KARA HOGAN v. FAIRCHILD EQUIPMENT EMPLOYEE BENEFIT PLAN PRAIRIE STATES ENTERPRISES INC (2023)

DECISION AND ORDER

Plaintiff Kara Hogan commenced this action against Defendants Fairchild Equipment Employee Benefit Plan (the Plan) and Prairie States Enterprises Inc. (PSE), alleging that Defendants violated the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., by denying her health insurance benefits for medical treatment she received after sustaining injuries as a passenger in a vehicle collision. The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331. Having reviewed the administrative record, the court concludes that the Plan's denial of benefits must be affirmed.

BACKGROUND

The Plan is a private, self-funded health insurance plan governed by ERISA. Administrative Record (AR), Dkt. No. 20, at 3. Fairchild Equipment is the Plan Sponsor and Administrator. AR 4. PSE is a third-party administrator for the Plan. AR 5. As a third-party administrator, PSE was retained to assist with claims processing and technical services. It was not the insurer and had no authority to exercise discretion for receipt of benefits for claims. AR 24, 72. At the time of the incident precipitating this claim, Plaintiff was a covered member of the Plan due to her father's employment with Fairchild Equipment Inc. Dkt. No. 22 at 1.

On February 20, 2021, Plaintiff was admitted to Aurora BayCare Medical Center (Aurora) in Green Bay, Wisconsin, for medical treatment for the serious injuries she sustained in a vehicle collision. AR 139. Plaintiff was the front-seat passenger in a vehicle driven by her boyfriend. AR 283. The driver failed to negotiate a curve in the road, causing the vehicle to leave the road, travel about four feet down into a ditch, and crash into a utility pole at approximately 1:30 a.m. Id. As a result of the collision, Plaintiff fractured her right femur and jaw and sustained other injuries, which required three days of hospitalization. AR 107, 140. Plaintiff's treating physicians made multiple notes on her intake evaluations that she appeared to be intoxicated. AR 118–19. The medical record also includes a notation that she is to be monitored for withdrawal. AR 125. Medical staff performed a toxicology screen, and Plaintiff tested positive for alcohol and “Cocaine/Metabolite.” AR 131. Physicians later indicated that Plaintiff was intoxicated by “both ethanol and cocaine on admission.” AR 154.

In response to the claim for benefits submitted to the Plan on Plaintiff's behalf, PSE requested copies of her medical records from Aurora. AR 176–78. Upon its review of the records received from Aurora, PSE notified Plaintiff and Aurora by letter dated March 1, 2021, that her claim for benefits was denied. AR 179. PSE explained that the denial was based on the Plan's “illegal drugs or medications” exclusion. Section 8.03 of the Plan, titled “Medical Exclusions,” provides that “[s]ome health care services are not covered by the Plan.” AR 60. It then lists in seventy different subsections the categories of health care services that are not covered. Subsection 34 carries the heading “Illegal Drugs or Medications” and excludes any charge for care, supplies, or services:

That are services, supplies, care or treatment to a Participant for Injury or Sickness Incurred while the Participant was voluntarily taking or was under the influence of any controlled substance, drug, hallucinogen or narcotic not administered on the advice of a Physician, even if the cause of the Illness or Injury is not related to the use of the controlled substance, drug, hallucinogen or narcotic. This Exclusion will apply even if the Participant has a prescription for the drug and the drug is legal in the state where the Participant lives. Expenses will be covered for Injured Participants other than the person using controlled substances and expenses will be covered for Substance Abuse treatment as specified in this plan. This Exclusion does not apply if the Injury (a) resulted from being the victim of an act of domestic violence, or (b) resulted from a documented medical condition (including both physical and mental health conditions).

AR 63.

The letter denying coverage explained “[t]his is a benefit determination, not a medical decision.” AR 180. If the Plan member disagreed with the determination, the letter explained that the member could submit a written letter of appeal. Id. In the accompanying instructions for submitting an appeal, PSE explained that “[t]he patient or their legal guardian must send a letter requesting an appeal and include ALL necessary or any additional information you would like considered to Prairie States Enterprises within 180 days from the original denial letter.” AR 181 (bold and italics in original). The instructions emphasized “Information received after receipt of your signed appeal letter will not be considered in the appeal process.” Id. (italics and underlining in original).

In response to PSE's letter denying benefits, Plaintiff's father, Timothy Hogan, telephoned PSE on March 9, 2021, and asked how PSE got the information that his daughter had cocaine and alcohol in her system. AR 108. Mr. Hogan stated that he had been told by hospital personnel that they would not give that information to anyone. Id. PSE explained that faxing clinical information to substantiate medical necessity of an inpatient stay is a standard process in the insurance industry. Id. Mr. Hogan did not deny that his daughter was under the influence of cocaine at the time of the accident.

On March 29, 2021, Aurora sent PSE a “Formal Medical Necessity Appeal Request,” summarizing the care it provided and seeking review of the denial of benefits under the Plan for the three days of inpatient services Aurora had provided Ms. Hogan. AR 191. On April 6, 2021, PSE received an authorization for the appeal signed by Plaintiff. AR 108, 267. In its description of the various injuries Plaintiff sustained and the care it provided her, Aurora did not deny that Plaintiff was under the influence of cocaine at the time of the accident. In fact, its letter explicitly noted that her “drug screen showed positive for cocaine.” AR 191.

On April 14, 2021, Plaintiff's case was presented to the appeals committee for review. AR 270. As part of the review process, the appeals committee requested that Plaintiff's case be reviewed by an outside physician. AR 109. On April 19, 2021, Dr. Maryanne Ilnickij, who is board certified in internal medicine, reported to PSE that based on the Plan's Medical Exclusions List, Plaintiff's inpatient stay at Aurora was not a covered benefit. Dr. Ilnickij concluded from her review that “[t]he record documents alcohol intoxication and cocaine use at the time of admission.” AR 271–72. By letter dated April 21, 2021, PSE notified the parties that the decision denying benefits based on the medical plan exclusion was upheld. The letter stated that the decision was final and there were no further appeal rights available for this claim. AR 274.

On August 2, 2021, Plaintiff wrote a letter to PSE formally requesting an appeal of the decision denying her health care benefits. AR 283. In her letter, Plaintiff recited the circumstances of the crash, described her injuries, and noted that she was a passenger and was wearing her seatbelt at all times. She concluded her letter, stating that she was a 23-year-old woman with the rest of her life ahead of her, that the injuries she sustained had changed her life, and that due to the denial of insurance coverage, she was unable to return to her previous activities. Id. Plaintiff's attorney also sent a letter appealing PSE's denial of coverage under the Plan. In a letter dated August 16, 2021, regarding “Insurance Appeal Request,” Plaintiff's attorney wrote:

Kara Hogan is in disagreement with the handling of the claim due to the fact that she was not the driver or operator of the vehicle at the time of the crash. She was merely a front-seat passenger at the time, and thus, should not be denied medical insurance benefits.

AR 282. Neither letter challenged the factual basis for the denial of benefits, namely, that Plaintiff was “voluntarily taking or was under the influence of any controlled substance” at the time of her injuries. No other information was submitted by Plaintiff or her attorney.

On September 21, 2021, PSE sent Plaintiff a letter acknowledging her additional appeal request but advising her that the review process was completed on April 21, 2021. Represented by new counsel, Plaintiff commenced this action for judicial review of the Plan's decision on August 1, 2022.

LEGAL STANDARD

“A denial of benefits normally is reviewed de novo ‘unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.’ ” Edwards v. Briggs & Stratton Ret. Plan, 639 F.3d 355, 360 (7th Cir. 2011) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). “In such a case, the denial of benefits is reviewed under an ‘arbitrary and capricious’ standard.” Id. (quoting Hess v. Reg-Ellen Mach. Tool Corp. Emp. Stock Ownership Plan, 502 F.3d 725, 727 (7th Cir. 2007)). Here, the parties agree that the Plan vests the plan administrator with discretionary authority and that the arbitrary and capricious standard applies.

“Under the arbitrary and capricious standard, the reviewing court must ensure only that a plan administrator's decision ‘has rational support in the record.’ ” Id. (quoting Semien v. Life Ins. Co. of N. Am., 436 F.3d 805, 812 (7th Cir. 2006)). “Put simply, an administrator's decision will not be overturned unless it is ‘downright unreasonable.’ ” Id. (quoting Davis v. Unum Life Ins. Co. of Am., 444 F.3 569, 576 (7th Cir. 2006)). “However, ‘[r]eview under the deferential arbitrary and capricious standard is not a rubber stamp and deference need not be abject.’ ” Id. (quoting Hackett v. Xerox Corp. Long-Term Disability Income Plan, 315 F.3d 771, 774 (7th Cir. 2003)). The court will nevertheless “uphold the plan's decision ‘as long as (1) it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, (2) the decision is based on a reasonable explanation of relevant plan documents, or (3) the administrator has based its decision on a consideration of the relevant factors that encompass the important aspects of the problem.’ ” Id. (quoting Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461 (7th Cir. 2001) (internal quotation marks omitted)).

ANALYSIS

As an initial matter, PSE asserts that it is not a proper defendant in this case. Hogan agrees that the Plan is the only appropriate defendant and does not oppose PSE's dismissal as a defendant. Dkt. No. 25-1 at 5. Accordingly, PSE is dismissed as a defendant to the action.

As for her claim for benefits, Plaintiff argues that the Plan abused its discretion by denying her medical coverage under the Plan's illegal drugs or medications exclusion. Dkt. No. 22 at 15. She contends that the Plan did not adequately develop evidence in the administrative record to support its conclusion that she was under the influence of cocaine at the time she sustained her injuries. Id. at 7–8. Plaintiff challenges the Plan's reliance on the results of the toxicology screen performed at the hospital upon her admission to support its determination that she tested positive for cocaine. Id. at 4. She contends that the toxicology report does not actually support the Plan's determination because she tested positive for a cocaine metabolite. Id. A cocaine metabolite, Plaintiff argues, only shows that she had cocaine in her system at some point prior to the toxicology screen being conducted and is not evidence that she was under the influence of a controlled substance at the time of the accident, which is what the Plan's exemption requires. Id. at 6–8. Plaintiff also argues that the Plan improperly relied upon an internist, rather than a toxicologist, to review the results of the toxicology report. Id. at 9. She maintains that a physician board certified in internal medicine is not qualified to interpret the toxicology report and merely “rubber stamped” the Plan's denial of benefits. Id. at 14–15.

What Plaintiff seems to ignore is that judicial review is limited to the administrative record. See Perlman v. Swiss Bank Corp. Comprehensive Disability Prot. Plan, 195 F.3d 975, 981–82 (7th Cir. 1999) (“Deferential review of an administrative decision means review on the administrative record.”). The administrative record in this case reveals no dispute as to the dispositive issue: Were the services, supplies, care, or treatment for injury incurred while Plaintiff was voluntarily taking or under the influence of a controlled substance? The hospital records, while perhaps not conclusive on the issue, are strongly suggestive. Plaintiff appeared intoxicated and tested positive for cocaine metabolite. AR 118–19, 131. Her treating physician and nurse practitioner indicated that Plaintiff was “intoxicated with both ethanol and cocaine on admission.” AR 154, 162–63. Hospital staff were instructed to “monitor [her] for withdrawal.” AR 125. And before she was discharged, physicians reviewed the results of her drug test with her and recommended she consult with a social worker. AR 154.

Perhaps more importantly, when PSE issued its letter denying coverage on the ground that the medical services provided by Aurora were excluded under the “Illegal Drugs or Medications” exclusion of the Plan, neither Plaintiff, nor her representatives, ever denied she was under the influence of cocaine at the time of the accident. In its initial letter denying coverage, PSE instructed Plaintiff that her letter requesting an appeal must “include ALL necessary or any additional information you would like considered.” AR 181. At that point, if Plaintiff sincerely believed the exclusion did not apply, one would have expected at least a statement from Plaintiff that she was not under the influence of cocaine at the time of the accident and some explanation of why her hospital records indicated otherwise. PSE was presented with nothing of the kind. Plaintiff's father wanted to know who told PSE that cocaine was in her system after he had been assured by hospital staff it would not be disclosed. AR 108. Plaintiff's first lawyer simply argued that Plaintiff disagreed with the application of the exclusion because “she was not the driver or operator of the vehicle at the time of the crash,” AR 282, a fact irrelevant to the application of the exclusion by its plain terms. And Plaintiff, in her own appeal request, noted she was not the driver and needed the health insurance coverage to place her on the path to recovery. AR 283. Given this record and considering also the opinion provided by Dr. Ilnickij based on her separate review of the medical record, the decision to deny coverage under the “Illegal Drugs or Medications” exclusion was reasonable.

Plaintiff's argument to the contrary is based entirely on information and arguments that are not a part of the administrative record and were never presented to PSE or the Plan before the commencement of this action for judicial review. Plaintiff's argument also relies on a series of criminal cases which carry a much higher burden of proof and in which the issue arose under different circumstances and other contexts. See, e.g., State v. Hubbard, 2008 WI 92, 313 Wis. 2d 1, 752 N.W.2d 839 (defendant convicted of operating a vehicle under the influence of a prescription drug challenging jury instruction defining “materially impaired”); State v. McAdory, 2021 WI App 89, 400 Wis. 2d 215, 968 N.W.2d 770 (challenge to sufficiency of the evidence to support conviction for operating motor vehicle while impaired by drugs). Based on McAdory, in particular, Plaintiff suggests that the Plan had a duty to hire a toxicologist to further explain the laboratory results and rule out any possibility that by the time of the accident whatever cocaine she ingested was no longer affecting her. But in the face of the hospital records stating that Plaintiff was under the influence of cocaine and alcohol at the time of her admission and absent any dispute by Plaintiff, there was no reason to inquire further. See Capone v. Aetna Life Ins. Co., 592 F.3d 1189, 1200 (11th Cir. 2010) (ERISA fiduciary was entitled to rely upon toxicology tests and accuracy of screening equipment to conclude that claimant was under the influence of alcohol where he presented no evidence beyond unsubstantiated assertion of improper calibration); Tran v. United of Omaha Life Ins. Co., 780 F. Supp. 2d 965, 974 (D. Neb. 2011) (where participant provides Plan with no evidence that contradicts report and there is nothing in report which suggests that proper procedures were not followed, no additional investigation is required by Plan).

Plaintiff primarily relies on the Sixth Circuit's unpublished decision in Loan v. Prudential Insurance Co. of America, 370 F. App'x 592 (6th Cir. 2010). There, the plaintiff's husband died after falling down two flights of stairs in his home and drinking three glasses of wine. Id. at 593. The plaintiff submitted a claim under the husband's group accidental death insurance policy issued through his employer. The policy excluded coverage for any loss that resulted from “being legally intoxicated or under the influence of any narcotic unless administered or consumed on advice of a Doctor ․” Id. Following the fall, Loan was transported to the University of Kentucky Chandler Medical Center where his toxicology report revealed that his blood alcohol level was 0.146. Because his blood alcohol level was above the legal limit for driving, Prudential determined that Loan had been “legally intoxicated” at the time of the accident and denied the plaintiff benefits. Id. The district court affirmed the denial of benefits, but the Sixth Circuit reversed, finding that it was unreasonable for Prudential to rely on the toxicology report alone to determine that Loan was legally intoxicated. Id. at 597. The court explained that “Prudential's only independent evidence of Mr. Loan's intoxication was the toxicology report produced after he was transported to the hospital.” Id. at 596. It noted that the plaintiff had contested the reliability of toxicology reports generally as well as the methods and circumstances surrounding Loan's specific blood draw. Id. The court concluded that, “[w]ithout the benefit of a toxicology expert's analysis, it is difficult to determine whether the report in question was reliable.” Id. at 597.

Loan is distinguishable from this case on at least two grounds. First, and most obvious, the plaintiff in Loan challenged the plan's denial and offered alternative explanations for the blood alcohol content (BAC) level in the toxicology report during the administrative appeal. The plaintiff cited expert treatises detailing the unreliable nature of moving from an estimated BAC to an assessment of the degree of intoxication. She also pointed to a variety of other factors that can affect BAC over time. The plaintiff pointed to problems with the specific toxicology report at issue and noted that factors unique to the decedent could also affect the result. Id. at 596–97. Here, by contrast, and as noted above, Plaintiff did not challenge the determination that she was under the influence of cocaine and the time of the accident during the administrative appeal and offered no evidence or argument suggesting otherwise. It was only after seeking judicial review in this court that Plaintiff actually offered any argument challenging the denial of coverage.

The cases are also distinguishable because the Plan language in this case was significantly different than the language of the plan at issue in Loan. In Loan, the plan provided that the loss was not covered “if it results from ․ being legally intoxicated or under the influence of any narcotics unless administered or consumed on the advice of a Doctor.” Id. at 593. The Plan in this case, to repeat, excluded coverage for medical care for injuries incurred “while the Participant was voluntarily taking or was under the influence of any controlled substance ․” AR 63. In other words, unlike Loan, the exclusion in this case applied if Plaintiff was under the influence of a controlled substance, regardless of whether the injuries resulted from or were caused by her use of a controlled substance. Given these differences, Loan is inapposite.

The court's task is “not to determine if the administrator's decision is correct, but only if it is reasonable.” Davis, 444 F.3d at 577. The Plan's decision that Plaintiff was under the influence of cocaine at the time of the crash is supported by the record evidence. For these reasons, the Court concludes that the Plan did not act arbitrarily and capriciously in denying Plaintiff's claim for medical coverage. Accordingly, the decision of the Plan is affirmed, and the case dismissed. The Clerk is directed to enter judgment accordingly.

SO ORDERED at Green Bay, Wisconsin this 21st day of April, 2023.

William C. Griesbach United States District Judge