February 16, 1999
Linda Farina
Senior Director - Employee Benefits
Metromedia Restaurant Group
6500 International Parkway
Plano, Texas 75093
Dear Ms. Farina,
I have received your February 10, 1999 letter.
I must reiterate, for the 18th [documented] time, that the primary issue is First Health's non-compliance with the language of the Plan, and USC 29, "ERISA" when issuing a claim denial.
A secondary issue, but of prime importance, is your failure as the named fiduciary of the Plan, whether through omission or commission, to exercise your discretionary authority to enforce the language of the Plan.ERISA plan administrators do not have unbounded discretion. Under federal law, an ERISA plan
"shall provide to every claimant who is denied a claim for benefits written notice setting forth in a manner calculated to be understood by the claimant:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent plan provisions on which the denial is based;
(3) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary and;
(4) Appropriate information as to the steps to be taken if the participant or beneficiary wishes to submit his or her claim for review."
29 C.F.R. @ 2560.503-1(f).
More formally:
Sec. 1133. Claims procedureIn accordance with regulations of the Secretary, every employee benefit plan shall -
(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and
(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.
Defective notice may remove plan time limits for appeal. I have repeatedly asked a full and fair review by the appropriate named fiduciary of the decision denying the claim. You are that "named fiduciary."Sec. 1104. Fiduciary duties
(a) Prudent man standard of care
(1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and -
(A) for the exclusive purpose of:
(i) providing benefits to participants and their beneficiaries; and
(ii) defraying reasonable expenses of administering the plan;(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;
(Remainder of Section 1104 omitted)
Sec. 1109. Liability for breach of fiduciary duty
(a) Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. A fiduciary may also be removed for a violation of section 1111 of this title.
(b) No fiduciary shall be liable with respect to a breach of fiduciary duty under this subchapter if such breach was committed before he became a fiduciary or after he ceased to be a fiduciary.
Among the duties that ERISA imposes on fiduciaries is a duty to refrain from making materially false or misleading statements to plan participants and beneficiaries. Varity Corp. v. Howe, 134 L.Ed. 2d 130, 116 S. Ct. 1065, 1073 (1996); see also Armstrong v.Jefferson Smurfit Corp., 30 F.3d 11, 12 (1st Cir. 1994) (fiduciary must disclose material facts of which plan participants are unaware but need to know in order to protect their interests in dealing with third parties. ERISA also expressly authorizes beneficiaries to sue to enjoin breaches of fiduciary duty. n1 29 U.S.C.A. @ 1132(a)(3)(West 1985); Varity, 116 S. Ct. at 1075.
ERISA also provides that "a person is a fiduciary with respect to a plan to the extent(i) he exercises any discretionary authority or discretionary control respecting management of such plan, or
(ii) he has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C.A. @1002(21)(A) (West Supp. 1996). The term "control" in this definition has been interpreted as "the power to exercise a controlling influence over the management or policies of a person other than an individual." 29 C.F.R. @ 2510.3-21(e)(2) (1996)." A plan administrator engages in a fiduciary act when making a discretionary determination about whether a claimant is entitled to benefits under the terms of the plan documents "; Libbey-Owens-Ford Co. v. BlueCross and Blue Shield Mut., 982 F.2d 1031, 1035 (6th Cir. 1993)(" When [a company] administers claims for [a plan] and has authority to grant or deny the claims, the company is an ERISA 'fiduciary.")
"A fiduciary owes a duty of loyalty to its beneficiaries which includes the obligation to deal fairly and honestly with plan members." Varity Corp., 116 S. Ct. at 1074-75. This duty not to mislead is derived both from the common law of trusts and ERISA's statutory language. See 29 U.S.C.A. @ 1104(a)(1) (West 1985 & Supp.1996) (requiring plan fiduciaries to "discharge [their] duties with respect to a plan solely in the interest of the participants and beneficiaries . . ."); Armstrong, 30 F.3d at 12. In addition, an ERISA fiduciary's duty of loyalty requires that it disclose material facts that could adversely affect a plan member's interests. Shea v.Esensten, 107 F.3d 625, 1997 WL 78350, at *5 (8th Cir. 1997); see also Eddy v. Colonial Life Ins. Co., 287 U.S. App. D.C. 76, 919 F.2d747, 750 (D.C. Cir. 1990) ("The duty to disclose material information is the core of a fiduciary's responsibility, animating the common law of trusts long before the enactment of ERISA .").
A fiduciary also owes a duty to beneficiaries not to participate, conceal, or knowingly allow breaches of duty made by a co-fiduciary, such as a plan administrator. 29 U.S.C.A. @ 1105(a)(West 1985).
A contract exonerating an ERISA fiduciary from fiduciary responsibilities is void as a matter of law. Second, a fiduciary's contract with an employer cannot get it off the hook with the employees who participate in the ERISA plan. They [the employees and beneficiaries] did not sign a contract exonerating the fiduciary. Third, a contract providing that a party is not a named fiduciary does not mean that it is not an unnamed fiduciary.
If an ERISA fiduciary writes words in an instrument exonerating itself of fiduciary responsibility, the words, even if agreed upon, are generally without effect. ERISA provides that " any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void as against public policy." 29 U.S.C. @ 1110(a). If [First Health] is a fiduciary, as defined in section 1002(21)(A), " any interpretation of the Plan which prevents [First Health] acting in a fiduciary capacity from being found liable as [a] fiduciary is void." Kayes v. Pacific Lumber Co., 51F.3d 1449, 1460 (9th Cir.), cert. denied, 133 L. Ed. 2d 206, 116 S.Ct. 301 (1995). " ERISA defines fiduciary not in terms of formal trusteeship, but in functional terms of control and authority over the plan, thus expanding the universe of persons subject to fiduciary duties - and to damages - under @ 409(a)." Id. at 1459(quoting Mertens v. Hewitt Assocs., 508 U.S. 248, 113 S. Ct. 2063,2071, 124 L. Ed. 2d 161 (1993))
There is a difference under ERISA, between a "named fiduciary," under 29U.S.C. @ 1102(a), and a "fiduciary" under 29 U.S.C. @ 1002(21)(A). Named fiduciaries are a subset of fiduciaries.
Your most recent letter once again attempted to put the onus on me to continue the non-productive paper shuffle so that you could "understand my issues."
From my November 21, 1998 letter to you:"A PWBA consumer information brochure states "Your plan must give you the reason for denial in writing and in a manner you can understand." I have asked for no more than what The Plan and the law requires. Until that is complied with, any actions to date by First Health must be considered inadequate and unresponsive."
That quote still applies. Restated, until First Health conforms to " shall provide to every claimant who is denied a claim for benefits written notice setting forth in a manner calculated to be understood by the claimant: *** (1) The specific reason or reasons for the denial; *** (2) Specific reference to pertinent plan provisions on which the denial is based; *** (3) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and *** (4) Appropriate information as to the steps to be taken if the participant or beneficiary wishes to submit his or her claim for review ", there is no way I can intelligently provide "...any additional material or information necessary for the claimant to perfect the claim." The reviewers to date have chosen to ignore the information already submitted.
The medical and legal documents that I have provided you and First Health so far should be sufficient to confirm that First Health has been deficient in their compliance with the Plan, and in their "medical" decisions.
The onus is on you, as named fiduciary, to:(a) Direct First Health to document the claim denials in the form required by the Plan and ERISA; or
(b) Exercise your discretionary authority as named fiduciary and Plan Administrator, and conduct a full and fair review of the decision denying the claim, and provide the result of that review to me in writing.If any previous material or documentation needs to be reviewed, it may be found at:
Your failure to end the delay tactics and override First Health's egregious claim denials has hindered and blocked my access to appropriate health care. That blockage has resulted in a needless disability, deteriorating prognosis, loss of job, and mental, physical, and economic harm.
Bitterly,
R. James Martin
cc:Todd Watson
