Following his release from a hospital after suffering a stroke, Douglas Murch’s physician wrote a home health certification and plan of care for him which said that constant home health care was medically necessary to allow him to function at home in light of the fact that his wife suffers from rheumatoid arthritis and was unable to assist him. Aetna Life Insurance Company was a third party administrator for the Prudential Welfare Benefit Plan which provided health insurance to Mr. Murch. Mr. Murch retained the services of a home health agency to provide coverage for him 24 hours a day.
The services provided by the agency included essential nursing care as well as bathing, dressing and light housekeeping. Aetna informed Mr. Murch that it would pay for only 4 hours of nursing care each day because it interpreted the plan documents to exclude “custodial care.” Mr. Murch filed suit in the U.S. District Court for the Western District of Washington under the Employee Retirement Income Security Act (“ERISA”).
The Court, in Murch v. Prudential Welfare Benefit Plan, ___ Fed. Supp. 2d___ (W.D. Wash. 2006) granted summary judgment in favor of Mr. Murch and returned the case back to Aetna with an order to reconsider coverage in light of the Court’s ruling that in Mr. Murch’s case “custodial coverage” of home health care along with essential nursing coverage was a plan benefit.
The Court first addressed the standard of its review noting that a denial of benefits challenged under ERISA is to be reviewed de novo unless the benefit plan gives the TPA authority to determine eligibility for benefits or to construe the terms of the plan. See Firestone Tire & Rubber v. Bruch, 489 U.S. 101 (1989) noting that in the Ninth U.S Circuit Court of Appeals proper discretionary authority must be expressly granted by the plan’s language, the court found such express authority absent and granted review de novo. The problem was that the Plan documents gave authority to an “administrative committee as plan administrator” to delegate authority to the TPA to determine benefits, but Prudential, not the Plan administrator, granted the authority to Aetna, but there was no discretion granted by the Plan Administrator itself.
The Court found further that whether the standard of de novo or abuse of discussion were applied, Aetna’s determination failed to meet Mr. Murch’s “reasonable expectation” as set forth in the Summary Plan Description (“SPED”) provided to Mr. Murch.
The doctrine of reasonable expectations applies as a principle of federal common law controlling interpretation of insurance contracts governed by ERISA. Winters v. Costco Wholesale Corp., 49 F.3d 550, 554 (9th Cir. 1995). An ERISA contract should be interpreted “in the ordinary and popular sense as would a [person] of average intelligence and experience. Deegan v. Continental Casualty Co., 167 F.3d 502 (9th Cir. 1999).
The Prudential Plan provided that home health services was a covered service but also excluded home health care that was “strictly custodial.” The Court found that the benefits exclusion, as interpreted by Aetna was not in the main body of the SPED, but rather in the definitional section and essentially not sufficiently conspicuous to attract the attention of a reasonable layman and that the language of the text as a whole was poorly written and self contradictory, - hence Aetna’s interpretation was unreasonable.
Aetna argued that the required nursing care could have been confined to a 4-hour period daily, but the Court noted that the need for services was “sporadic” through the day and night and refused to interpret the SPED as if it were a “Procrustean Bed” capable of artificially limiting the coverage time of the home health agency nurses to just the actual time spent at random times through the day night providing nursing as opposed to custodial services.
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