This 4^th Circuit case is another addition to the growing list of cases holding that contractual disputes between plan sponsors and claims administrators are subject to state law.

The defendant in this case, Information Systems and Networks Corp. (“ISN”) established a self-funded health benefit plan governed by ERISA.  ISN purchased insurance from the plaintiff in this case, Great-West Life and Annuity Insurance Company (“Great-West”) to cover some benefits under the Plan.  ISN also contracted separately with Great-West to provide stop-loss coverage.

The main dispute arose over Great West’s claim that ISN failed to repay it for funds it fronted for ISN’s ERISA plan and fees for services. The court found the key to its holding in the discretion vested in ISN, the plan administrator.  The Plan language stated that ISN had complete authority to control and manage the Plan. ISN had full discretion to determine eligibility, to interpret the Plan and to determine whether a claim should be paid or denied, according to the provisions of the Plan as set forth in this booklet.  Great-West processed claims and provided other services to the Employer related to the self-funded benefits. Great-West does not insure or guarantee the self-funded benefits.

Based upon the non-discretionary role attributed to the claims administrator, the Court held for Great West, holding that ERISA does not preempt a state law breach of contract claim, nor a state law unjust enrichment claim, brought by the third-party company hired to perform only nondiscretionary administrative services, under the self-funded portion of an employee health care benefit plan covered by ERISA.

The plan administrator, with full discretion to determine whether a claim for self-funded benefits should be paid or denied expressly acknowledged the debt and recommended to the sponsor’s chief executive officer that it should be paid; and resolution of either claim requires no interpretation of the plan terms nor is it in any way dependant upon the plan being governed by ERISA.

Tags:

This entry was posted by Adam V. Russo on Thursday, April 17th, 2008 at 11:22 am and is filed under 4th, Stop Loss. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.