Arber v. Equitable Beneficial Life Ins. Co.

• Citation: 848 F. Supp. 1204
• Decision Date: 04 April 1994
• Docket Number: Civ. A. No. 93-CV-6458.
• Parties: David J. ARBER, Sr. and Carol A. Arber and Omni Finishing Systems, Inc. v. EQUITABLE BENEFICIAL LIFE INSURANCE COMPANY.
• Court: United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)

848 F. Supp. 1204

David J. ARBER, Sr. and Carol A. Arber and Omni Finishing Systems, Inc. v. EQUITABLE BENEFICIAL LIFE INSURANCE COMPANY.

Civ. A. No. 93-CV-6458.

United States District Court, E.D. Pennsylvania.

April 4, 1994.

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Frederick C. Horn, F. Craig La Rocca, Pearlstine/Salkin Associates P.A., Lansdale, PA, for plaintiffs.

Richard J. Sestak, Kittredge, Donley, Elson, Fullem & Embick, Philadelphia, PA, for defendant.

MEMORANDUM AND ORDER

JOYNER, District Judge.

Defendant, Equitable Beneficial Life Insurance Company has filed a motion to dismiss the Plaintiffs' complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. That motion will be granted in part for the reasons set forth below.

I. STATEMENT OF RELEVANT FACTS

This case, which was instituted under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., originated on or about May 7, 1993 when the defendant insurer denied a claim for medical benefits submitted by plaintiff Carol A. Arber and rescinded in its entirety the policy of group medical insurance which it had issued to the plaintiff employer, Omni Finishing Systems.

According to the allegations set forth in the Plaintiff's complaint, in the Spring of 1992, Omni Finishing Systems contacted Carpitella and Cassel Associates, a corporation which is engaged in the business of selling group insurance benefits, for the purpose of obtaining group medical insurance for its employees. Carpitella Associates, acting as the Defendant's authorized agent, recommended that Omni obtain group insurance from the Equitable Beneficial Life Insurance Company and in furtherance of that advice, accepted a Group Enrollment Form from Mr. and Mrs. Arber on Equitable's behalf. That form, among other things, requested information on the health and physical condition of the applicant employee and any covered dependents and included a release/authorization permitting the company to obtain information about the applicants from any hospital, doctor, licensed medical practitioner, clinic, etc. for use by the defendant company in determining eligibility for insurance benefits.

From all appearances, David and Carol Arber completed the application and signed the authorization on June 15, 1992, indicating thereon that David Arber suffered from hypertension which was stabilized by certain medications, and that in March, 1992, Carol Arber had suffered a back sprain from which she had completely recovered. Both Mr. and Mrs. Arber indicated that their attending physician was Dr. Paul Ravetz of Warminster, Pennsylvania and, in August, 1992, Equitable requested and received the Plaintiffs' medical records from Dr. Ravetz. Thereafter, effective July 1, 1992, Equitable by and through Carpitella Associates, issued a Certification of Group Insurance to the Plaintiffs reflecting policy No. 7544 00312 000.

On November 30, 1992, Carol Arber was advised by one Jerome Cutler, M.D. that surgery on her back was advisable to relieve what was apparently a chronic lower back pain condition. At or around that same time, Mrs. Arber sought and received pre-certification from the defendant company that her surgical and medical expenses relative to the recommended surgery would be covered under Equitable's plan with her husband's employer, Omni Finishing. In reliance upon the pre-certification of coverage, Carol Arber underwent surgery at Thomas Jefferson University Hospital in February, 1993 at a total cost of $21,543.41. Nevertheless, in response to the Arbers' submission of the back surgery bills to it for payment, Defendant, on May 7, 1993, denied the claim and rescinded the medical insurance coverage for the entire Omni Finishing Systems, Inc. group reciting as its reason therefor "the written submission of false information which materially affected the acceptance of the risk by the Company."

Although Plaintiffs endeavored to appeal Equitable's denial of their claim, the Defendant did not respond and this lawsuit was filed on December 6, 1993.

II. DISCUSSION

A. Legal Principles Governing Rule 12(b)(6) Motions to Dismiss

By way of the now-pending motion, Defendant argues that Plaintiffs' complaint should be dismissed in its entirety for failure to state a claim upon which relief can be granted. In evaluating the merits of such an argument, we look first to the requirements for pleading cases in the district courts prescribed by Fed.R.Civ.P. 8(a). That rule states:

A pleading which sets forth a claim for relief, whether an original claim, counterclaim, cross-claim, or third-party claim, shall contain (1) a short and plain statement of the grounds upon which the court's jurisdiction depends, unless the court already has jurisdiction and the claim needs no new grounds of jurisdiction to support it, (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks. Relief in the alternative or of several different types may be demanded.

Subsections (e) and (f) of Rule 8 further provide, in relevant part:

(e) Pleading to be Concise and Direct; Consistency.

(1) Each averment of a pleading shall be simple, concise, and direct. No technical forms of pleadings or motions are required.

...

(f) Construction of Pleadings.

All pleadings shall be so construed as to do substantial justice.

Thus, it has repeatedly been recognized that under the preceding flexible pleading requirements, a complaint must provide a defendant with fair notice of what the plaintiff's claim is and the grounds upon which it rests. Williams v. New Castle County, 970 F.2d 1260, 1265-1266 (3rd Cir.1992) citing Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957). In ruling upon a motion to dismiss for failure to state a claim upon which relief may be granted, the courts must primarily consider the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case and exhibits attached to the complaint may also be taken into account. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3rd Cir.1990). In considering such a motion, the court must accept as true all allegations in the pleadings and must give the plaintiff the benefit of every favorable inference that can be drawn from those allegations. Schrob v. Catterson, 948 F.2d 1402, 1405 (3rd Cir.1991); Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3rd Cir.1990). A complaint is properly dismissed only if it appears certain that the plaintiff cannot prove any set of facts in support of his claim which would entitle him to relief. Ransom v. Marrazzo, 848 F.2d 398, 401 (3rd Cir.1988).

B. Defendant's Motion to Dismiss Plaintiffs' ERISA Claims

Preliminarily, it should be noted that Defendant advances four arguments in support of its contention that Plaintiffs' ERISA claims set forth in Counts I, III and IV of the complaint and that the claims of the plaintiff employer, Omni, should now be dismissed. In the interests of clarity, each of these arguments is addressed seriatim, in the paragraphs which follow.

1. Legal Sufficiency of Count I to State a Claim under 29 U.S.C. § 1132(a)(1)(B)

Defendant first challenges Count I of Plaintiffs' complaint by asserting that its failure to aver that the denial of the Arbers' claim was arbitrary and capricious renders it fatally defective. We agree.

As delineated in § 2 of ERISA, 29 U.S.C. § 1001(b), it was Congress' intent to, among other things,

"... protect interstate commerce and the interest of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal Courts."

As a result, ERISA comprehensively regulates employee welfare benefit plans that, through the purchase of insurance or otherwise, provide medical, surgical or hospital care, or benefits in the event of sickness, accident, disability or death. Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 44, 107 S.Ct. 1549, 1551, 95 L.Ed.2d 39 (1987); Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1136 (7th Cir.1992). Under 29 U.S.C. § 1132(a)(1),

A civil action may be brought —

(1) by a participant or beneficiary —

(A) for the relief provided for in subsection (c) of this section, or

(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;

Although the Act itself is silent as to the appropriate standard of review for actions brought under § 1132(a)(1)(B), the United States Supreme Court, guided by principles of trust law, resolved the issue once and for all in Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). In ascertaining the entitlement of a group of former Firestone employees to severance benefits and damages, and whether the company's denial of those benefits was proper under § 1132, the Supreme Court looked to the Restatement (Second) of Trusts § 187 (1959) and noted that trust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers. 489 U.S. at 111, 109 S.Ct. at 954. The court then went on to lay down the standard of review to be applied in determining the validity of a claim to benefits under an ERISA plan:

"Consistent with established principles of trust law, we hold that a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary

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