ERISA-Tenth Circuit Rules That The Full Cost Of Inpatient Hospital Alcohol Treatment Must Be Paid By The Group Policy, Even Though Employee Handbook Is To The Contrary

In Garrett v. Principal Life Insurance Company, No. 13-6087 (10th Cir. 2014), the defendant, Principal Life Insurance Company (“Principal”), is appealing from the district court’s orders that reversed Principal’s decision to deny plaintiff Patrick Garrett (” Mr. Garrett”) his claim for medical benefits and awarded Mr. Garrett the full amount of his claim.

In this case, Mr. Garrett has been insured since 1998 through a group medical benefits policy (the “Group Policy”) issued to his employer by Principal as part of an employee benefits plan under ERISA. The Group Policy provided coverage for inpatient hospital alcohol abuse treatment. In June 2008, Principal sent the employer a new “Group Booklet-Certificate.” The booklet-certificate purported to exclude inpatient coverage for alcohol abuse treatment, but stated: “Member rights and benefits are determined by the provisions of the Group Policy”. Principal did not issue a new group policy which excluded such inpatient coverage until 6 months after Mr. Garrett filed his claim for medical benefits described below.

Mr. Garrett went to Cliffside Malibu (“Cliffside”) in March 2009 for inpatient alcohol abuse treatment. At the conclusion of Mr. Garrett’s treatment in April, Cliffside submitted a claim to Principal for $65,000. Principal denied the claim and Mr. Garrett filed suit for medical benefits under section 502(a)(1)(B) of ERISA. The question for the Tenth Circuit Court of Appeals (the “Court”): must Principal honor the claim for the medical benefits?

In analyzing the question, the Court noted Principal’s argument that the 2008 booklet-certificate should control what is and is not a covered medical benefit. However, the Court concluded that the Group Policy-which covers inpatient hospital alcohol abuse treatment- governs. First, a summary plan description should not be enforced over the terms of a plan, based on the Supreme Court’s decision in Amara. Second, there is no evidence that the Group Policy was amended. The Court also agreed with the district court that the full amount of the Cliffside bill-$65,000-should be paid by Principal. As such, the Court affirmed the district court’s orders.

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