Watkins v. M Class Mining Health Prot. Plan

• Decision Date: 07 May 2020
• Docket Number: 5-18-0377 cons.,NOS. 5-18-0138,S. 5-18-0138
• Citation: 2020 IL App (5th) 180138,439 Ill.Dec. 568,148 N.E.3d 621
• Parties: Jeffery WATKINS and Katelynn Watkins, Plaintiffs-Appellees, v. M CLASS MINING HEALTH PROTECTION PLAN, an Employee Welfare Benefit Plan, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

2020 IL App (5th) 180138

148 N.E.3d 621

439 Ill.Dec. 568

Jeffery WATKINS and Katelynn Watkins, Plaintiffs-Appellees,

v.M CLASS MINING HEALTH PROTECTION PLAN, an Employee Welfare Benefit Plan, Defendant-Appellant.

NOS. 5-18-0138

5-18-0377 cons.

Appellate Court of Illinois, Fifth District.

May 7, 2020

Edna S. Kersting, of Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, of Chicago, for appellant.

David L. Antognoli, of Goldenberg, Heller & Antognoli, P.C., of Edwardsville, for appellees.

JUSTICE CATES delivered the judgment of the court, with opinion.

¶ 1 The plaintiffs, Jeffery Watkins (Jeffery) and his daughter Katelynn Watkins (Katelynn), brought this action pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (2012) (ERISA), challenging the decision of the M Class Mining Health Protection Plan (Plan) to deny coverage for medical expenses Katelynn incurred as a result of a motor vehicle accident. On the parties' cross-motions for summary judgment, the circuit court of Madison County granted judgment in favor of the plaintiffs, finding the claims for the injuries related to the accident were not excluded under the Plan and entered a judgment against the Plan in the amount of $1,202,714.12. For the reasons that follow, we reverse the circuit court's award of $107,214 in attorney fees and remand for reconsideration of the attorney fees award and affirm the circuit court's judgment in all other respects.

¶ 2 BACKGROUND

¶ 3 On February 19, 2016, Katelynn, who was 16 years old, was seriously injured in a single-car automobile accident while she was driving to school. At the time of the accident, Jeffery worked for M Class Mining (Employer) and received healthcare coverage through the Plan, Employer's welfare benefit plan. Katelynn was also a beneficiary and a participant of the Plan.

¶ 4 There was no dispute that the Plan was a self-funded employee welfare benefit plan as defined by ERISA. The Plan was administered in accordance with a Plan document. The Plan document identified the Employer as the Plan administrator and the Plan's only named fiduciary. The Plan document stated that the Plan administrator had retained the services of MCA Administrators, Inc. (MCA), to act as a third-party administrator, which would "provide certain claims processing and other technical services."

¶ 5 Article 8.01 of the Plan document states, in relevant part:

"The Plan Administer shall administer this Plan in accordance with its terms and establish its policies, interpretations, practices, and procedures. It is the express intent of this Plan that the Plan Administrator shall have maximum legal discretionary authority to construe and interpret the terms and provisions of the Plan, to make determinations regarding issues which relate to eligibility for benefits * * *, to decide disputes which may arise relative to a Participant's rights, and to decide questions of Plan interpretation and those of fact relating to the Plan. The decisions of the Plan Administrator as to the facts related to any claim * * * shall receive the maximum deference provided by law and will be final and binding on all interested parties. Benefits under this Plan will be paid only if the Plan Administrator decides, in its discretion, that the Participate is entitled to them."

¶ 6 Article 8.02 of the Plan document provided that the administrator's duties included determining all questions of eligibility, status, and coverage under the Plan; interpreting the Plan, including construing disputed terms; making factual findings; deciding disputes relative to a participant's rights; reviewing claim denials and appeals of denial; appointing and supervising a third-party administrator to pay claims; and delegating such powers, duties, and responsibilities as appropriate.

¶ 7 Article 9.01, titled "Health Claims," states:

"All claims and questions regarding health claims should be directed to the Third Party Administrator. The Plan Administrator shall be ultimately and finally responsible for adjudicating such claims and for providing full and fair review of the decision on such claims in accordance with the following provisions and with ERISA. Benefits under the Plan will be paid only if the Plan Administrator decides in its discretion that the Participant is entitled to them. The responsibility to process claims in accordance with the Plan Document may be delegated to the Third Party Administrator; provided, however, that the Third Party Administrator is not a fiduciary of the Plan and does not have the authority to make decisions involving the use of discretion."

¶ 8 In the event of an adverse benefit determination, the Plan document gives the participant the right to receive (1) notice of the specific reasons for the denial; (2) a description of any additional information necessary for the participant to perfect the claim and an explanation of why such information is necessary; (3) copies of all documents, records, and other information relevant to the participant's claim for benefits; and (4) any rule, guideline, protocol, or similar criterion that was relied upon in making the determination.

¶ 9 Article 9.02A of the Plan document entitled a participant to a full and fair review of an adverse benefit determination. This included "a review that does not afford deference to the previous adverse benefit determination and that is conducted by an appropriate named fiduciary of the Plan, who shall be neither the individual who made the adverse benefit determination that is subject of the appeal, nor the subordinate of such individual."

¶ 10 Following the accident, Katelynn received medical treatment from numerous providers. The plaintiffs and the medical providers made timely claims to the Plan for reimbursement of their medical expenses incurred for treating Katelynn by submitting their claims to MCA.

¶ 11 The administrative record included several e-mail chains between MCA employees.¹ On March 16, 2016, Sharla Hassings, a registered nurse and care manager affiliated with MCA, reported to MCA employee Deborah Immel that Jeffery had informed Hassings that Jeffery did not have automobile insurance at the time of Katelynn's accident. Immel then relayed this information to several MCA employees, including Cathy Dickson, Carol Jeffries, Tina Ezersky, and Maryann Marasco, asking, generally, whether Katelynn's medical expenses would be covered by the Plan. In an undated e-mail, Ezersky, an MCA "Claims Auditor," then forwarded the previously described e-mail chain to Jeffries, stating Katelynn's claims would be denied based on the Plan's illegal act exclusion and directed Jeffries to issue a letter denying Katelynn's medical treatment claims. The illegal act exclusion provides that the Plan would not cover any charge for care, supplies, or services "[t]hat are to treat Injuries sustained or a Sickness contracted while the Participant committed or attempted to commit a felony or misdemeanor, or was engaged in an illegal occupation or activity."

¶ 12 Following this determination, MCA sent letters to several providers denying payment on the claims related to Katelynn's injuries. MCA stated the claims were barred by the illegal act exclusion because "there was no automobile insurance coverage in effect at the time of the accident." These letters were signed by Jeffries, a "Claims Supervisor" for MCA. The denial letters indicated that Jeffery and Employer were also sent copies of the letters.

¶ 13 The record includes another e-mail chain dated March 18, 2016, wherein Marasco asked Jeffries, on behalf of Dickson, if MCA could deny another provider claim related to Katelynn's accident. On that same date, Ezersky made a notation in MCA records that pursuant to a discussion with Dickson, the claim would be denied under the illegal act exclusion. Jeffries then made a notation in MCA records that she sent a denial letter to the provider.

¶ 14 On August 24, 2016, counsel for the plaintiffs sent MCA an appeal of the initial denial of the claims for medical benefits. The plaintiffs asserted that the claims were erroneously denied because (1) Katelynn and the motor vehicle she was operating at the time of the accident were covered by a liability insurance policy in compliance with Illinois law and (2) even if the vehicle was uninsured, Katelynn was not engaged in an illegal activity within the meaning of the illegal act exclusion because the failure to maintain liability insurance was not criminal in nature and had no causal connection with the accident or the injuries Katelynn sustained. The plaintiffs requested that the Plan reverse the denial of the claims; provide the plaintiffs with copies of all documents, records, and other information relevant to the denial of the claims; and produce any rule, guideline, protocol, or similar criterion that was relied upon in making the adverse determination. The plaintiffs attached as an exhibit a Safe Auto Insurance Company (Safe Auto) policy declarations page, purportedly issued on August 2, 2016, indicating Jeffery had liability insurance on two vehicles from November 3, 2015, through May 3, 2016, and that Katelynn was an authorized driver of those vehicles.

¶ 15 The administrative record, however, also includes documents obtained by MCA purporting to be from Safe Auto indicating that Jeffery received an automobile liability insurance policy from Safe Auto beginning on November 3, 2015, but that this policy was cancelled on December 3, 2015, for nonpayment of the premium. It is unclear from the record when these documents were obtained by MCA.

¶ 16 The administrative record shows that MCA received the plaintiffs' appeal on August 25, 2016. On that date, Marasco made a notation in MCA's records that a letter was received from an attorney and, per Dickson, the letter was scanned and sent to "Russ to handle [the] case." On August 29, 2016, Marasco e-mailed Russ Bowman, an attorney, advising him that Dickson wanted Bowman to send a...