Mull v. Motion Picture Indus. Health Plan

937 F.Supp.2d 1161

Lenai MULL et al.

v.MOTION PICTURE INDUSTRY HEALTH PLAN et al.

Case No. CV 12–06693–VBF–MAN.

United States District Court, C.D. California.

Dec. 20, 2012.

Daniel E. Wilcoxen, Sacramento, CA, Donald M. Decamara, Donald M. De Camara Law Offices, Carlsbad, Ca, for Lenai Mull et al.

Elizabeth Rosenfeld, Kathryn Jane Halford, Wohlner Kaplon Phillips Young and Cutler, Encino, CA, for Motion Picture Industry Health Plan et al.

PROCEEDINGS (IN CHAMBERS): ORDER GRANTING IN PART AND DENYING WITHOUT PREJUDICE IN PART THE MOTION TO DISMISS; ALLOWING PLAINTIFFS TO AMEND THE COMPLAINT; AND ALLOWING ALL PARTIES TO FILE DISPOSITIVE MOTIONS

VALERIE BAKER FAIRBANK, District Judge.

Linda Kanter, Courtroom Deputy.

This is an action under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. Defendants—the Motion Picture Industry (“MPI”) Health Plan and its Board of Directors (“the Plan”)—have moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim on which relief can be granted. The Court will grant the motion to dismiss with prejudice as to plaintiffs' claim that the Plan's “third-party reimbursement” provision is unenforceable because it was not presented and explained with sufficient clarity (“the clarity claim”). The Court will deny the motion to dismiss without prejudice, however, as to plaintiffs' claim that the Plan's application of that same provision should be subject to equitable defenses. On the equitable-defense issue, the plaintiffs may well be able to plead a claim under a cognizable legal theory, and should be afforded an opportunity to rectify any inadequacies in their pleading if they so choose.¹ In other words, the defendantsprevail on the clarity claim, but the plaintiffs' equitable-defense claim survives for the time being. Finally, the Court will grant plaintiffs leave to amend the complaint and will allow all parties to file dispositive motions on a schedule set forth below.

PROCEDURAL HISTORY and BACKGROUND

Norman Mull (“Mull”) is a “wrangler” who resides in California, and he has been employed in the motion picture industry as a wrangler, a stunt man, and on one occasion as an actor. See Complaint filed August 3, 2012 (“Comp”) ¶¶ 3–4; see also Internet Movie Database, http:// www. imdb. com/ name/ nm 0611899. In connection with that employment, the Plan provided medical insurance coverage to Mull, his wife Danielle Mull, and his daughter Lenai Mull (“plaintiffs”), see Comp ¶ 4.

The complaint does not appear to allege that either defendant was the plan administrator. ERISA defines plan administrator as “(i) the person specifically so designated by the terms of the instrument under which the plan is operated; (ii) if an administrator is not so designated, the plan sponsor; or (iii) in the case of a plan for which an administrator is not designated and a plan sponsor cannot be identified, such other person as the Secretary [of Labor] may by regulation prescribe.” 29 U.S.C. § 1002(16)(A). “[T]he plan administrator is not determined by the actions or responsibilities of a particular party, but by the language in the coverage documents.” Turnipseed v. Educ. Mgmt. LLC's Employee Disability Plan, 2010 WL 140384, *4 (N.D.Cal. Jan. 13, 2010). The plaintiffs may rectify this oversight if they choose to amend the complaint. Cf. Lynn v. PG & E Co., 2010 WL 2557383, *4 (N.D.Cal. June 21, 2010) (“ERISA authorizes claims against the relevant plan and plan administrator. Because the complaint fails to allege that PG & E is the plan or plan administrator, it fails to state a claim upon which relief may be granted. Accordingly, the Court grants defendant's motion to dismiss on this ground, with leave to amend to name the proper defendant or plead that PG & E is a proper defendant.”); Larson v. Providence Health Plan, 2009 WL 562815, *5 (D.Or. Mar.2, 2009) (“[P]laintiffs' complaint does not allege that PSH–O is the health plan or a plan administrator. * * * [T]herefore ... defendants' motion for judgment on the pleadings as to ... PHS–O should be granted. If, however, plaintiffs can allege in good faith that ... PSH–O is or was a plan administrator, they may file an amended complaint....”).

Plaintiffs allege that while Lenai was entitled to medical benefits under the Plan as a dependent of her father, she sustained severe injuries in an auto accident in February 2010, see Comp ¶ 6. Lenai underwent surgeries designed to stabilize fractures, inflate a lung, and implant rods in her thighs, causing her to miss substantial time from college and to endure physical and mental pain and suffering, see id. Lenai's accident-related medical expenses were about $190,000 as of August 3, 2012, of which the Plan paid $148,000, see id.

Plaintiffs allege that the driver who caused the accident settled Lenai's claims against him for his liability insurance policy limit of $100,000 (“the third-party settlement”). By contrast, plaintiffs allege, “the full value” of Lenai's “severe injuries” is about $2 million, such that her settlement with the driver's insurance carrier did not make her whole. See Comp ¶ 7. This allegation is material to plaintiffs' claim that the Court should let them assert equitable defenses to limit the enforcement of the reimbursement provision, such as the make-whole doctrine. See generally CGI Techs. & Solutions, Inc. v. Rose, 683 F.3d 1113, 1121 (9th Cir.2012) (“it is a general equitable principle of insurance law that, absent an agreement to the contrary, an insurance company may not enforce a right to subrogation until the insured has been fully compensated for her injuries, that is, she has been made whole.”) (citing Barnes v. Indep. Auto. Dealers Ass'n of Calif. H & W Benefit Plan, 64 F.3d 1389, 1395 (9th Cir.1995)); Aetna Life Ins. Co. v. Kohler, 2011 WL 5321005, *6 (N.D.Cal. Nov. 2, 2011); accord Cagle v. Bruner, 112 F.3d 1510 (11th Cir.1997) (holding that the make-whole doctrine applies in favor of a beneficiary “where an ERISA plan neither explicitly adopts nor disavows the doctrine”); see, e.g., Providence Health Plans of Oregon v. Simnitt, 2009 WL 3713131 (D.Or.2009) (“This court ruled that a beneficiary must be fully compensated for her injuries, or ‘made whole,’ before an insurance company may enforce a right to subrogation. Further, the court ruled that the language of the ERISA plan at issue did not abrogate the ‘make whole’ doctrine. Following this ruling, the parties stipulated that defendant had not been made whole by her recovery and that judgment be entered in defendant [beneficiary]'s favor.”).

Statutory and Regulatory Provisions Cited by the Parties, and Plaintiffs' Theory of the Case.

As discussed below, defendants contend that the clear language of the Plan requires Lenai to turn the $100,000 third-party settlement proceeds over to the Plan, as reimbursement for its payment of medical claims on her behalf, pursuant to a reimbursement provision entitled “Claims Involving Third Party Liability” (“the reimbursement provision”) which appears at pages 49–50 of the 195–page Active MPI Health Plan Summary Plan Description (“SPD”). See generally Unisys Med. Plan v. Timm, 98 F.3d 971, 973 (7th Cir.1996) (“Unlike subrogation, which arises under state law and allows the insurer to stand in the shoes of its insured, reimbursement is a contractual right governed by ERISA and comes into play only after a plan member has received personal injury compensation. While subrogation and reimbursement may have similar effects, they are distinct doctrines.”). Defendants further contend that until and unless Lenai turns over the $100,000, the plan entitles them to deny medical claims submitted by any of the Mulls at least up to the $100,000 the Plan is owed under the provision.²See Comp ¶ 8. The reimbursement provision provides in pertinent part as follows:

If you or your dependent's injury or illness was, in any way, caused by a third party who may be legally liable or responsible for the injury or illness, no benefits will be payable nor paid under any coverage of the MPI Health plan unless you contractually agree in writing in a form satisfactory to the MPI Health Plan, to do all of the following:

1. Provide the MPI Health Plan with a written notice of any clam made against the third party for damages as a result of the injury or illness;

2. Agree to reimburse the MPI Health Plan for benefits paid by the Plan from any Recovery ... when the Recovery is obtained from or on behalf of the third party or the insurer of the third party or from your own uninsured or underinsured motorist coverage....

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7. Direct any legal counsel retained by you or any other person acting on your behalf to hold that portion of the Recovery to which the Plan is entitled in trust for the sole benefit of the Plan and to comply with and facilitate the reimbursement to the MPI Health Plan of the monies owed it (as described and defined below).

If you or your dependent fails to comply with any of the aforementioned requirements, no benefits will be paid with respect to the injury or illness. Whatever benefits have already been paid, they may be recouped by the MPI Health Plan.

Reimbursement of benefits paid by the Plan for an injury or illness for which you or your dependent has received any Recovery is the liability of the Participant. If reimbursement is requested and not received by the Plan, in addition to any other available remedies, the amount of such benefits (including any applicable in interest), as described below, will be deducted from all future benefit payments to or on behalf of the Participant and/or any dependent, until the overpayment is resolved. ( Please refer to page 44 under Overpayment.)

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The Plan's Right to Recovery Reimbursement

The term “Recovery” includes any amount awarded to or received by way of court judgment, arbitration award, settlement or any other arrangement, from any third party ... related...