The Employee Retirement Income Security Act of 1974, or ERISA, governs most employer-sponsored benefit plans.  ERISA establishes protections for employees in the administration of their employer-sponsored benefits, requiring that the administrator adhere to certain requirements when determining a plan participant’s eligibility for benefits.  In ERISA cases, typically the plan’s terms govern.  However, ERISA does recognize certain “equitable” doctrines for situations not necessarily covered by the terms of the employer-sponsored plan.  One of those equitable doctrines is “waiver,” which the courts have established as the intentional relinquishment of a right under the plan.  In this article, we address Cohorst v. Anthem, No. CV 16-7925-JFW (SKX), 2017 WL 6343592 (C.D. Cal. Dec. 12, 2017), a recent decision from the Central District of California, which rejected a health plan administrator’s decision to approve, and then later deny, an employee’s benefits based on a theory of waiver. 

What are the equitable doctrines under ERISA?

ERISA section 502(a)(3), 29 U.S.C. section 1132(a)(3)(B), permits a plan participant or beneficiary to bring a civil action against fiduciaries to obtain “other appropriate equitable relief,” including the equitable remedies of reformation, waiver and estoppel, and surcharge, i.e., make whole relief.  Unlike a benefit claim, requesting equitable relief relies on the fiduciary relationship between the plan or claims administrator and the participant.  Under ERISA, a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, . . . or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

Waiver under ERISA?

A court will find waiver where a party intentionally relinquishes a right or acts so inconsistently with an intent to enforce the right that it induces a reasonable belief that the right has been extinguished.  For example, in Salyers v. Metro. Life Ins. Co., 871 F.3d 934, 938 (9th Cir. 2017), the court found waiver where the administrator accepted premium payments, but later denied a death benefit because participant failed to provide “Statement of Health” as required for eligibility.  Furthermore, the insurer or plan administrator may not argue ignorance of a lack of coverage where its agent had such knowledge, as the court found in Salyers.

Cohorst v. Anthem

In Cohorst, supra, Plaintiff Aubrey Cohorst sued Anthem Health Plans of Kentucky, Inc., (Anthem) for its denial of a benefits claim under an employer-sponsored health plan governed by ERISA.  The underlying dispute involved Anthem’s denial of coverage for Cohorst’s artificial disc replacement surgery, which required the use of a “Mobi-C” device.  Cohorst’s doctor determined the surgery medically necessary, and consequently sought Anthem’s prior approval.  In this initial approval process, Anthem confirmed its approval of the surgery, but did not specify the medical device that would be used.  Anthem’s internal documents mirrored its initial approval, describing the surgery as “medical necessary” and meeting “criteria guidelines.”

When Cohorst’s physician contacted Anthem to confirm which medical device had been approved for surgery, Anthem told the doctor it approved the “Pro Disc-C” and not the “Mobi-C.”  Shortly after this conversation, Anthem created a new reference number allegedly based on the request to use the “Mobi-C” device and overturned its original approval, finding the procedure to be “Experimental” or “Investigative” and thus not medically necessary under the terms of the plan.  Ultimately, Cohorst underwent the surgery and Anthem refused to cover the costs associated with the surgery, a total of $140,434.25, of which, $130,000 was attributed to the cost of the surgery and $5,434.25 to the cost of the Mobi-C device.

Under a de novo standard of review, the court first evaluated the plan and the relevant exclusionary language, determining that the procedure did fall within the exclusion.  Despite this, the District Court still found for Cohorst based on a theory of waiver.  Emphasizing Anthem’s inconsistent behavior, the court held that Anthem waived its right to assert the exclusion when it first approved the surgery as medically necessary.  That the “Mobi-C” device was not specifically approved was irrelevant, when a party intentionally relinquishes a right, as Anthem did in Cohorst, the doctrine of waiver applies.

If your ERISA claim has been denied, having an experienced disability, health and life insurance attorney matters to the success of your claim.  Fill out our free consultation form today to set a time to discuss your claim with the McKennon Law Group’s attorneys, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.