ERISA-Sixth Circuit Upholds Grant Of Benefits, But Not Imposition Of Penalties, For Failure To Provide Benefits For Treatment For Alcohol Addiction

In Butler v. United Healthcare of Tennessee, Inc., No. 13-6446 (6th Cir. 2014), the following obtained. More than nine years ago, the plaintiff, Janie Butler (“Janie”), checked into a substance-abuse treatment facility to obtain inpatient rehabilitation for her alcohol addiction. She sought coverage for the treatment through her husband’s employer-issued ERISA plan run by the defendant, United Healthcare of Tennessee, Inc. (“United”). United denied treatment, deeming it medically unnecessary. After seven years’ worth of internal reviews, trips to the district court and remands to the plan for reconsideration, the district court decided that enough was enough. It held that United had acted arbitrarily and capriciously in continuing to deny the requested coverage. And it awarded John Butler (her then-husband and the assignee of Janie’s plan benefits) the cost of the requested benefits plus prejudgment interest and statutory penalties. United objects to the decision to grant benefits and to the order to pay penalties.

Upon reviewing the case, the Court affirmed the grant of benefits, but reversed the penalty award. Why? As to the benefits, the Court said that Janie obviously qualified for rehabilitation benefits under United’s residential-rehabilitation guideline, which grants residential-rehabilitation benefits to insured individuals with a “[h]istory of continued and severe substance abuse despite appropriate motivation and recent treatment in an intensive outpatient . . . program.” The Court concluded that United’s denial of these benefits is a clear abuse of discretion.

As to the penalties, the Court noted that the district court had awarded statutory penalties to John Butler, reasoning that ERISA allows penalties of “up to $100 a day” if the plan “administrator” “fails or refuses to comply with a request for any information” that the statute requires the administrator to provide. See 29 U.S.C. ยง 1132(c)(1)(B). However, since United is not the “administrator” of the plan, that was a mistake. The plan did not name an administrator, so under ERISA the employer is treated as being the “administrator”. Further, John Butler did not allege a violation of section 1132 (the alleged violation being of section 1133), so that the $100/day penalty cannot apply.

Posted in:
Updated:

Comments are closed.