Newell v. Prudential Ins. Co. of America

• Decision Date: 20 July 1989
• Docket Number: No. 1:87-CV-2391-RHH.,1:87-CV-2391-RHH.
• Citation: 725 F. Supp. 1233
• Parties: Joe Rodger NEWELL, Jr., Plaintiff, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — Northern District of Georgia

725 F. Supp. 1233

Joe Rodger NEWELL, Jr., Plaintiff, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.

No. 1:87-CV-2391-RHH.

United States District Court, N.D. Georgia, Atlanta Division.

February 9, 1989.

Supplemental Opinion July 20, 1989.

James L. Ford, Ford & Haley, Atlanta, Ga., for plaintiff.

Ben Kingree, III, Carter & Ansley, Atlanta, Ga., for defendant.

ORDER

ROBERT H. HALL, District Judge.

Plaintiff brings this action pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., claiming that defendant wrongfully denied benefits allegedly due to him under a group contract of major medical health and accident insurance.

On December 12 and 13, 1988, this case was tried before the court. The narrow issue presented was whether Prudential acted in an arbitrary and capricious manner in denying plaintiff's claims. The court requested the parties to file post-trial briefs summarizing their arguments. In his Post-Trial Memorandum, plaintiff argues:

(1) That Prudential's procedure for determining need for hospital care violates its fiduciary obligations under ERISA as a matter of law. Plaintiff maintains that Prudential, as a fiduciary under ERISA, cannot allow its own employees to determine a plan participant's need for hospital care;

(2) That Prudential arbitrarily and capriciously violated its own procedures for determining need for hospital care;

(3) That Prudential violated ERISA by failing to provide plaintiff with notice of denial of coverage as required by 29 U.S.C. § 1133.

Based on the evidence presented at trial, as well as the parties' briefs filed subsequent to trial, the court makes the following findings of facts and conclusions of law with respect to the ERISA claims.

Along with his Post-Trial Memorandum, plaintiff also filed a Motion for Consideration of Class Certification. On February 1, 1989, plaintiff filed a motion for Leave to Amend the Complaint. For the reasons stated below, the court DENIES plaintiff's Motion for Class Certification and plaintiff's Motion for Leave to Amend the Complaint.

I. Motion for Consideration of Class Certification and Motion for Leave to Amend the Complaint

Following the trial of this action on December 12 and 13, 1988, plaintiff filed a Motion for Consideration of Class Certification and a Motion for Leave to Amend the Complaint.

Northern District of Georgia Civil Rule 300-2 provides:

The plaintiff shall within 90 days after the complaint is filed move for a determination under F.R.Civ.P. 23(c)(1) as to whether the suit may be maintained by class action. The Court may extend the time upon a showing of good cause.

Not only was plaintiff's motion for class certification filed outside the 90 day period, it was filed after the completion of the trial on the merits of plaintiff's action.

Plaintiff argues that "(g)ood cause exists for certification of this issue because the only persons who will suffer if class action status is denied are those beneficiaries who have already suffered detriment by virtue of a Prudential procedure that violates its duty under the law." Plaintiff's Memorandum in Support of its Motion for Class Certification, p. 3. Plaintiff is patently wrong in its statement that defendant will suffer no prejudice if the court grants class certification at this late juncture. Prior to the filing of plaintiff's Motion for Consideration of Class Certification, defendant had no knowledge that plaintiff was considering a class action. Thus, defendant had no opportunity to conduct discovery or prepare for trial of a class action.

In Lusted v. San Antonio Indep. School Dist., 741 F.2d 817 (5th Cir.1984), the court denied plaintiff's Motion for Class Certification which was filed after trial on the merits. The court noted that since there was no indication in the record that the case was tried as a class action and "that all the parties to the action knew of its class nature and acquiesced in it," the post-trial certification of a class would be highly prejudicial. Id. at 821, quoting Bing v. Roadway Express, Inc., 485 F.2d 441, 446 (5th Cir.1973). Similarly, in the case at hand, defendant would be significantly prejudiced were the court to allow certification of the suggested class at this late hour.

Accordingly, the court DENIES plaintiff's Motion for Consideration of Class Certification and DENIES plaintiff's Motion for Leave to Amend the Complaint.

II. Findings of Facts and Conclusions of Law

With respect to plaintiff's individual ERISA claims, the court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

1.

At all relevant times, Joe Rodger Newell, Jr. was an employee of Massey Fair Ingredient Sales, Inc. ("Massey").

2.

At all relevant times, Prudential had issued its Group Policy No. GSP86888M (the "Policy") to Massey. The Policy covered Massey employees, and upon election, the dependents of Massey employees.

3.

At all relevant times, Joe Rodger Newell, III was an insured dependent of his father under the Policy.

4.

The Policy states that "eligible charges" do not include charges for "unnecessary services or supplies." To be considered "needed," a service must meet the following tests:

(a) It is ordered by a Doctor.

(b) It is commonly and customarily recognized through-out the Doctor's profession as appropriate in the treatment of the Sickness or injury.

(c) It is neither educational nor experimental in nature.

(d) It is not furnished mainly for the purpose of medical or other research. Also, in the case of a Hospital stay, the length of the stay and Hospital services and supplies will be considered needed only to the extent Prudential determines them to be:

(a) related to the treatment of the Sickness or Injury; and

(b) not allocable to the scholastic education or vocational training of the patient.

Plaintiff's Ex. 1, p. 6.

5.

The Policy also carries a Pre-Admission and Concurrent Review Service ("PACRS") rider. The rider provides that the general policy includes the tests for determination of need. However, pursuant to the rider, claimants must request that Prudential make a "determination of need." A determination of need is "a determination by Prudential, under the terms of the Coverage, that approves or disapproves a day or days of Inpatient Hospital Stay ... as needed for medical care of a diagnosed Sickness or Injury." Id., p. 45. The determination of need is to be made prior to admission. If Prudential finds "medical necessity" for admission, it will inform the doctor and the hospital, by phone, of the number of days of inpatient hospital stay that Prudential approves. The Policy provides that written notice will be sent to the claimant, the doctor and the hospital, indicating the number or pre-authorized days.

The Policy also provides that it may be possible to extend the number of days of inpatient hospital stay that Prudential approves as needed for the medical care of the patient's condition; upon request being made, Prudential will make a new determination of need upon information received by the doctor.

6.

On December 2, 1986, after approximately two months of out patient care, Joe Newell, III was admitted to the Greenleaf Center Inc. ("Greenleaf") under the care of his attending physician, G. Michael Schmits, M.D. At the time of his admission to Greenleaf, Mr. Newell was sixteen years old and was a high school student in his junior year.

7.

Greenleaf is a JCAH accredited hospital located in Fort Oglethorpe, Georgia. It provides for outpatient and inpatient health care for individuals who have been diagnosed with psychiatric or substance abuse conditions. Greenleaf provides an adolescent health care unit which has facilities for approximately twenty patients. According to Dr. Schmits, these patients are not segregated on a diagnostic basis because of the substantial overlap between psychiatric and substance abuse problems in adolescents. Greenleaf provides a controlled hospital environment for adolescents suffering from alcohol abuse and substance abuse; Greenleaf offers educational and detoxification programs.

8.

Dr. Schmits, who conducted the initial psychiatric evaluation on Joe Newell, III at the time of his admission, listed dual diagnoses of major depression and recurrent substance abuse. Neither of these diagnoses was intended as a primary diagnosis; rather, Dr. Schmits felt the two diagnoses were inextricably interwoven.

9.

Upon Joe Newell, III's admission to Greenleaf, Cindy Sedman, the Admissions and Discharge Coordinator of Greenleaf contacted Prudential to inquire about coverage under the Policy. At that time, Ms. Sedman spoke with Ms. Deaton at Prudential. Ms. Sedman learned that Joe Newell, III had insurance coverage but that a determination of need for inpatient hospital stay was required (pursuant to the PACRS provision).

10.

After speaking with Ms. Deaton, Ms. Sedman was under the impression that the Policy had a 60 day, $20,000 limit for both alcohol and substance abuse. The Policy actually had unlimited benefits for alcohol or substance abuse but had a 30 day and $20,000 limit on benefits for depression. On January 13, 1987, Ms. Sedman spoke with Prudential agent Lori Daniels. Following this conversation, Ms. Sedman was under the impression that the Policy provided unlimited benefits for both alcohol/substance abuse and depression.

11.

On December 4, 1986, Prudential's PACRS, in Parsippany, New Jersey, sent a form letter to Dr. Schmits which confirmed that it had been notified of Joe Newell, III's admission to Greenleaf. The letter also requested that a copy of the admission note and an estimated length of stay be sent to PACRS in five working days of that letter so that PACRS could make a determination of need. These documents were sent to PACRS.

12.

On December 9, 1986, PACRS advised Ms. Sedman that a seven day hospital stay had been approved for Joe Newell, III.

13.

On December 17, 1986, PACRS...