Fallick v. Nationwide Mut. Ins. Co.

• Citation: 957 F.Supp. 1442
• Decision Date: 12 March 1997
• Docket Number: No. C2-95-1273.,C2-95-1273.
• Parties: Arthur FALLICK, Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY and Nationwide Life Insurance Company, Defendants.
• Court: United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio

957 F.Supp. 1442

Arthur FALLICK, Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY and Nationwide Life Insurance Company, Defendants.

No. C2-95-1273.

United States District Court, S.D. Ohio, Eastern Division.

March 12, 1997.

Chattman, Gaines & Stern, Roger W. Van Deusen, Cleveland, OH, Milberg Weiss Bershad Hynes & Lerach, L.L.P., Melyvn I. Weiss, Brad N. Friedman, Aaron W. Tandy, New York City, for Plaintiff Fallick.

Bricker & Eckler, Randolph C. Wiseman, Anne Marie Sferra, Columbus, OH, for Defendant Nationwide.

MEMORANDUM OPINION AND ORDER

GRAHAM, District Judge.

Plaintiff Arthur Fallick is a former employee of defendant Nationwide Mutual Insurance Company, which is a subsidiary of defendant Nationwide Life Insurance Company (both hereinafter occasionally referred to as "Nationwide"). Fallick is a beneficiary of an employee medical benefit plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1001 et seq. Plaintiff alleges that defendants improperly reduce or deny claims for benefits on the grounds that such claims are in excess of what defendants determine to be "reasonable and customary," and that defendants ignore directions on their own preprinted claims forms and misdirect reimbursement claims to providers who have already been paid.

In its order dated September 27, 1996, this Court converted the motion to dismiss for failure to state a claim upon which relief can be granted to a motion for summary judgment on the issue of exhaustion of administrative remedies. The parties were then granted further time in which to submit evidence and briefs on this issue. The parties have done so and this matter is now before the Court on defendants' motion for summary judgment.

I.

Plaintiff has currently pending before this Court a motion to certify this case as a class action. A motion for summary judgment may be decided before the district court determines whether the action is maintainable as a class action. Thompson v. County of Medina, Oh., 29 F.3d 238 (6th Cir.1994); Marx v. Centran Corp., 747 F.2d 1536, 1552 (6th Cir.1984), cert. denied, 471 U.S. 1125, 105 S.Ct. 2656, 86 L.Ed.2d 273 (1985).

Neither Fed.R.Civ.P. 23 nor due process necessarily requires that the district court rule on class certification before granting or denying a motion for summary judgment. Rule 23 clearly favors early determination of the class issue, but where considerations of fairness and economy dictate otherwise, and where the defendant consents to the procedure, it is within the discretion of the district court to decide the motion for summary judgment first.

Wright v. Schock, 742 F.2d 541, 545-546 (9th Cir.1984). In this case, defendants, who have moved for summary judgment, clearly consent to the immediate resolution of the issues raised therein. Furthermore, it is particularly appropriate to resolve the issue of exhaustion of administrative remedies before addressing the issue of class action certification. Therefore, this Court shall proceed to decide the motion for summary judgment.

Under Fed.R.Civ.P. 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See LaPointe v. United Autoworkers Local 600, 8 F.3d 376, 378 (6th Cir.1993); Osborn v. Ashland County Bd. of Alcohol, Drug Addiction and Mental Health Servs., 979 F.2d 1131, 1133 (6th Cir.1992) (per curiam). The party that moves for summary judgment has the burden of showing that there are no genuine issues of material fact in the case at issue, LaPointe, 8 F.3d at 378, which may be accomplished by pointing out to the court that the nonmoving party lacks evidence to support an essential element of its case. Barnhart v. Pickrel, Schaeffer & Ebeling Co., 12 F.3d 1382, 1389 (6th Cir.1993). In response, the nonmoving party must present "significant probative evidence" to demonstrate that "there is [more than] some metaphysical doubt as to the material facts." Moore v. Philip Morris Cos., 8 F.3d 335, 339-40 (6th Cir.1993). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). See generally Booker v. Brown & Williamson Tobacco Co., 879 F.2d 1304, 1310 (6th Cir.1989).

In reviewing a motion for summary judgment, "this Court must determine whether `the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Patton v. Bearden, 8 F.3d 343, 346 (6th Cir.1993) (quoting Anderson, 477 U.S. at 251-53, 106 S.Ct. at 2511-13). The evidence, all facts, and any inferences that may permissibly be drawn from the facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); see Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). However, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson, 477 U.S. at 252, 106 S.Ct. at 2512; see Gregory v. Hunt, 24 F.3d 781, 784 (6th Cir.1994). Finally, a district court considering a motion for summary judgment may not weigh evidence or make credibility determinations. Adams v. Metiva, 31 F.3d 375, 378 (6th Cir.1994).

II.

All ERISA plans are required to provide a claims appeal procedure. 29 U.S.C. § 1133, which governs the claims procedure under ERISA, provides that every employee benefit plan shall "afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim." 29 U.S.C. § 1133(2). While this section does not require the exhaustion of the administrative remedies it requires plans to provide, the Sixth Circuit Court of Appeals has held that "[t]he administrative scheme of ERISA requires a participant to exhaust his or her administrative remedies prior to commencing suit in federal court." Costantino v. TRW, Inc., 13 F.3d 969, 974 (6th Cir.1994) (quoting Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 986 (6th Cir.1991)); see also Mason v. Continental Group, Inc., 763 F.2d 1219, 1226-27 (11th Cir.1985), cert. denied, 474 U.S. 1087, 106 S.Ct. 863, 88 L.Ed.2d 902 (1986); Amato v. Bernard, 618 F.2d 559, 566-67 (9th Cir.1980). However, the exhaustion requirement may be excused if fulfilling that requirement would be futile or the remedy inadequate. Costantino at 974; Amato, 618 F.2d at 568.

As a general matter, the decision whether to apply the exhaustion requirement is a matter of the district court's sound discretion. See Baxter v. C.A. Muer Corp., 941 F.2d 451, 453-54 (6th Cir.1991).

III.

In December 1992, plaintiff took a permanent disability leave from Nationwide Mutual after approximately twenty-three years employment. Plaintiff was and is entitled to health care and other benefits under Nationwide Group Insurance Policy Number 1202200, until January 1, 1994, and thereafter under the Nationwide Insurance Companies and Affiliates Employee Health Care Plan (hereinafter collectively referred to as the "Nationwide Plans"). Nationwide Life had insured the Nationwide Group Insurance Policy from on or before January 1, 1990 to December 31, 1993. Nationwide Life was therefore the fiduciary of that plan as that status is defined by 29 U.S.C. § i002(14)(A) According to the amended complaint, defendant Nationwide Mutual has continually been the "plan sponsor" for the Nationwide Plans as that term is defined under 29 U.S.C. § 1002(16)(B). Since January 1, 1994, Nationwide Mutual has been self-insured, thus qualifying as a fiduciary for the Nationwide Insurance Companies and Affiliates Employee Health Care Plan under 29 U.S.C. § 1002(14)(A).

Defendants have, since 1990, regularly included in their standard group policies a coverage exclusion limiting payment and/or reimbursement to charges which are "reasonable and customary." Any amount of a charge in excess thereof is not covered by the policy and is not applied to the individual's deductible. The "reasonable and customary" exclusion is defined by defendants in the insurance contracts and the employee handbooks as follows:

It means reasonable in terms of service, care, or treatment provided, and customary in that it is equal to the charge usually made by that provider and does not exceed the usual charge made by those in the same geographical area with similar professional standing.

Nationwide Employee Handbook at 1195 (attached as Ex. 5 to Fallick Aff. of July 9, 1996). Plaintiff alleges that defendants refuse to disclose any further information or data relating to how they determine what charges are in excess of "reasonable and customary." Plaintiff claims that defendants' calculations of reasonable and customary charges deviate from their written description of those calculations in three ways.

First, plaintiff asserts that defendants calculate their payments for their group insurance plans based upon a set percentile (e.g. the 85th or 90th percentile) of the entire range of charges for a given procedure in a geographic region. Plaintiff claims that this practice is inconsistent with the "equal to the charge" and "does not exceed the usual charge" language that defendants use in their definition of "reasonable and customary."

Second, plaintiff asserts that defendants routinely fail to calculate the "usual...