Kunin v. Benefit Trust Life Ins. Co., CV 87-3715-IH.

• Decision Date: 19 September 1988
• Docket Number: No. CV 87-3715-IH.,CV 87-3715-IH.
• Citation: 696 F. Supp. 1342
• Parties: Daniel KUNIN, Plaintiff, v. BENEFIT TRUST LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Central District of California

696 F. Supp. 1342

Daniel KUNIN, Plaintiff, v. BENEFIT TRUST LIFE INSURANCE COMPANY, Defendant.

No. CV 87-3715-IH.

United States District Court, C.D. California.

September 19, 1988.

Gage, Mazursky, Schwartz, Angelo & Kussman by Richard H. Rabkin, Beverly Hills, Cal., for plaintiff.

Booth, Mitchel & Strange by Robert F. Keehn, Los Angeles, Cal., for defendant.

OPINION

IRVING HILL, District Judge.

In this opinion the Court, in an apparent case of first impression, decides that autism is not a "mental illness" within the meaning of an exclusionary clause in a group health and medical insurance policy.

FACTS

Jurisdiction of the Court is invoked under ERISA (29 U.S.C. § 1132). In 1986, plaintiff Daniel Kunin was covered under a group health and medical insurance policy issued to his employer by the defendant Benefit Trust Life Insurance Company. The parties agree that the policy itself is an "employee welfare benefit plan" under 29 U.S.C. § 1002(1). Defendant insurance company is both the writer of the policy and the administrator of the plan.

During 1986 plaintiff's dependent son, Alex Kunin, was hospitalized for about 30 days at the UCLA Neuropsychiatric Institute. Alex was diagnosed there as suffering from "organic brain dysfunction ... and syndrome of autism secondary to the first diagnosis." That diagnosis is not disputed. Both sides characterize the diagnosis as one of autism.¹ The plaintiff incurred bills for this hospitalization and treatment in the amount of $54,696.96 and submitted a claim to the defendant in that amount.

The defendant's policy contains a limitation which limits medical benefits for "mental illness or nervous disorders" to a maximum of $10,000 in any calendar year. Defendant rejected the portion of the claim over $10,000, relying exclusively on the assertion that autism is a "mental illness" within the meaning of the policy.² Pursuant to this position defendant paid only $10,000 of plaintiff's claim and refused to pay the remainder. This action followed.³ Plaintiff invokes the remedy provided for in 29 U.S.C. § 1132(a)(1)(B), and seeks to recover $44,696.96, the unpaid portion of his expenses, plus attorneys fees.

The action was tried as a court trial. This opinion is meant to constitute the Court's findings of fact and conclusions of law as well as a full statement of the Court's reasoning. The case appears to be one of first impression. No prior reported opinion has been cited to the Court, and the Court has found none, which construes an identical policy limitation clause or defines the term "mental illness" in a similar context.⁴

Much of the trial concerned itself with expert testimony as to the definition and description of autism and its etiology. That testimony establishes the facts set forth below.

The syndrome of autism falls within the category of pervasive developmental disorders. The syndrome is defined by its symptoms. The essential features are a lack of responsiveness to other people, gross impairment in communicative skills, and bizarre responses to various aspects of the environment (e.g. resistance to change or peculiar interest in or attachments to certain objects). These symptoms usually appear within the first 30 months of life. In the medical community autism is generally treated by child psychiatrists.

Two definitions of autism appear in publications of the American Psychiatric Association. The shorter, more concise definition is contained in its Psychiatric Glossary (1984). Autism is defined there as follows:

"A developmental disability caused by a physical disorder of the brain appearing during the first three years of life. Symptoms include disturbances in physical, social, and language skills; abnormal responses to sensations; and abnormal ways of relating to people, objects and events." Id. at 11 (italics in original).

A much longer and more involved definition is contained in the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders III (1980). That multi-page definition is largely a description of the symptoms.

The expert testimony established that the two definitions are consistent with each other and are consistent with the Court's description of the illness supra.

Although the precise etiology of autism remains unknown, medical research has produced increasingly strong evidence of a demonstrable organic basis for the syndrome. Specifically, significant physical changes and dysfunctions which accompany autism have been identified within the brain. Experts in the field consider the syndrome of autism to be the behavioral expression of these underlying organic dysfunctions. This current understanding of the syndrome explains the dual diagnosis of Alex Kunin's illness at UCLA — i.e., "organic brain dysfunction" and autism "secondary" thereto. Where the physical cause of a medical condition is known, the behavioral symptoms are viewed as "secondary" to the physical cause.

Research into the causes of autism has also led to the conclusion that the syndrome is not environmentally or psychologically based. There is a consensus among experts that the syndrome of autism is not caused by environmental trauma or childhood relationships with parents or others. It is clear that autism cannot be treated by traditional psychotherapy.

MERITS

The Court, at the threshold, must consider the proper standard of judicial review applicable to the instant case. Under the rules generally applied by appellate courts, a plaintiff seeking reversal of a decision of an ERISA plan administrator concerning entitlement to benefits must bear a substantial burden. Such a plaintiff must establish that the decision to deny benefits was arbitrary and capricious, or made in bad faith, or not supported by substantial evidence, or erroneous as a matter of law. That standard of review has been most recently enunciated by the Ninth Circuit in Johnson v. District 2 Marine Engineers Beneficial Association, 857 F.2d 514 (9th Cir.1988). In the instant case, recognizing that he may have to meet the Johnson standard, plaintiff has asserted alternatively that the administrator's decision as to his claim was arbitrary and capricious and/or made in bad faith.

The Johnson opinion refines somewhat the "arbitrary and capricious" concept. It holds that "a decision is not arbitrary or capricious if it is based on a reasonable interpretation of the plan's terms and was made in good faith". 857 F.2d at 516. That is plaintiff's approach, as well, in this case. Though he has phrased his claim as a claim of arbitrariness and capriciousness, he asserts simply that defendant's interpretation of the policy was not a reasonable one.

It seems to the Court that there are strong public policy considerations in the instant case which would dictate a burden of proof requirement for the plaintiff less rigorous than the Johnson standard. The normal situation is one in which the plan has been formulated by negotiations between labor and management and is administered under a system in which both sides are represented in the administration or in the choice of an administrator. In that type of situation, care is taken to insure that the plan administrator is impartial, objective and has no fiscal stake in any of his interpretations or other actions. Johnson was just such a case. The plan there was jointly administered by a board of trustees composed of multiple employer and union representatives.

There are a few cases which have applied a lesser standard and lesser requirement of proof in situations where the plan administrator is not entirely impartial or objective and may have a vested interest in denying benefits. The Ninth Circuit has held that less deference should be afforded to the decisions of a plan administrator who is also a senior management official of the employer than is given to the decisions of an independent administrator, where the decision involves an outlay of funds by the employer. Dockray v. Phelps Dodge Corp., 801 F.2d 1149, 1152 (9th Cir.1986); Jung v. FMC Corp., 755 F.2d 708, 711-712 (9th Cir.1985.)

It would seem that the Dockray and Jung rationale is also applicable to the instant situation where the administrator, though not a management employee, is the insurer itself. The administrator here faces the same kind of conflict of fiscal interest which motivated the Ninth Circuit in Dockray and Jung to weaken the normal deference rule.

In the instant case not only does the administrator have a profit motive, a benefit to itself, in denying a claim, it is also an insurance company interpreting a standard insurance policy which it wrote and issued in return for a premium. It could be argued with some force that rather than requiring a showing of "arbitrary and capricious" conduct or lack of good faith, reversal of the administrator's decision, in a situation like this, should be allowed under standards akin to those employed in other litigation between an insurer and an insured. Those standards are well known and well established, i.e., any ambiguity or uncertainty in the policy will be construed against the insurer in order to achieve the object of coverage for the losses to which the policy relates. 1 Witkin Summary of California Law, 9th Ed. 632, Contracts § 639. Along the same line, the law is settled that language of coverage in a policy will be construed in the most inclusive sense for the benefit of the insured and language of exclusion will be reciprocally be construed in the most restrictive sense. Reserve Ins. Co. v. Pisciotta, 30 Cal.3d 800, 808, 180 Cal.Rptr. 628, 632, 640 P.2d 764, 768 (1982).

This Court finds it unnecessary, however, to decide whether a different standard of review should be applied under the special circumstances of this case. The Court reaches its result in the instant case, one favorable to the plaintiff, by applying the Johnson standard for ERISA cases.

Turning to the question at bar, one preliminary question...