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C.D. Cal.: De facto Administration of Policy Benefits

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  • C.D. Cal.: De facto Administration of Policy Benefits

    In a recent case from the Central District of California, the court clarifies what type of entities may be sued under ERISA, and what level of individual liability must be established in order to prevail.

    Broadly stated, “an entity other than the plan itself or the plan administrator may be sued under [ERISA] in appropriate circumstances . . . as long as that party’s individual liability is established.” Cyr, 642 F.3d at 1204, 1207. Liability extends at least to any party that can deny a claimant’s “request for increased benefits even though . . . it was responsible for paying legitimate benefits claims.” Id. at 1207. The Ninth Circuit thus held the insurer in Cyr liable because it “effectively controlled the decision whether to honor or deny a claim under the program.”
    Despite Anthem's contention that they are a "step removed" from administrative decisions, the court found that a similar relationship between Anthem and the wholly owned plan administrating subsidiary, AUMS, existed.

    [...]under Spinedex and Cyr, whether a party actually makes the final administrative decision is not dispositive. The relevant inquiry is whether it “den[ies] or cause[s] improper denial of benefits.” Spinedex, 770 F.3d at 1297 (emphasis added). This is what Anthem has done. The coverage guidelines developed by Anthem “cause” grants or denials by foreclosing certain claims—such as claims for microprocessor controlled foot-ankle prostheses—regardless if AUMS would otherwise find them “medically necessary” and not “investigational” under plan definitions.
    Ultimately, the court found that Anthem's relationship to the plan was significant enough that it fell under the broad definition outlined by ERISA, and denied Anthem's Motion to Dismiss. The opinion is attached below.
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