United States District Court, W.D. Michigan, Southern Division
OPINION REGARDING DEFENDANT'S MOTION FOR SUMMARY
GORDON J. QUIST UNITED STATES DISTRICT JUDGE.
Spectrum Health Hospitals (Spectrum), as assignee of Michael
Gruszka, a Spectrum patient, sued Mr. Gruszka's
employer/health insurer, Defendant Tooling Systems Group,
Inc. (Tooling), under the Employee Retirement Income Security
Act of 1974 (ERISA), as amended, 29 U.S.C. § 1001,
et seq., to collect health insurance benefits.
Tooling asserts that Spectrum failed to exhaust its
administrative remedies when it failed to timely appeal
Tooling's denial of benefits. Tooling filed a motion to
dismiss for failure to state a claim under Federal Rule of
Civil Procedure 12(b)(6) or, alternatively, for summary
judgment. The Court heard oral argument on October 19, 2017.
was hospitalized in a Spectrum facility and received a left
ventricular assist device, commercially referred to as an
HVAD system. In seeking reimbursement from Tooling for
Gruszka's medical procedures and hospitalization, on June
26, 2015, Spectrum submitted a claim for over $462, 000-$273,
938 of which was allocated on the Explanation of Benefits
(EOB) form with a code of R624, which was the corresponding
code for “FDA Investigational Device.” On
September 18, 2015, Tooling informed Spectrum that it was
denying the $273, 938 portion of the claim because:
“This service, medicine, or supply appears to be
experimental or investigational”-medical costs not
covered by Gruszka's policy.
EOB outlined procedures for Spectrum and Gruszka to follow if
they had questions regarding any denial or otherwise
disagreed with Tooling's determination. The EOB provided
instructions for appealing the decision. The denial stated
that the appeal must be filed “within 180 days
following denial of the claim.” The 180 days expired on
March 18, 2016.
April 16, 2016, Spectrum, under an included authorization
from Gruszka, requested an ERISA-compliant EOB from Tooling,
detailing the reasons for the denied claim. On May 23, 2016,
after some further correspondence, Tooling reiterated its
position that the HVAD device was “experimental”
or “investigational.” On October 31, 2016,
Spectrum submitted a formal appeal of Tooling's
determination, which Tooling denied because the 180-day
appeal period had expired. Spectrum continued the appeal
process while Tooling stood by its determination that the
time for an appeal had expired. On May 1, 2017, Tooling
repeated its denial based on timeliness and refused to refer
the matter to an external party for review. Thereafter,
Spectrum filed suit against Tooling.
parties and the Court are well-acquainted with the summary
and the Code of Federal Regulations on the implementation of
claims and their denial is a matter of legal interpretation
for the courts, and is not an issue of fact. See Kent v.
United of Omaha Life Ins. Co., 96 F.3d 803, 806 (6th
Cir. 1996). The Sixth Circuit applies the substantial
compliance test, which provides that plan administrators
“need only substantially comply with ERISA notice
requirements.” Marks v. Newcourt Credit Grp.,
Inc., 342 F.3d 444, 460 (6th Cir. 2003) (citing
Kent, 96 F.3d at 807-08). The Court must determine
whether Tooling fulfilled the essential purpose of 29 C.F.R.
§ 2560.503-1 by notifying Spectrum and Gruszka of its
reasons for denying part of their claim and affording them a
fair opportunity for review. Id.
notification to Spectrum and Gruszka substantially complied
with the purposes of § 2560.503-1. Tooling paid a
portion of the claim and, as to the HVAD system, the notice
clearly identified the $273, 938 expense as experimental or
investigational and provided an explanation of the appeal
process. Rather than take advantage of the fair opportunity
for review described in the notice, Spectrum waited nearly a
month after the appeal period had expired to contact
Tooling-apparently to the financial detriment of
the notice substantially complied with the purposes of §
2560.503-1, the appeal period was triggered. Cf. Thompson
v. J.C. Penney Co., No. 00-3504, 2001 WL 1301751, at *4
(6th Cir. Aug. 7, 2001) (affirming the district court's
finding that because the notice of denial of benefits was
deficient, the sixty day appeal period under that plan was
the Court will grant Tooling's motion for summary
foregoing reasons, Tooling's motion for summary judgment
will be ...