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Killian v. Concert Health Plan, No. 11-1112 (7th Cir. Nov. 7, 2013) (en banc)

Seven years into litigation, plaintiff James Killian is a little closer to achieving justice for his late wife. After litigating an ERISA case unsuccessfully before two federal district court judges and a Seventh Circuit panel, the full Seventh Circuit today holds that Mr. Killian may pursue a claim for himself and his spouse's estate against her health care plan. He alleges that the plan misled them about whether Ms. Killian's end-stage care was within network, in breach of the duty of prudence under 29 U.S.C. § 1104(a)(1)(B). The court affirms that the ERISA duty of prudence requires complete disclosure by the plan administrator, "even if that requires conveying information about which the beneficiary did not specifically inquire."

Killian v. Concert Health Plan, No. 11-1112 (7th Cir. Nov. 7, 2013) (en banc): Mr. Killian was reacting to a family medical emergency in early 2006 when his spouse - complaining of a prolonged cold and headaches - discovered that she had cancer throughout her body, including her lungs and brain. Mr. Killian's family sought a second medical opinion under pressurized circumstances: they were informed that Mrs. Killian had possibly just days to live without surgery.

He alleges that he made two phone calls on April 7, 2006, to two different numbers in short order, taken from contact numbers listed on the front of his spouse's Concert Health insurance card:

"He first called the 'provider participation' number listed on the front of Mrs. Killian's insurance card. Mr. Killian informed the Concert representative that he and Mrs. Killian were at St. Luke's Hospital for a second opinion, that the physicians had determined that the tumor had to be removed and that the physicians wanted Mrs. Killian to be admitted for brain surgery. The representative searched her database and could not find any information on 'St. Luke's,' but told Mr. Killian to 'go ahead with whatever had to be done.'"

                                      *   *   *   *

"Mr. Killian called back later the same day, April 7, but this time he called the number listed under the prominent 'Customer Service' heading on the front of Mrs. Killian's insurance card, which is the same number under the heading 'Utilization review' on the front and back of the card and is also listed as the number for medical claims. The representative who took the second call seemed to be aware of Mr. Killian's earlier call and confusion about the name of the hospital because when he mentioned Rush she said, perhaps in jest, 'Oh, you mean St. Luke's.' He could hear her laugh and tell a colleague, 'It's the guy from St. Luke's.' When Mr. Killian told the representative, 'I'm trying to get confirmation that we are going to be-my wife is going to be admitted to Rush,' the representative said, 'Okay.' She did not tell Mr. Killian whether services at Rush were in or out of network or whether There would be any limits to coverage." [Foot notes omitted.]

Despite Ms. Killian's hospital treatment, she died shortly Thereafter. Mr. Killian then learned that her treatment was supposedly not covered because the hospital was out-of-network, leaving the family holding a bill of some $80,000.

Eventually, Mr. Killian sued Concert Health for benefits under the plan terms, statutory damages (for failing to timely produce copies of the plan documents), and breach of fiduciary duty (for failing to advise him that his family was going out-of-network). In the district court and before the Seventh Circuit panel, Mr. Killian lost the benefits and fiduciary-duty claims, though - in a small consolation - prevailed on the statutory damages claim (valued in the single thousands of dollars).

Today, en banc, the court (9-3) reversed summary judgment on the fiduciary duty claim. After resolving the issue of whether the claim became moot (after the spouse's estate closed - though the plaintiff later re-opened it, to pursue the claim), the majority takes up the core issue of whether a plan must make affirmative efforts to disclose negative coverage information.

The court holds - citing Kenseth v. Dean Health Plan, Inc., 610 F.3d 452 (7th Cir. 2010) - that the plan administrator's actions in this context may have fallen short of its ERISA duty of prudence:

"Taking these facts in the light most favorable to Mr. Killian for purposes of summary judgment, a reasonable trier of fact could conclude: (1) that Mr. Killian was concerned about whether the providers were in network; (2) that Mr. Killian called the number that Mrs. Killian's insurance card said should be used to determine provider participation to resolve this question; (3) that the representative knew that Mr. Killian was seeking this information; (4) that the representative told Mr. Killian to 'go ahead with whatever had to be done,' even though she knew that she had not been able to establish the provider's network status; and (5) that Mr. Killian left that telephone call believing that Mrs. Killian could 'go ahead with whatever had to be done' because he had followed the instructions on Mrs. Killian's insurance card, was told to do so and received no warning that the 'go ahead' was not to be understood as an authorization. Mr. Killian's testimony is susceptible to the interpretation that, during the stress of the moment, he believed that he could rely on the representative's instruction to 'go ahead.' Mr. Killian 'should not be penalized because he failed to comprehend the technical difference between '[go ahead]' and '[the provider is in network].' The same ignorance that precipitates the need for answers often limits the ability to ask precisely the right questions.' Kenseth, 610 F.3d at 467. A finder of fact would be entitled to conclude that, at the very least, the representative should have instructed Mr. Killian that she was unable to locate an entry in her system for 'St. Luke's' and that she could make no representations at that time as to whether the provider was in network."

The majority also holds that There is a genuine dispute of material fact about whether the alleged breach caused Mr. Killian or the estate any injury:

"Nor does the summary judgment record establish that the Killians suffered no harm. It is undisputed that the Killians would have made an appointment with Dr. Bonmi for a second opinion regardless of his network participation status, but two days elapsed between the telephone calls and the actual surgery. A rational finder of fact could conclude that the Killians would have found another hospital or sought emergency admission at Rush had Concert informed them that Rush was out of network. Concert fails to point to any evidence in support of its assertion that the decision to obtain a second opinion regardless of network status necessarily implies that the Killians would have stayed and had the surgery performed at Rush even if Concert told them that Rush was out of network."

The majority notes that the standard applied here did not require prescience or a deep duty of inquiry, but simply a need to apply care to a known set of facts:

"ERISA does not require a fiduciary to set out on a quest to uncover some kind of harm that might befall a beneficiary. But this case requires no such expedition. It simply requires an application of the rule, articulated in Kenseth, that an insurance company cannot defeat a breach of fiduciary duty claim by asserting that it was unaware that an insured was seeking certain material plan information when the insured called two different numbers that the insurance company itself established to provide the sort of information in question."

There follow There separate opinions. Judger Posner, writing only for himself, concurs in the result but would hold that the claim should be decided solely on a contractual basis, rather than fiduciary duty grounds. Judge Posner contends that the plan included an implicit term that the plan would provide some means of determining accurately and promptly whether a provider was in- or out-of-network:

"The contractual duties that I have just described required the plan administrator to inform the plaintiff of his options if he inquired about them-and he claims he did. If so informed the plaintiff might have decided to move his wife to a hospital in the network. There was time, and it appears that There was at least one hospital in range of Rush competent to perform the surgery. whether the plaintiff and his wife would have exercised that option is critical to whether he can recover the addition al $80,000 that he paid Rush for the surgery. But it is an issue that awaits resolution on remand."

There judges dissent. Judge Manion, joined by Judge Sykes, would uphold the original, adverse panel decision. Besides taking extended issue with the majority's interpretation of the fact record, the dissenters contend that a plan's duty to communicate possible negative consequences - even when not specifically asked by a participant to do so - could wind up costing both plans and participants:

"[I]n creating such liability today, the court's decision has wide-spread ramifications. Health insurance is already expensive. And the court's holding will only further increase the cost of health insurance because insurance companies, to prevent being held liable for expenses not covered by their policies, will require their representatives to review the policy provisions with each caller. This not a no-cost proposition: It costs insurance companies money to staff telephones and the more policy terms the representatives must cover, the more it will cost. And the higher the administrative expenses, the fewer dollars spent on health care-and the higher the premiums. Insureds then may not be able to afford the policy they prefer and instead may opt for a less costly option with more restrictions."

Finally, Judge Easterbrook generally sides with the There dissenters in holding that the majority defines the plan administrator's duty of prudence too broadly. He too cites the ills that may ultimately might befall participants when plans - as a preemptive measure to this decision - simply stop offering oral advice: "Perhaps my colleagues would hold that ERISA disallows telling participants that they can't rely on oral advice. That would induce plans to close their telephonic hotlines, a step sure to injure participants. Today's decision will push employers and their plans' administrators in that regrettable direction." 

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