com- municate to Kenseth whether and how such determinations could be obtained. Kenseth I, 610 F.3d at 472-73.

We noted that any silence or ambiguity in the Certificate regarding a means of obtaining a binding coverage determination would be immaterial if the Certificate itself was clear as to coverage for Kenseth's surgery. Assessing the language of the Certificate, we concluded that, although the average reader might have understood that Kenseth's original vertical banded gastroplasty surgery was excluded from coverage, it was far from clear that the policy excluded coverage for services aimed at resolving complications from that surgery, however long ago the original procedure may have taken place. Kenseth I, 610 F.3d at 474. Moreover, the confusion created by the language of the Certificate was exacerbated by Dean's payments for earlier procedures that provided temporary fixes for the complications Kenseth suffered from the vertical banded gastroplasty.

The Certificate also lacked clarity on the means by which a participant may obtain an authoritative determination on coverage for a particular medical service. Kenseth I, 610 F.3d at 476. Although the Certificate advised participants to call customer service if they were "unsure if a service will be covered, " that invitation was unaccompanied by a warning that the callers could not rely on the statements of the customer service representative, or that Dean might later deny coverage for a service that the customer service representative assured the callers would be covered. Evidence in the record supported an inference that Dean was aware that participants often called with coverage questions and that callers were likely to rely on what customer service representatives told them. Other evidence supported an inference that Dean did not train customer service representatives to warn callers that they could not rely on the answers they were given by phone in response to coverage-related questions. Moreover, the evidence indicated that Dean did not train customer service representatives to advise callers like Kenseth how they might obtain definitive advice regarding whether particular medical services would be covered by the policy. As a fiduciary, Dean owed to "Kenseth a duty to administer the plan solely in her interest, not its own." Kenseth I, 610 F.3d at 480. We concluded:

In this case, the factfinder could conclude that this duty included an obligation to warn Kenseth, whose call to customer service it had invited, that she could not rely on what its customer service agent told her about coverage for her forthcoming surgery and hospitalization. And, given that Dean does not dispute that there was a means by which she could have obtained coverage information that she could have relied on, the factfinder could further conclude that Dean was also obliged to tell her by what means she could obtain that information. . . . These facts, construed favorably to Kenseth, lead us to conclude that a factfinder could reasonably find that Dean breached the fiduciary obligation that it owed to Kenseth as the party charged with discretionary authority to construe the terms of her health plan and to grant or deny her claim for benefits—including the duty to provide her with complete and accurate information.

Kenseth I, 610 F.3d at 480.

We also found that the evidence was sufficient to survive summary judgment on the issue of whether Kenseth was harmed by this possible breach of fiduciary duty. Kenseth produced evidence that she had undergone other treatments to ameliorate her condition, and although the second surgery was the best option to permanently resolve her problems, it was not necessary that she have that procedure in December 2005. We noted that Kenseth might be able to demonstrate that she could have postponed the surgery until obtaining insurance that would cover the procedure, or could have undergone the same surgery elsewhere for a lower cost, or she could have continued to pursue other, less costly treatments. Kenseth I, 610 F.3d at 481.

At the time of our first opinion, the answer to the question of whether Kenseth was seeking a remedy that ERISA authorizes for a breach of fiduciary duty was far from clear. Our case law at the time suggested that Kenseth could not recover monetary damages that resembled compensatory relief. Kenseth I, 610 F.3d at 482. We held that the equitable relief authorized by section 1132(a)(3) included only the types of relief that were typically available in equity, such as injunctions, mandamus, and restitution. The make-whole relief that Kenseth seemed to be seeking was beyond the scope of section 1132(a)(3), according to our understanding of the Supreme Court's holding in Mertens v. Hewitt Assocs., 508 U.S. 248 (1993). But the parties had not fully briefed the issue of relief and so we remanded "for a determination as to whether Kenseth is seeking any form of equitable relief that is authorized by 29 U.S.C. § 1132(a)(3) and, if so, for further proceedings on that claim as are consistent with this opinion." Kenseth I, 610 F.3d at 483. We noted that if Kenseth was not able to identify a form of equitable relief appropriate to the facts of this case, she would have failed to make out a claim on which relief could be granted and her claim would have to be dismissed.

On remand, Kenseth amended her complaint to clarify the relief she was seeking. See R. 59. Specifically, Kenseth asked the court to order Dean to (1) cure an ambiguity in the summary plan description regarding the procedure by which a participant may obtain a binding coverage determination prior to incurring the costs of care; (2) cure an ambiguity in the summary plan description regarding when services related to non-covered services are also not covered; (3) amend the Certificate to clarify that statements made by a customer service representative are not binding on Dean; (4) train customer service representatives to inform callers that statements made by the representatives are not binding on Dean; (5) implement a procedure by which persons seeking coverage information in non-emergency situations may receive a binding determination of whether the plan covers particular procedures or treatments; (6) amend the plan to describe that a participant may receive a binding coverage determination before incurring costs for a non-emergency treatment; (7) pay Kenseth's care providers the amount Dean would have paid if the services had been covered as represented to Kenseth on the phone; (8) enjoin subsidiary or parent corporations of Dean from collecting fees for services rendered to Kenseth; (9) make whole all unaffiliated entities to whom Kenseth owed a debt due to the surgery that Dean represented would be covered; (10) pay a surcharge to Kenseth equal to the amount she owes to others directly due to Dean's breach of fiduciary duty; (11) pay Kenseth's attorneys' fees and costs for this action; (12) honor its policy of covering costs incurred when a customer service representative mistakenly represents that a service will be covered; and (13) honor its policy of covering medical expenses when Dean mistakenly misleads a participant by failing to have a proper procedure in place by which the participant could obtain a binding coverage determination before costs are incurred. R. 59.

The parties filed cross-motions for summary judgment on Kenseth's remaining claim for breach of fiduciary duty. The district court declined to decide whether Kenseth had demonstrated as a matter of law that Dean breached its fiduciary duty to her because the court determined that it could not grant Kenseth the relief she sought even if she proved a breach of fiduciary duty. Kenseth v. Dean Health Plan, Inc., 784 F.Supp.2d 1081, 1083-84 (W.D. Wis. 2011) ("Kenseth II"). The court found that Kenseth's request that Dean hold her harmless for the cost of the surgery was really a plea for compensatory damages that are not available as equitable relief under section 1132(a)(3). The court also concluded that it could not grant any of Kenseth's requests to change the plan, the Certificate, or Dean's policies and practices because Kenseth was no longer a participant in Dean's plan. 784 F.Supp.2d at 1092-93. Finally, the court determined that Kenseth was not entitled to an award of attorneys' fees because she had achieved only very limited success in the course of the lawsuit, and the defendant's legal position had been substantially justified. 784 F.Supp.2d at 1094-96. Kenseth appeals from the judgment in favor of Dean.


After the district court granted judgment in favor of Dean and before the case was briefed on appeal, the Supreme Court decided Cigna Corp. v. Amara, 131 S.Ct. 1866 (2011). On appeal, Kenseth contends that Cigna requires that we reverse and remand for further proceedings. Under Cigna, Kenseth argues, equitable relief may include a money payment, including compensation for a loss resulting from a breach of fiduciary duty. Kenseth also objects to the district court's conclusion that, even if it was possible to place Kenseth back in the position she was in before the breach of fiduciary duty, Kenseth would have incurred the costs of surgery anyway because she had no other options given the nature of her health problems. The court erred on the facts and the law, Kenseth contends, and the record raises at least a triable question of fact on her other options if she had been told in a timely manner that the surgery would not be covered by her insurance. Although the district court declined to decide the issue, Kenseth also maintains that she is entitled to partial summary judgment on her claim that Dean breached its fiduciary duty to her in the manner we set forth in our original opinion. Moreover, Kenseth claims that she has adequately demonstrated her standing to seek injunctions requiring Dean to change its practices and plan even though she was no longer a plan participant at the time she moved for summary judgment. She asserts that she was a plan participant at the time of the injury, that she had a different insurance plan for a time, and that she is now again a Dean plan participant. That should be sufficient, she contends. Finally, she asks that we order the district court to reconsider her entitlement to attorneys' fees.

For its part, Dean contends that Kenseth has failed to identify any form of equitable relief available to her under the facts of the case. As a threshold matter, Dean claims that Kenseth has not shown that she is a "participant" entitled to bring a claim under section 1132(a)(3). Moreover, Dean claims that Kenseth lacks standing to pursue prospective injunctive relief under that same provision. Dean again attacks Kenseth's pursuit of monetary damages as unavailable as equitable relief under section 1132(a)(3). Dean contests Kenseth's pursuit of equitable relief against Dean affiliates that are not defendants in the lawsuit, and also challenges Kenseth's pursuit of attorneys' fees (both as equitable relief and as an exercise of the district court's discretion). Dean asks us to affirm the district court's conclusion that Kenseth failed to demonstrate that she could have averted the harm if she had been given accurate information by the customer service representative. Finally, Dean contends that Kenseth is not entitled to summary judgment on the liability aspect of her claim for breach of fiduciary duty.


We begin with an overview of Cigna, a case that significantly altered the understanding of equitable relief available under section 1132(a)(3). In 1998, Cigna changed its basic pension plan for the company's employees. The original plan provided a defined benefit in the form of an annuity calculated on the basis of pre-retirement salary and length of service; the new plan provided most retiring employees with a lump sum cash balance calculated by other means that turned out to be far less favorable. For employees who had already earned some benefits under the old plan, the new plan converted those benefits into an opening amount in the employee's new cash balance account. The employees challenged the adoption of the new plan, claiming that Cigna failed to give them proper notice of the changes. The district court agreed that Cigna violated its disclosure obligations under ERISA, finding that the company's initial descriptions of the new plan were significantly incomplete and misleading. The court ...

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