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St. Alexius Medical Center v. Roofers Unions Welfare Trust Fund

United States District Court, N.D. Illinois, Eastern Division

January 31, 2017



          Ruben Castillo United States District Court Chief Judge

         St. Alexius Medical Center ("St. Alexius") brings this action against the Roofers' Unions Welfare Trust Fund ("the Fund") under the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. (R. 21, Am. Compl.) Before the Court are the parties' cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. (R. 56, Fund's Mot.; R. 59, St. Alexius's Mot.) For the reasons stated below, judgment is entered in favor of the Fund.


         The following facts are undisputed unless otherwise stated. The Fund is an employee welfare benefit plan established under ERISA that provides health and welfare benefits to eligible participants and beneficiaries. (R. 65, St. Alexius's Resp. to Facts ¶ 3.) St. Alexius is an Illinois medical facility that believes it is owed payment from the Fund for medical services provided to one of the Fund's participants. (Id. ¶ 4.)

         In order to understand the parties' dispute, some background is necessary on the Fund itself. The Fund has been in existence since 1950 and has been providing health and welfare benefits since that date. (Id. ¶ 7.) The terms and conditions of the benefits provided by the Fund were set forth in a plan document adopted in 1996, referred to herein as the "Historical Plan." (Id; R. 57-9, Historical Plan at 1-300.) Effective January 1, 2006, the Fund adopted a Summary Plan Description ("SPD"), a 100-page "booklet" summarizing the provisions contained in the Historical Plan. (R. 65, St. Alexius's Resp. to Facts ¶¶ 8-10; see also R. 57-10, SPD at 39.) The SPD provides that "[i]f any discrepancy exists between [the SPD] and the [Historical] Plan, the provisions of the [Historical] Plan will govern." (R. 65, St. Alexius's Resp. to Facts ¶ 9.) At the time of the SPD's adoption, the Fund's board of trustees adopted the following resolution:

RESOLVED, that the revised Summary Plan Description be and the same is hereby approved as presented, and
FURTHER RESOLVED, that the [Historical Plan] be amended to the extent necessary to make it consistent with the Summary Plan Description.

         (R. 57-15, Resolution at 2.) After the SPD took effect, amendments to the plan-called "Summaries of Material Modifications" or "SMMs"-were made directly to the SPD rather than to the Historical Plan. (R. 57-17, Rachal Aff. ¶ 8.)

         In September 2011, a U.S. Department of Labor audit of the Fund noted that the SPD, along with various amendments made after the adoption of the SPD, contained the most updated statement of benefits provided by the Fund. (R. 65, St. Alexius's Resp. to Facts ¶ 16.) According to the minutes of a September 22, 2011, board meeting at which this issue was addressed, the Department of Labor sought clarification "that the SPD is the Plan Document and that all participant rights are derived from the SPD and not the [Historical] Plan Document." (R. 57-16, Minutes at 2.) In response, the board issued an "Important Notice to All Plan Participants" stating as follows:

The Trustees clarify and confirm that the provisions contained in the Welfare Plan's Summary Plan Description (January 1, 2006 Version) and subsequently issued Summaries of Material Modifications ("SPD") serve as the Welfare Plan's Plan document. The Welfare Plan has been administered using the provisions of the SPD and not the Plan document in existence prior to publication of the SPD. As such, the provisions in the historical Plan document are not operative and have not been utilized to determine any participant's rights and benefits under the Welfare Plan.

(R. 57-13, Notice at 34.) The parties dispute the significance of this notice-specifically, whether it meant that the SPD would serve as the operative ERISA plan from September 2011 forward, or, alternatively, whether it simply clarified that the SPD was already the operative plan document as of that date. (See R. 65, St. Alexius's Resp. to Facts ¶¶ 11-18.)

         The Historical Plan and the SPD contain many similarities, including providing for payment of covered expenses incurred by participants upon timely receipt of proof of loss. (Id. ¶ 19.) Under either plan, proof of loss must be submitted no more than one year after the date the loss occurred. (Id. ¶ 20.) A claim for benefits is considered to have been filed on the date it is received at the Fund office even if the claim is incomplete. (Id. ¶ 21.) Post-service claims (meaning claims for services that have already been rendered) are usually approved or denied within 30 days of the date they are received. (Id. ¶ 22.) If additional time is required, a "Plan extension" can be requested by the Fund. (Id.) Such extensions can occur "when there are circumstances beyond the control'' of the Fund, but do not include situations where "a claimant has not provided the Plan with all information or documents needed to process the claim." (Id. ¶ 23.) Similarly, a request for additional information or materials from a doctor or other medical provider is not considered a "Plan extension." (Id.) The time for the Fund to decide a claim starts running when a claim is considered "complete." (Id. ¶ 24.)

         Both the Historical Plan and the SPD exclude payment for medical treatment for any injury or illness sustained while a participant was performing "any act of employment" or doing anything pertaining to any occupation or employment for remuneration or profit, regardless of whether benefits are payable in whole or in part under a workers' compensation statute or similar law. (Id. ¶ 27.) Both plans delegate discretionary authority to the Fund's board of trustees to interpret the terms of the plan and make benefits decisions in accordance with the plan. (Id. ¶ 31.) If a claim for benefits has been denied in whole or in part, the claimant may file a notice of appeal within 180 days after receipt of written notice of the denial.[1] (Id. ¶ 25.) Appeals are resolved by a formal review committee, and the claimant has the right to present his or her position in writing or to appear in person, either with or without a legal representative. (Id. ¶ 26.) Final benefits decisions are "binding on all persons, " except to the extent that such decisions are found to be arbitrary or capricious by a court or arbitrator with jurisdiction over the matter. (Id. ¶31.)

         Notwithstanding these similarities, the SPD and the Historical Plan do contain one material difference: The SPD does not contain any limitations period for filing suit to challenge an adverse benefits determination, whereas the Historical Plan contains a two-year limitations period prohibiting the filing of any civil action more than "two years from the expiration of the time within which proof of loss is required to be furnished." (Id. ¶ 29; R. 57-9, Historical Plan at 37.)

         Between January 2007 and November 2007-after the adoption of the SPD but before the "Important Notice" was issued in response to the Department of Labor audit-St. Alexius provided hospital services to a Fund participant, who is referred to for privacy reasons only as "Patient." (R. 65, St. Alexius's Resp. to Facts ¶ 4.) These services totaled $153, 424 and included two surgeries Patient underwent to repair herniated discs and other impairments in his back.[2] (Id. ¶¶ 5, 32; see also R. 57-5, Medical Records; R. 57-6, Medical Records; R. 57-7, Medical Records.) In the course of obtaining these services, Patient assigned his right to benefits to St. Alexius, so that payment could be made by the Fund directly to St. Alexius. (R. 71, Fund's Resp. to Facts ¶ 9.) On January 29, 2007, and March 1, 2007, Patient notified the Fund office by telephone that he had undergone back surgery at St. Alexius on January 9, 2007; he stated that the surgery was related to a work injury but that his employer had not yet filed a workers' compensation claim with its insurance carrier.[3] (R. 65, St. Alexius's Resp. to Facts ¶ 33.) He further stated that it was disputed whether his injury was covered by workers' compensation insurance and that he had hired a lawyer to represent him in connection with the matter. (Id.)

         On May 1, 2007, the Fund office received a subpoena from the Illinois Workers' Compensation Industrial Commission ("Industrial Commission") seeking medical records related to Patient's treatment at St. Alexius. (Id. ¶ 34.) On April 9, 2008, St. Alexius sent the Fund a copy of a denial from the workers' compensation insurance carrier for Patient's employer finding that his injury was non-compensable. (Id. ¶ 35.) The denial was dated June 8, 2007, but was not received by the Fund office until April 2008. (Id.)

         On April 10, 2008, the Fund office wrote to Patient requesting copies of the workers' compensation accident report originally filed with his employer, workers' compensation check stubs, and any determination made by the Industrial Commission as to whether his injury was work-related. (Id. ¶ 36.) On April 16, 2008, the Fund office wrote to St. Alexius stating that it had received the workers' compensation carrier denial, but that Patient was required to pursue a claim with the Industrial Commission before any consideration of his claim for benefits would be made by the Fund. (Id. ¶ 37.) The letter stated that if the Industrial Commission found Patient's injuries non-compensable under the workers' compensation statute, the charges would then be considered by the Fund. (Id.)

         On August 14, 2008, St. Alexius wrote to the Fund office stating that it was "our understanding" that the Fund "has denied the above claims pending the outcome of [Patient's] workers' compensation cases as [they] relate to the above claims." (Id. ¶ 38.) St. Alexius enclosed copies of documents showing that Patient's workers' compensation claims had been settled for a total of $28, 365. (Id.) Documents included with the letter showed that Patient had filed multiple workers' compensation claims for various impairments, including herniated discs and spinal injuries allegedly caused by "repetitive trauma and heavy lifting." (R. 57-2, Industrial Commission Documents at 29-32.) The letter from St. Alexius stated that no additional workers' compensation payments would be forthcoming, and that, in St. Alexius's view, the Fund "is now the primary payer" of the hospital bills. (Id., Letter of August 14, 2008, at 39.) The letter closed by requesting immediate payment of the charges, and stating that if the Fund "continues to pend or deny the above claims, we request a copy of the actual insurance policy, the group policy or master plan ... or other document given to [Patient] or others covered by the same policy describing their benefits under the plan." (Id.)

         On August 21, 2008, the Fund sent St. Alexius a letter acknowledging receipt of its letter and stating that the Fund office had "requested the medical records for the charges in question, " which would be "reviewed upon receipt." (Id., Letter of August 21, 2008, at 36.) The letter further stated, '"I am enclosing a copy of our Summary Plan Description as you requested." (Id.; see also R. 65, St. Alexius's Resp. to Facts ¶ 39.) On October 28, 2008, an attorney for St. Alexius wrote to Fund employee Mary Isenhart, stating that "when we last spoke, you advised me" that the Fund "intended to uphold its denial of coverage" even though, in St. Alexius's view, the bills were not related to a work injury. (R. 57-2, Letter of October 28, 2008, at 28.) St. Alexius's attorney reiterated the request for all applicable plan documents, and closed by stating that if the Fund "is still reviewing this matter, please advise me of the status of this review and whether you require any documentation or information to complete the review." (Id; R. 57, Fund's Facts ¶40.)[4]

         On December 5, 2008, the Fund denied Patient's claim for benefits. (Id. ¶ 41.) Separate denials, referred to as "explanation of benefits" forms, were issued for each of the bills submitted by St. Alexius. (R. 57-8, Denial Forms at 67-85.) The basis for the denial was stated as follows: "Charges incurred in connection with injury or illness sustained while the person is performing any act of employment... are not covered under the plan, see page 80, number 42 of your Plan booklet." (Id. at 68.) The forms further advised, "If you disagree with this determination, please refer to the Plan's Claim Appeal Procedures located on the reverse side of this form." (Id.) The reverse side of the forms contained general information about those procedures, including that an appeal had to be filed in writing with the Fund office within 180 days. (Id. at 69; see also R. 57, Fund's Facts ¶ 42.)

         For reasons not revealed in the record, St. Alexius had no further contact with the Fund office until January 2014, when it re-submitted copies of its August 2008 and October 2008 letters. (R. 57, Fund's Facts ¶ 43.) In a brief letter accompanying these documents, St. Alexius stated, "'We feel these claims should have been processed and paid by the Fund. Please forward this issue to your legal department for review." (R. 57-2, Letter of January 28, 2014, at 25.) On February 14, 2014, the Fund sent St. Alexius a letter acknowledging receipt of St. Alexius's "request to appeal, " but noted that St. Alexius needed to obtain written authorization from Patient to proceed with an appeal in accordance with the SPD. (Id., Letter of February 14, 2014, at 24.) On February 27, 2014. St. Alexius sent the Fund office a signed authorization from Patient and stated, "Please place our appeal before the appeals committee and or Board of Trustees as soon as possible." (Id., Letter of February 27, 2014, at 14.)

         On March 14, 2014, St. Alexius requested a copy of all ERISA plan documents relevant to Patient's claim. (R. 57, Fund's Facts ¶ 45.) On April 24, 2014, St. Alexius wrote to the Fund again and submitted documentation in support of its appeal, including medical records. (Id. ¶ 46.) On May 24, 2014, the Fund's review committee denied St. Alexius's appeal, determining that the appeal was "untimely because it was filed more than five years after the written notice of claim denials were issued by the Fund Office." (Id. ¶ 48.)


         In November 2014, St. Alexius filed this lawsuit. (R. 1, Compl.) St. Alexius subsequently filed an amended complaint asserting two claims. (R. 21, Am. Compl.) In Count I, St. Alexius seeks to recover $153, 424 for unpaid hospital bills under 29 U.S.C. § 1132(a). (Id. ¶¶ 1-21.) In Count II, St. Alexius seeks to recover $228, 000 in statutory penalties pursuant to 29 U.S.C. § 1132(c)(1)(B), based on the Fund's failure to provide St. Alexius with relevant plan documents in response to separate requests it made in August 2008, January 2014, and March 2014. (Id. ¶¶ 22-26.) The Fund moved to dismiss, and the Court dismissed Count II as it pertained to St. Alexius's August 2008 request for the plan documents, finding that this claim was untimely.[5] (R. 35, Mem. Op. & Order at 15.) The motion was denied in all other respects. (Id.) Thereafter, the Fund answered the complaint and the case proceeded to discovery. (See R. 45, Ans.; R. 46, Min. Entry.) The parties now each move for summary judgment in their favor. (R. 56, Fund's Mot.; R. 59, St. Alexius's Mot.)

         In support of its motion, the Fund argues that St. Alexius is not entitled to payment of the hospital bills for several reasons. (R. 58, Fund's Mem. at 2-12.) The Fund believes that St. Alexius's claim is time-barred by the two-year limitations period contained in the Historical Plan, which in the Fund's view is the applicable ERISA plan document. (Id. at 7-12.) The Fund further argues that St. Alexius failed to timely exhaust its administrative remedies as required by ERISA. (Id. at 2-7.) As to the merits, the Fund argues that the review committee's decision to deny St. Alexius's appeal was neither arbitrary nor capricious, because the appeal was filed long after the 180-day deadline expired. (Id. at 12-16.) Finally, the Fund argues that statutory penalties are not warranted under 29 U.S.C. § 1132(c) because St. Alexius received a copy of the SPD in August 2008, and any delay in its receipt of the Historical Plan was not based on bad faith, nor did it result in any prejudice to St. Alexius. (Id. at 14-16.)

         For its part, St. Alexius believes that it is entitled to payment of the hospital bills incurred by Patient. (R. 60, St. Alexius's Mem. at 2, 6.) St. Alexius argues that its claim is not time-barred because the SPD is the governing ERISA plan document, and the SPD does not contain a statute of limitations. (Id. at 3-4.) St. Alexius further argues that it exhausted its administrative remedies within the 180-day deadline because its August 2008 letter to the Fund office constituted an administrative appeal. (Id. at 2, 6.) On the merits, St. Alexius argues that the Fund's decision to deny its appeal was arbitrary and capricious because the charges at issue were not related to a work injury. (Id. at 10.) St. Alexius also ...

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