The opinion of the court was delivered by: MUKASEY
MICHAEL B. MUKASEY, U.S.D.J.
Florence Manginaro, as guardian for her son, Austin Scott Manginaro ("Scott"), and Austin Manginaro, Scott's father, sue the Welfare Fund of Local 771, I.A.T.S.E. (the "Fund"), the Fund's current and former trustees (the "Trustees"), and the Union Labor Life Insurance Company ("ULLICO"), alleging that defendants refused to pay certain of Scott's medical expenses in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1140 et seq. (1994). ULLICO counterclaims for reimbursement of medical expenses it has already paid on Scott's behalf.
Plaintiffs move pursuant to Fed. R. Civ. P. 56(c) for partial summary judgment on the unpaid claims, and for dismissal of ULLICO's counterclaims. ULLICO also seeks summary judgment on certain counterclaims, as well as dismissal of plaintiffs' complaint. The Fund and the Trustees move for summary judgment dismissing the complaint on procedural grounds. For the reasons stated below, each of the parties' motions is granted in part and denied in part, and a part of plaintiffs' claims is remanded to ULLICO and the Fund for consideration of additional evidence.
The following facts, which are not in dispute, are relevant to these motions: the Fund is an employee welfare benefit plan governed by ERISA. (Fund Rule 56.1 Statement P 1) The Trustees and ULLICO are fiduciaries of the Fund. (Compl. PP 9, 11; ULLICO Moving Br. at 5 n.3) Austin Manginaro is a Fund participant and Scott is a Fund beneficiary. (Fund Rule 56.1 Statement P 4) The Fund provides medical benefits to its participants and beneficiaries pursuant to the terms of group insurance policies between the Fund and various insurance companies. (Id. P 3) Between January 1, 1991, and December 31, 1994, Scott was covered by a group insurance policy issued by ULLICO (the "Plan"). (Id. P 5)
Scott was born on April 15, 1971. (Pl. Rule 56.1 Statement P 3) On May 27, 1979, he was severely burned and suffered smoke inhalation in a toy store fire. (Id. PP 4-5) While being treated at the Nassau County Medical Center, Scott was given an overdose of morphine which caused him to slip into a coma. (Id. PP 6-7) Although Scott awoke from that coma and eventually returned home (id. P 9), he continues to suffer from quadriplegia and other severe neurological impairments. (Compl. P 6) Since leaving the hospital, Scott has received 24-hour-a-day nursing care at the direction of his treating physician, Mihai D. Dimancescu. (Pl. Rule 56.1 Statement P 10)
From 1979 through 1990, the Fund's prior medical insurers, the Equitable Life Assurance Society ("Equitable") and Equitable's successor, Aetna Life Insurance Company ("Aetna"), fully reimbursed plaintiffs for Scott's nursing expenses. (Pl. Rule 56.1 Statement P 17) From time to time, the Fund, Equitable, or Aetna, would ask plaintiffs to submit additional information regarding a particular claim for benefits. (Id. P 43) Plaintiffs provided this information themselves, or in certain cases arranged for Dimancescu to send it directly to the Fund or the relevant insurer. (Id. P 45)
B. Third-Party Litigation
Plaintiffs sued both the toy store and the hospital seeking to recover for Scott's injuries. (ULLICO Rule 56.1 Statement P 7) In June 1984, they settled their claims against the toy store for approximately $ 2.4 million. (Id.) Pursuant to that settlement, which is not allocated to any particular type of damages suffered by Scott, plaintiffs have received, and will continue to receive, lump-sum payments at regular intervals until 2004. (Pl. Ex. 39) The settlement also provides for Scott to receive monthly payments, for life, in the amount of $ 10,000 plus 3% interest compounded annually, which is, at present, $ 13,840 per month. (ULLICO Rule 56.1 Statement P 8)
Plaintiffs' malpractice lawsuit against the hospital culminated in a $ 1.1 million judgment in their favor issued on November 10, 1993, a result later affirmed on appeal. See Manginaro v. County of Nassau, 221 A.D.2d 603, 605, 634 N.Y.S.2d 181, 183 (2d Dep't 1995). The Appellate Division characterized the award as "damages for [Scott's] future unreimbursed medical expenses." Id.
As noted, Scott was covered by the Plan between January 1, 1991, and December 31, 1994. Several of the Plan's provisions are at issue here. First, the Plan contains a limitation on actions which provides, in pertinent part, as follows:
No legal action can be brought until at least 60 days after written proof of loss is given to the Company [ULLICO]. No legal action can be brought more than two years after the date written proof of loss is required.
(Pl. Ex. 8 at 41) Second, the Plan contains a subrogation clause which provides, in full, as follows:
The Company [ULLICO] shall be subrogated to the extent of any benefits paid under this Contract, to the proceeds of any settlement or judgment effected against a third party and resulting from the exercise of any rights of recovery which the Insured [plaintiffs] may have against any person or organization. The Insured claiming benefits under this shall execute and deliver such instruments and take such other action as the Company may require to implement this provision. The Insured shall do nothing to prejudice the rights given the Company by this provision without its consent.
(Id. at 38) Third, the Plan contains an exclusion for medical expenses incurred for "custodial care." (Id. at 30) The Plan defines "custodial care" as follows:
Custodial Care means treatment, services, or confinement, regardless of who recommends, prescribes, or performs them, or where they are provided, which could be rendered safely and reasonably by a person not medically skilled, and are designed mainly to help the patient with daily living activities. Custodial care includes:
A. personal care such as help in: walking, getting in and out of bed, bathing, eating (including tube or gastronomy), exercising, dressing, using the toilet or administration of an enema;
B. homemaking such as preparing meals or special diets;
D. acting as companion or sitter; and
E. supervising medication which can usually be self-administered.
The Contractholder [the Fund] together with the Company [ULLICO], its medical staff and/or an independent medical review determines which services are Custodial Care.
The determination of Custodial Care in no way implies that the care being rendered is not required by the patient; it only means that it is the kind of care that is not covered under this Contract.
(Id. at 4) Neither the Fund nor ULLICO provided plaintiffs with a copy of the Plan. (Pl. Rule 56.1 Statement P 16)
However, on July 21, 1992, the Fund gave Austin Manginaro a Summary Plan Description ("SPD") detailing certain features of the Plan.
(A. Manginaro Reply Decl. PP 4-5; 7/25/97 Canoni Decl. Ex. A) The SPD -- unlike the Plan -- does not mention any limitation on actions, although it does contain a similar exclusion for custodial care:
Care comprised of services and supplies, including room and board and other institutional services, which are provided to an individual, whether disabled or not, primarily to assist him in the activities of daily living. Such services and supplies are custodial care without regard to the practitioner or provider by whom or by which they are prescribed, recommended or performed. Coverage is not provided for such care.
(Pl. Ex. 6 at 27) (emphasis in original) The SPD also includes the following passage regarding subrogation and reimbursement:
If you or a dependent receive [sic ] benefit payments from the Local 771 I.A.T.S.E. Welfare Fund for services or prescription drugs that result from a claim against a third party, the Fund has the right to collect payment from the third party or to be repaid from benefits you recover from the third party. This right of recovery does not apply if the third party is an insurer or a policy [sic ] covering you or your dependents.
When you or your dependents file for benefits under these circumstances, you agree to reimburse the Fund for any benefit payments you receive out of the money you recover from the third party. You or your dependents also agree to take whatever action is necessary and to provide all information, assistance, and paperwork that the Fund requires in order to enforce its rights . . . .
(Id. at 20-21) Finally, the SPD provides that it is "not meant to interpret or extend or change in any way the provisions of this Plan as expressed in the insurance contracts" and that if "information in this [SPD] conflicts with the insurance contracts or Plan rules and regulations, the contracts or rules and regulations will govern." (Id. at Intro.)
D. ULLICO's Denial of Coverage
As had the Fund's prior medical insurers, ULLICO fully reimbursed plaintiffs for Scott's nursing expenses between January 1, 1991, and June 13, 1992, paying claims during this period totaling $ 399,285.60. (ULLICO Rule 56.1 Statement PP 9-10, 24) However, beginning with the period June 14-27, 1992, ULLICO denied payment for these claims on the ground that they were charges for custodial care and therefore not covered by the Plan. (Id. PP 12-14) ULLICO informed plaintiffs of the denial of coverage by letter dated September 9, 1992. (Id. P 14)
ULLICO's decision to deny coverage was made by Salvatore Fiscina, M.D., a medical advisor employed by ULLICO. (Pl. Rule 56.1 Statement P 152) Fiscina concluded that Scott's nursing services were not covered by the Plan because they:
appear to be non-skilled and custodial . . . [and] could be rendered safely and reasonably by a person not medically skilled. The nursing services involve personal care assistance and the preparation and giving of meals. They also involved moving the insured, and acting as a companion. The passive exercises of the extremities could be done by a non-medical person.
(Pl. Ex. 28 at 2 (emphasis in original)) Fiscina's findings were based on his review of two sets of documents: 1) a medical advisor referral form (Pl. Ex. 26); and 2) notes from Scott's nurses for the period June 14-27, 1992 (the "Notes"). (Pl. Ex. 14) Fiscina did not consider any other information relating to Scott's condition or the nature of the nursing services being provided to him before deciding to deny coverage.
The referral form contains the following information about Scott's condition and the terms of the Plan:
Scott was then 21 years old and had been injured in a fire in 1979; Scott would require nursing services for life because of injuries sustained in the fire and because of a morphine overdose; diagnoses of "burn, unspecified" and "unspecified condition of brain" were applicable; Scott was receiving full time nursing care; medically necessary skilled nursing care was 100% covered under the Contract; there was no limit to the amount which would be reimbursed under the Contract; and ULLICO had already paid $ 263,082.90 for Scott's care.
(Pl. Rule 56.1 Statement P 126; Pl. Ex. 26) According to the Notes, which detail the activities of Scott's nurses from June 14-27, 1992, the nurses spent much of their time performing personal care services for Scott, such as bathing, feeding, exercising, administering medication, and the like. (Pl. Ex. 14) However, the Notes also reflect that Scott experienced a choking episode during this period which required him to be suctioned twice by one of the nurses. (Id.) Fiscina does not mention the choking episode in his report. (Pl. Ex. 28 at 2)
As for the Fund, it did not participate in the decision to deny coverage for Scott's nursing expenses. (Pl. Rule 56.1 Statement P 64) Jean Catalanatto, the Fund's Administrator, learned of ULLICO's decision in September 1992. (Id. P 63) Although Catalanatto examined that decision to determine if custodial care was indeed excluded by the Plan, she did not review Fiscina's findings that the nursing services being provided to Scott were in fact custodial. (Id. P 66) At her deposition, Catalanatto testified that she never questioned Fiscina's factual findings and had "just assumed that [Scott's] condition had gotten better." (Catalanatto Dep. at 66)
On September 24, 1992, plaintiffs sent a letter of appeal via certified mail to ULLICO requesting reconsideration of the denial of coverage. (Pl. Ex. 19-20) A copy of that letter was also sent to the Fund. (Id.) Neither ULLICO nor the Fund responded to plaintiffs' letter, and no internal review of ULLICO's decision was conducted. (Compl. PP 25-27)
On January 8, 1993, plaintiffs filed suit against ULLICO in New York state court challenging the denial of coverage. (Id. P 26) While that case was pending, plaintiffs continued to submit claims to ULLICO for nursing expenses incurred between June 27, 1992, and December 31, 1994, the end of the Plan period. (Id. P 27) These unpaid claims total $ 472,035.00. (Id. P 28) The state court lawsuit -- which raised breach of contract and tort claims ...