In Wrenn v. Principal Life Insurance Company, No. 09-3658 (8th Cir. 2011), the plaintiff filed suit under ERISA against defendants, Principal Life Insurance Company and Principal Financial Group, Inc. (collectively “Principal”), for the failure to pay certain medical benefits. The district court upheld Principal’s decision to not pay the benefits, and the plaintiff appealed.
In this case, the plaintiff’s child had been hospitalized for malnutrition. The child was covered under a group health insurance policy, which was subject to ERISA (the “Policy”). Principal was both the insurer and the claims administrator for the Policy. The Policy limited the benefits available for “Mental Health, Behavioral, Alcohol or Drug Abuse Treatment Services” to not more than 10 days per year. Further, it provided that, in the event the covered individual receives treatment for more than one condition, benefits will be paid based on the “primary focus” of the treatment, as determined by Principal. Looking at these provisions, Principal determined that the “primary focus” of the plaintiff’s child’s hospitalization was mental health treatment, and therefore paid benefits for only 10 days of hospitalization for each of 2006 and 2007. Hospital charges totaling $44,260.63 remained unpaid. Was Principal correct in applying the 10 day limit?
The Court determined that, even applying a deferential review, Principal was not correct in applying this limit. The test, under a deferential review, is whether Principal’s application is supported by substantial evidence. Thus, in order for Principal to reasonably deny payment of the hospital charges, substantial evidence had to support its determination that the primary focus of the hospitalization was mental health treatment, i.e., treatment designed to alter the child’s behavior. The record contained evidence that the child’s malnutrition, a physical condition, was the reason for her admission to the hospital, and that the treatment and concern about her by the doctors centered on her physical health. The record contained no evidence that the hospitalization, or the discharge therefrom, was related to the child’s mental health.
Accordingly, the Court concluded there was not enough evidence to support the determination that the primary focus of the hospitalization was mental health treatment. As such, the 10 day limit did not apply. The Court reversed Principal’s and the district court’s decision, and remanded the case with directions to enter judgment in the plaintiff’s favor.