Technibilt Grp. Ins. Plan v. Blue Cross & Blue Shield

TECHNIBILT GROUP INSURANCE PLAN AND TECHNIBILT, LTD., Plaintiffs, v. BLUE CROSS AND BLUE SHIELD OF NORTH CAROLINA, Defendant.

CIVIL ACTION NO. 5:19-CV-00079-KDB-DCK

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA STATESVILLE DIVISION

March 25, 2021

ORDER

Defendant Blue Cross and Blue Shield of North Carolina ("Blue Cross") is a third party health insurance administrator for the Plaintiff Technibilt Group Insurance Plan (the "Plan"), sponsored by Plaintiff Technibilt Ltd. ("Technibilt"). In this action, Plaintiffs assert claims against Blue Cross for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 ("ERISA") related to Blue Cross' alleged failure to timely pay medical expenses incurred by a dependent of a Plan participant (the "Large Claim"), which resulted in a substantial loss to the Plan of more than $800,000 when all the expenses could not be claimed under a reinsurance policy. Now before the Court are the Parties' cross Motions for Summary Judgment (Doc. Nos. 31, 42).

The Court has carefully considered these motions, all the Parties' timely filed briefs and exhibits and oral argument on the motions from the Parties' counsel on March 18, 2021. For the reasons discussed below (and in the Court's earlier Order denying Defendant's Motion to Dismiss (Doc. No. 13) (the "MTD Order")), the Court finds that there are numerous genuinely disputed material factual issues and neither Plaintiffs nor Defendant is entitled to judgment as a matter of law. Therefore, the Court will DENY both motions. Whether Defendant breached its fiduciary duties under ERISA must be decided in a bench trial in this matter unless the Parties reach an earlier resolution of their dispute.

I. LEGAL STANDARD

Summary judgment may be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56. When ruling on a summary judgment motion, a court must view the evidence and any inferences from the evidence in the light most favorable to the nonmoving party. Smith v. Collins, 964 F.3d 266, 274 (4th Cir. 2020). "Summary judgment cannot be granted merely because the court believes that the movant will prevail if the action is tried on the merits." Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 568-69 (4th Cir. 2015) (quoting 10A Charles Alan Wright & Arthur R. Miller et al., Federal Practice & Procedure § 2728 (3d ed.1998)). "The court therefore cannot weigh the evidence or make credibility determinations." Id. at 569 (citing Mercantile Peninsula Bank v. French (In re French), 499 F.3d 345, 352 (4th Cir. 2007)). "When faced with cross-motions for summary judgment, the court must review each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law.'" Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (citation omitted).

II. FACTS AND PROCEDURAL HISTORY

The Court has previously summarized the general factual contentions of the Parties in the MTD Order, which need not be repeated here. See Doc. 13 at 3-5. And, suffice it to say that in their respective discussions of the additional facts purportedly revealed in discovery the Parties continue to disagree on the relevant "facts" and how those facts should be considered and appliedwith respect to Plaintiff's claims. See Doc. No. 44 at 2-5; Doc. No. 32 at 2-8. To the extent necessary, the Court will more specifically reference the Parties' various factual disputes below.

III. DISCUSSION

In general, the Parties do not dispute the well-established legal principles governing the alleged breaches of Defendants' fiduciary duty under ERISA with respect to the Plan, which the Court has previously described. See Doc. No. 13 at 8-10. Rather, they argue about the application of stridently disputed facts to those standards. Indeed, while ERISA is undoubtedly a "complex" statute, it is ultimately a "remedial statute" that "should be liberally construed in favor of protecting the participants in employee benefits plans." Dawson-Murdock v. Nat'l Counseling Grp., Inc., 931 F.3d 269, 278 (4th Cir. 2019) (quoting Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 123 (4th Cir. 1991)). So, notwithstanding the technical ERISA arguments presented by both sides, because it appears clear (or at a minimum is genuinely disputed) that Technibilt fully turned over administration of their ERISA health benefit plan to Blue Cross (letting it decide who to pay, how much to pay, when to pay, etc.) the Court must determine at trial whether Blue Cross performed its delegated role prudently or instead dropped the ball (or more accurately the bill) in not paying the Large Claim before year-end, thereby resolving disputed factual issues related to Blue Cross' fiduciary duties.

Overall, Plaintiffs must show that (1) Blue Cross was a fiduciary of the Plan (which Blue Cross admits that it was, although it seeks to limit the scope of its fiduciary status), (2) Blue Cross breached its fiduciary responsibilities under the Plan, and (3) the Plan was adversely affected by Blue Cross' breach. See Sims v. BB&T Corp., 2018 WL 3128996, at *5 (M.D.N.C. June 26, 2018). With respect to the scope of its fiduciary duties, Blue Cross reprises its argument from its Motion to Dismiss that it did not have discretionary authority or control over the conduct that allegedlyled to Technibilt's loss because investigation and payment, as opposed to adjudication, of a claim are allegedly ministerial (not fiduciary) functions. The Court ruled on this argument in the MTD Order, see Doc. No. 13 at 8-10, and it fares no better under Rule 56.

As mentioned above, Blue Cross was delegated broad discretion over the administration of the Plan, including all aspects of processing and payment (other than determining who is properly a Member of the Plan). See Doc. No. 42-2 (the Parties' Administrative Services Agreement ("ASA") at §§ 7.1-7.3.) While Blue Cross asks the Court to distinguish among these delegated duties, finding some to be "fiduciary" and others to be "ministerial," as previously explained the concept of "ministerial" duties applies to those routine tasks in which a person is merely applying standards set by others and thus cannot be held to exercise any discretionary authority. Here, by contrast, Blue Cross specifically bargained to be allowed to "apply its standard practices, policies and procedures," id. at § 7.4, so it was in fact exercising its own discretion with respect to all the "services described in this agreement." Accordingly, the Court finds that the scope of Blue Cross' fiduciary (i.e., discretionary) duties extends to its full administration of the Plan, including decisions whether to pursue expedited claims handling and the timing of the payment of very large claims that could significantly impact the Plan.¹

Moreover, at oral argument, Blue Cross' counsel conceded that the failure to "timely" pay claims could, in some circumstances, violate a fiduciary duty to the Plan.² Although Blue Crossargues that it timely paid the Large Claim based on when it received the Large Claim from the "Host Blue" insurer in Seattle (with whom the claim was required to be initially filed), its acknowledgement that a fiduciary duty can exist with respect to the timing of the payment of claims - that is, it is not always just a "ministerial" act - means that the real issue to be decided is whether or not Blue Cross breached that duty, considering all the relevant and unique circumstances of this case.

Indeed, whether or not Blue Cross breached its fiduciary obligations is the crux of the factual dispute among the Parties. On the one hand, Plaintiffs contend that the evidence shows that Blue Cross was aware of the Large Claim months before the end of 2018, that Technibilt repeatedly told Blue Cross that the Large Claim needed to be paid before year end and that Technibilt asked Blue Cross to do everything it could to get the Large Claim paid in 2018. See Doc. 42-4. Further, Plaintiff argues that it is undisputed that Blue Cross took no action even to encourage the "Host Blue" to expedite its review of the claim.

In turn, Blue Cross argues that it had no obligation to try to expedite the claim because it was permitted under the ASA to "apply its standard practices, policies and procedures," which required it only to pay claims following the receipt of fully reviewed claims from the "Host Blue." Specifically, Blue Cross contends that its "standard practice" was to pay out-of-state claims within 30 days of receiving the claim from the Host Blue, which would mean its payment of the Large Claim would be timely even though it was after year end. However, the ASA contains an exceptionto Blue Cross' ability to apply its "standard practices" if "contrary instructions, agreements or Group Health Plan provisions exist." Technibilt argues that it both gave Blue Cross "contrary instructions"³ and, in any event, it was imprudent for Blue Cross to not take action to try to speed up the processing of the claim as soon as it understood the importance of paying the claim by the end of the year. Thus, there is plainly a genuine factual dispute concerning whether Blue Cross breached its fiduciary duty of prudence with respect to its conduct regarding the payment of the Large Claim.

Finally, Blue Cross challenges whether the Plan suffered any harm as a consequence of Blue Cross' failure to pay the Large Claim in 2018. Blue Cross offers two arguments on this issue. First, Blue Cross contends that the Plan and its participants did not suffer any alleged losses because it was Technibilt - rather than the Plan - that was not reimbursed by the stop loss insurance coverage for the payment of the Large Claim.⁴ It would substantially elevate form over substanceto find that neither the Plan nor participants is harmed by the loss of insurance proceeds because...