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ZISEL v. PRUDENTIAL INS. CO. OF AMERICA

March 9, 1994

KATHLEEN ZISEL and ROBERT ZISEL, Plaintiffs,
v.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, et al., Defendants.



The opinion of the court was delivered by: LEONARD D. WEXLER

 WEXLER, District Judge

 Robert Zisel is a member of the Health Care Alliance Plan (the "Plan"), a self-funded employee benefit plan governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. ยง 1001 et. seq. Kathleen Zisel, Robert Zisel's wife, is a covered person under the Plan. She was diagnosed with Lyme disease and was prescribed a regimen of intravenous antibiotic drugs. On November 23, 1993, the Plan Administrator (the "Administrator") rendered a final decision denying coverage for this treatment, finding that it was not medically necessary. The Zisel's are seeking to enjoin defendants from refusing to pay for this treatment. Defendants seek an order in limine declaring that this Court will review the Administrator's decision using the arbitrary and capricious standard of review and that when making the determination, the only evidence that will be considered is evidence that was presented to the Administrator. For the reasons stated below, this Court will review the Administrator's decision using the arbitrary and capricious standard of review. However, in addition to the evidence submitted to the Administrator, the Court will consider helpful expert medical testimony and evidence going to the Administrator's bad faith. *fn1"

 I. Scope of Review

 In Firestone Rubber Co. v. Bruch, 489 U.S. 101, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989), the Supreme Court established rules regarding the level of deference to be accorded an ERISA plan administrator's or fiduciary's benefit determination. The Court held that

 
a denial of benefits challenged under [ERISA] is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.

 Id. at 115. (emphasis added). Thus, if the relevant plan documents confer discretionary authority upon the administrator, the arbitrary and capricious standard of review is to be applied. Id. The Firestone Court did not spell out what language is necessary to find that an administrator is invested with discretionary authority. The lower courts, however, have filled in the void and there is a consensus that "no magic words" are required to trigger one or the other levels of review. See De Nobel v. Vitro Corp., 885 F.2d 1180 (4th Cir. 1989). Rather, when making this determination, courts must examine the relevant plan documents to determine whether the administrator is given the power to construe doubtful terms or to resolve disputes over benefit eligibility.

 
The Plan Administrator has the authority to determine all questions arising under the provisions of the Plan, including the power to determine the rights and eligibility of participants or any other persons, and to remedy ambiguities, inconsistencies, or omissions. . . .
 
In carrying out their respective responsibilities under the Plan, the Plan Administrator and other Plan fiduciaries shall have discretionary authority to interpret the terms of the Plan and to determine eligibility for and entitlement to Plan benefits in accordance with the terms of the Plan. Any interpretation or determination made pursuant to such discretionary authority shall be given full force and effect, unless it can be shown that the interpretation or determination was arbitrary and capricious.

 This language makes it absolutely clear that the Administrator has broad discretion to determine eligibility issues, and therefore any eligibility decision can only be set aside if there has been an abuse of discretion. *fn2"

 Plaintiffs contend that although the Administrator may have discretionary authority when making other decisions, he does not retain that authority when determining whether a particular treatment is "medically necessary." Plaintiffs argue that the term "medically necessary" is defined in the Plan, and therefore the Administrator has no discretion in determining whether a situation falls within the meaning of that defined term. The Plan defines "medically necessary" as follows:

 
"Medically Necessary" means that a service, confinement or supply must be:
 
- Prescribed by a Physician for the diagnosis or treatment of a ...

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