In Shelby County Health Care Corporation v. The Majestic Star Casino, LLC Group Health Benefit Plan, Nos. 08-6078 and 08-6419 (6th Cir. 2009), the plaintiff, Shelby County Health Care Corporation (“Med”), filed suit under ERISA to challenge the decision of Majestic Star Casino, LLC (“Majestic”), the plan administrator of defendant The Majestic Star Casino, LLC Group Health Benefit Plan (the “Plan”), to deny Med’s claim for benefits. The Plan gave Majestic, as plan administrator, the sole responsibility for reviewing claims for benefits, and the discretionary authority to determine whether the benefits should be paid. Med had filed the suit pursuant to an assignment of benefits.The District Court ruled against Majestic, determining that Majestic erroneously denied benefits, and awarded the benefits to Med. Majestic appealed that ruling to the Sixth Circuit Court of Appeals.
In the case, Damon Weatherspoon, an employee of Majestic’s subsidiary, was injured in a one-car accident. Weatherspoon was driving without a license or any car insurance. After the accident, Weatherspoon received treatment for his injuries, accumulating medical bills totaling over $400,000. Weatherspoon, a participant in the Plan, assigned his insurance benefits from the Plan to Med, authorizing Med to seek and recover all health insurance and hospitalization benefits available to Weatherspoon under the Plan. Benefit Administrative Systems, Ltd.(“BAS”) was the Plan’s third party administrator. BAS had been hired solely to process claims and had no discretionary authority under the Plan with respect to benefit claims. BAS reviewed and investigated the case. It determined that the benefits should not be paid, on the grounds that driving without a license or car insurance was an illegal act. Majestic, as plan administrator, adopted this decision, without making its own review or investigation, and the benefits were not paid.
In reviewing the District Court’s ruling, the Court said that a denial of benefits by a plan administrator is to be reviewed under a de novo standard, unless the plan document gives the plan administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Nonetheless, when the decision to deny benefits is in fact made by a body, other than the one authorized by the plan to make such decisions, the courts review the decision de novo. Here, the District Court determined that, although the Plan gave Majestic the sole responsibility for reviewing benefit claims, Majestic was almost totally uninvolved in the decision to deny the benefits. It merely adopted the decision of BAS, a third party with no fiduciary authority, and did not engage in any independent fact-finding or analysis. Therefore, a de novo review is required. Using a de novo review, the Court found that the plan administrator’s decision-an adoption of BAS’s decision- to deny the benefits was erroneous, due to the lack of evidence that Weatherspoon’s failure to have a license or car insurance contributed to the accident. Therefore, the Court affirmed the District Court’s ruling that the benefits be paid to Med.