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Ruling on UPS ERISA Suit over Benefits Cap Reversed by Ninth Circuit

On Friday, September 8, 2017, a three-judge panel for the U.S. Court of Appeals in the Ninth Circuit reversed U.S. District Judge Cathy Ann Bencivengo's summary judgment award to United Parcel Service of America Inc. ("UPS") and Blue Cross and Blue Shield of Illinois ("BCBS") (collectively, the "Defendants"), which held that Defendants were not in violation of the Affordable Care Act ("ACA") or the Public Health Service Act ("PHSA") in capping Gary King's ("Plaintiff") lifetime health insurance coverage benefits, and that they did not violate the disclosure requirements of the Employee Retirement Income Security Act ("ERISA") in their informing plan participants about the cap.

In May 2015, Judge Bencivengo granted summary judgment to Defendants, ruling that, although language in ERISA, the ACA and the PHSA may imply that lifetime coverage limits are banned, a closer reading revealed that Defendants were allowed to cap Plaintiff's plan, and did so without deception. The Ninth Circuit panel ruled that although the district court did not err in ruling that ERISA's ban on lifetime benefit maximums does not apply to Plaintiff's plan because it is a retiree-only plan, Defendants violated ERISA's disclosure requirements by obscuring whether the benefit cap applied to Plaintiff's plan.

The panel ruled that Defendants' disclosures related to plan coverage did not reasonably apprise an average plan participant that the lifetime benefit maximum continued to apply to the retiree plan after the ACA was enacted. The panel focused on the format of UPS's summaries of plan modifications that were provided to participants. Specifically, the panel found issue with the fact that since the modification summaries included only new amendments, a plan participant would have to read the original 2006 summary plan description and each subsequent summary to determine the current language for each benefit provision. Additionally, there was no comprehensive table of contents that allowed plan participants to verify what had been changed with the plan.

Gary King and his late wife, Linda King, originally filed the case in the U.S. District Court for the Southern District of California in May 2013 after Linda had her claim for benefits denied due to her exceeding the plan's $500,000 lifetime benefit maximum. The Kings said in their amended complaint that they may be liable for more than $1 million in health care bills stemming from surgery and rehabilitation related to an infection Linda contracted. Her treatment was initially approved by BCBS and deemed to be medically necessary. After undergoing some of the treatment, the Kings received an explanation of benefits letter stating that out of a $949,755 bill, BCBS had only approved $133,601 for payment. The Kings then filed suit alleging breach of contract and breach of fiduciary duties under ERISA.

The legal team at SFMS has significant experience litigating ERISA matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier ([email protected]) or Chiharu Sekino ([email protected]). We can also be reached toll-free at (866) 540-5505.

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Gurrieri, Vin. "UPS Can't Duck ERISA Suit Over Benefits Cap, 9th Circ. Says." Law 360. Last modified on September 8, 2017.

Siegal, Daniel. "UPS Can't Cap Retiree's Health Benefits, 9th Circ. Told." Law 360. Last modified on March 9, 2017.

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