Reinert v. Giorgio Foods, Inc.

• Citation: 15 F.Supp.2d 589
• Decision Date: 18 May 1998
• Docket Number: No. Civ.A. 97-CV-2379.,Civ.A. 97-CV-2379.
• Parties: Russ A. REINERT and Barbara A. Reinert, Plaintiffs, v. GIORGIO FOODS, INC., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

Page 589

15 F.Supp.2d 589

Russ A. REINERT and Barbara A. Reinert, Plaintiffs, v. GIORGIO FOODS, INC., Defendant.

No. Civ.A. 97-CV-2379.

United States District Court, E.D. Pennsylvania.

May 18, 1998.

Order Awarding Damages, July 10, 1998.

John J. Speicher, Joan E. London, Reading, PA, for Plaintiffs.

Leonard Sarner, Philadelphia, PA, for Defendant.

OPINION AND ORDER

VAN ANTWERPEN, District Judge.

I. INTRODUCTION

The Plaintiffs allege that the Defendant Giorgio Foods, Inc. (the "Defendant") improperly denied Barbara Reinert benefits which were payable under the Giorgio Foods, Inc. Health and Welfare Plan (the "Plan"), in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. The Plaintiffs are seeking the amount of benefits allegedly owing, attorney's fees and costs, and an order directing the Defendant to pay Ms. Reinert's future medical expenses. Jurisdiction is appropriate under 28 U.S.C. §§ 1331, 1367 and 29 U.S.C. § 1132(e)(1).

The parties have filed cross-motions for summary judgment. The Defendant's Motion argues that the medical benefits at issue were properly denied because of an exclusion under the terms of the Plan for pre-existing conditions. The Plaintiffs' Motion argues that the Defendant's denial of benefits was arbitrary and capricious and erroneous as a matter of law. The Plaintiffs also argue that they relied upon the initial approval of their claims by the Defendant's agent to their detriment.

II. BACKGROUND

Although both parties maintain that there are no disputed issues of material fact in this case, we note that this "does not establish that a trial is unnecessary, thereby empowering the court to enter judgment as it sees fit." 10A C. Wright and A. Miller and M. Kane Federal Practice and Procedure, § 2720 (1983). Nevertheless, the parties agree on enough material facts to enable this court to render a decision on both parties' summary judgment motions.

A. The Plan

The Plan was established on May 23, 1991. Defendant's Exhibit 1 § 1.2. The Defendant appointed the Loomis Company ("Loomis") to serve as the Plan Benefit Services Manager. Defendant's Exhibit 2.

The Plan contains a pre-existing conditions clause which states, "No benefits are payable for expenses due to any Injury or Illness which first manifested itself prior to the effective date of coverage under the plan with respect to the Employee or Dependent." Defendant's Exhibit 3 at 21.

The Plan also provides for a Cost Containment Program, assigning precertification functions associated with the plan to Medicus Resource Management, Inc. ("Medicus").

Giorgio Foods, Inc. contracts with MEDICUS Resource Management, Inc. to assist you in determining whether or not proposed services are appropriate for reimbursement under the Plan. The program is not intended to diagnose or treat medical conditions, guarantee benefits, or validate eligibility. The medical professionals who conduct the program focus their review on the appropriateness of hospital stays and proposed surgical and ambulatory procedures.

Id. at 6.

In addition, the Plan provides for precertification as follows:

If a physician recommends hospitalization for any covered employee or dependent Giorgio Foods, Inc. Health and Welfare Plan provides a pre-admission review program through MEDICUS Resource Management, Inc. This program must be utilized for maximum benefits to be paid under the terms of the Health and Welfare Plan.

Id. at 7.

B. Ms. Reinert's Medical History

Ms. Reinert's diabetes first manifested itself in 1988. Reinerts' Answers to Defendant Giorgio Foods, Inc.'s First Set of Interrogatories to Plaintiff Barbara Reinert at 4. In February of 1994, she began taking insulin to treat her diabetes. Defendant's Exhibit 4.

On August 12, 1994, Ms. Reinert underwent surgery on her right foot. Defendant's Exhibit 8. The surgeon diagnosed osteomyelitis fifth toe, right foot, and diabetic ulcer, great toe, right foot. Ms. Reinert's fifth toe was amputated at that time. Defendant's Exhibit 9.

On November 29, 1994, Ms. Reinert was diagnosed as suffering from cellulitis and an abscess on her left foot. Defendant's Exhibit 5 at 5. On December 14, 1994, she entered the hospital for treatment of diabetic ulcers, cellulitis, and insulin dependent diabetes mellitus on her left foot. Defendant's Exhibit 11.

In March of 1995, hospital records indicate that Ms. Reinert was suffering from Charcot joint disease. Defendant's Exhibit 15. Also in early 1995, Ms. Reinert began to receive disability benefits from the Social Security Administration and to wear special footwear related to her condition. Defendant's Exhibits 4 at 56 and 6.

C. The Disputed Procedures

Ms. Reinert became eligible for coverage under the Plan on July 27, 1995. Defendant's Exhibit 4 at 15. The Plaintiffs seek payment from the Plan for costs associated with diagnosis and treatment of foot problems which began on March 18, 1996. Complaint at 2. This treatment included hospitalizations and surgeries on April 9 and 17, and July 13 and 19, 1996. Defendant's Exhibit 15, ¶¶ 12, 16.

On March 18, 1996, Ms. Reinert was diagnosed with an acute onset of a diabetic ulceration on her left foot. The ulceration was the product of an acute osteomyelitis of the cuboid bone of her left foot. Defendant's Exhibit 24.

On April 9, 1996, Ms. Reinert underwent surgery on her left foot to treat the ulceration, at which time a portion of her cuboid bone was resected. On April 17, 1996, Ms. Reinert was admitted to the hospital for an allergic reaction to a medication she had been given. The ulceration and infection treated at his time eventually healed completely. Defendant's Exhibit 26.

In July of 1996, Ms. Reinert again required surgery to treat a new ulceration caused by an insulin needle which had become lodged in her foot. At this time, her second left toe was amputated, the foreign object was removed, and the ulceration was treated. Defendant's Exhibits 24, 27.

D. The Review Process

Loomis assigned a medical claims analyst to the Plan. Defendant's Exhibit 17 at 6. Ms. Reinert received precertification approval from Medicus for several of the disputed claims. Defendant's Exhibit 21. Loomis paid all of the disputed claims until August 1996, at which point a claim was submitted in an amount which warranted an internal audit under Loomis's guidelines. Defendant's Exhibit 17 at 44. This internal audit revealed Ms. Reinert's history of diabetic foot ulcers, id. at 32-33, and Loomis subsequently requested and received Ms. Reinert's medical records from Fleetwood Medical Associates. Defendant's Exhibits 18, 19. On or about September 8, 1996, Loomis's medical claims analyst wrote to the medical providers involved in the disputed procedures and requested a refund for charges already paid. Defendant's Exhibit 21.

In September of 1996 Loomis also sent two letters to Mr. Reinert, stating, "Regretfully, we must inform you that no benefits are payable for these or any related charges due to the pre-existing condition provision in your Group Health Plan." Defendant's Exhibit 23. In October of 1996, Ms. Reinert's counsel wrote Loomis, seeking an immediate re-examination of the decision to deny benefits. Defendant's Exhibit 20.

As a result of this letter, Gerald F. Blaum, Jr., Vice President of the Loomis Company, reviewed the claim file. Mr. Blaum reviewed all relevant documents and consulted Dr. C. Harold Cohn, a thoracic surgeon, about the matter. After reviewing the case, Dr. Cohn concluded that Loomis's denial of benefits was proper. Mr. Blaum maintained the denial of the claim on behalf of the Plan, because of Ms. Reinert's history of diabetes mellitus, osteomyelitis, Charcot foot changes, and diabetic ulcers. Defendant's Exhibit 21 ¶¶ 1-8. On December 17, 1996, Mr. Blaum advised Ms. Reinert's attorney that Loomis's denial based upon the Pre-Existing Conditions Limitations clause in the Plan was proper. Defendant's Exhibit 22. Shortly thereafter the Plaintiffs' attorney filed suit to recover the disputed charges.

III. DISCUSSION

Under section 1132(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), a plaintiff may sue any party acting in a fiduciary capacity for appropriate equitable relief for breach of a fiduciary duty. Varity Corp. v. Howe, 516 U.S. 489, 116 S.Ct. 1065, 1076, 134 L.Ed.2d 130 (1996). Improper denial of benefits would obviously constitute just such a breach. When ERISA plan administrators have discretionary authority to determine benefit eligibility, the decision to deny benefits "will be overturned when arbitrary and capricious, not supported by substantial evidence, or erroneous on a question of law." Arber v. Equitable Beneficial Life Ins. Co., 848 F.Supp. 1204, 1211 (E.D.Pa.1994).

The Plaintiffs have made three general arguments which, they allege, support an award of summary judgment in their favor. First, they argue that the foot ulcerations were not pre-existing conditions, and that the Defendant's denial of benefits was erroneous as a matter of law. Second, the Plaintiffs argue that the manner in which the decision to deny benefits was reached and subsequently reviewed was arbitrary and capricious. Third, the Plaintiffs allege that they reasonably relied upon Medicus' initial approval of the treatment at issue to their detriment. The Plaintiffs also argue that they should be awarded attorney's fees if they should prevail on their Motion. The Defendant's Motion for Summary Judgment argues that the foot ulcerations were pre-existing conditions, and that the interpretation and application of the Plan was neither erroneous on a matter of law nor arbitrary and capricious.

We will first outline the standard which we will apply to the parties' cross-motions for summary judgment. Second, we will address the issue of whether the disputed procedures treated pre-existing conditions in order to determine whether the Defendant's conduct was erroneous on a question of law. T...