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DORATO v. BLUE CROSS OF WESTERN NEW YORK

July 20, 2001

GEORGE DORATO, PLAINTIFF,
V.
BLUE CROSS OF WESTERN NEW YORK, INC., DEFENDANT.



The opinion of the court was delivered by: Curtin, District Judge.

    INTRODUCTION

Presently before the court is plaintiff George Dorato's Motion for Summary Judgment and Motion to Amend the Complaint, together with defendant Blue Cross of Western New York, Inc.'s Motion for Summary Judgment. HealthNow, Inc., doing business as Blue Cross & Blue Shield of Western New York, defends this action.

Mr. Dorato originally sued "Blue Cross Western New York" [sic] in New York State Supreme Court, County of Niagara, on September 30, 1999. Item 1, Ex. A. Claiming that he was insured under a hospital contract and medical benefits contract through his former employer, Mr. Dorato sought payment for treatment of a herniated disk on a breach of contract theory. HealthNow, which received the summons and complaint on October 13, 1999, Item 1, ¶ 4, timely removed to this court on November 12, 1999. Item 1. On January 25, 2001, plaintiff filed a Motion for Summary Judgment. Items 12-15. The next day, defendant filed a Motion for Summary Judgment. Items 16-18. Plaintiff filed a Motion to Amend on March 14, 2001, Item 22, recharacterizing his claims under the Employees' Retirement Income and Security Act (ERISA), 29 U.S.C. § 1132, et seq., which defendant opposed. Items 25-26.

FACTS

Mr. Dorato had a health insurance contract ("the contract") with HealthNow, obtained through his former employer, SGL Carbon, Inc. On July 21, 1998, he stopped work, complaining of severe back pain. He was later diagnosed as having herniated lumbar discs. He underwent surgery in April 1999 and has not returned to work.

On September 12, 1998, Mr. Dorato filed a Notice of Claim with the New York State Workers' Compensation Board ("WCB"), alleging that his injury had occurred while at work on July 21, 1998. Item 14, p. 1.*fn1 The employer and carrier controverted the claim, having performed an investigation which cast doubt on Mr. Dorato's version of events and the compensability of his injuries. On July 28, 1998, the employer's workers' compensation carrier, ESIS, filed a C-7 Notice of Controversy with the Compensation Board. Item 14, p. 2. A Notice of Hearing indicated a hearing date of May 14, 1999, the purpose of which was to "consider Section 32 agreement" ("the Agreement").*fn2 The hearing actually took place on May 28, 1999. Mr. Dorato asserts that HealthNow was "placed on notice" for both the May 14, 1999 and the May 28, 1999 hearings, but did not appear. Item 14, p. 2. HealthNow disputes that it ever received any notice at all, and asserts it certainly did not receive notice by certified mail not less than eight days before the date of the hearing, as is required by 12 N.Y.C.R.R. § 300.8. Item 20, p. 12.

At the May 28, 1999 hearing, the WCB approved the Agreement between Mr. Dorato, his employer, and his employer's Workers' Compensation Carrier in the sum of $80,000.00. Item 14, pp. 6-8. The Decision of the Board, indicated on the first page of the Agreement, was that Mr. Dorato's workers' compensation "[c]laim is disallowed." Id. Plaintiff asserted that the Board arrived at the $80,000.00 figure "to avoid having his case established and an award made by the Compensation Board," given that Mr. Dorato's high average weekly wage at the time of his accident "would generate the maximum indemnity payments possible under New York State Law should his case be established." Item 14, p. 2. Defendant asserts that the settlement paid Mr. Dorato his "full wage benefits for the rest of his working career" and disallowed his claim insofar as medical bills were concerned. Item 20, p. 14. It is not clear what exactly the $80,000 settlement represented. At oral argument, Dennis Clary, Esq., who represented Mr. Dorato before the WCB, stated that he did not know why the carrier offered the $80,000.00.

During the pendency of plaintiffs compensation claim, HealthNow sent statements to Mr. Dorato indicating charges for various medical services. Some of the charges referred to an "Explanation Code Summary," which noted: "Your contract excludes services eligible for Worker's Compensation. However, if the Worker's Compensation Board denies benefits, submit a copy of their decision to us for reprocessing." Item 14, pp. 11-18.

Subsequent to the denial of his Workers' Compensation claim, Mr. Dorato forwarded his medical bills to the defendant for payment. In a letter to plaintiffs counsel dated June 21, 1999, defendant denied benefits "for any medical services rendered which are related to the injury or condition as a result of this Worker's Compensation case." Item 21, Ex. A, p. 1. The letter referred to Mr. Dorato's contract, Section Ten, "Exclusions," Paragraph 3, entitled "Worker's Compensation," which explained:

We will not pay for any injury, condition or disease if payment is available to you under a Workers' Compensation Law or similar legislation. We will not make any payments even if you do not claim the benefits you are entitled to receive under the Workers' Compensation Law.

As a result of HealthNow's denial of health insurance benefits, Mr. Dorato filed this suit.

DISCUSSION

I. Legal Standards

A. Standard for Summary Judgment

Summary judgment is appropriate when "there is no genuine dispute as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). On a motion for summary judgment, the moving party may discharge its burden by showing that "there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In turn, the nonmoving party must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). While the court construes all evidence and inferences in favor of the non-moving party, to sustain its burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

B. Standard of Review Governing Denial of ERISA Benefits

An "employee welfare benefit plan" is defined under ERISA as any plan, fund, or program that is established or maintained by an employer to provide to employees "`medical, surgical or hospital care or benefits, or benefits in the event of sickness, accident, disability [or] death,' whether these benefits are provided `through the purchase of insurance or otherwise.'" Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 732, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), quoting 29 U.S.C. § 1002(1). Clearly, Mr. Dorato's claim for benefits under his health insurance policy falls under ERISA. In addition, plaintiff acknowledges that the contract, forming the basis for his claims against HealthNow, is part of a plan established or maintained by his former employer to provide employees with hospital and medical benefits. Item 1, ¶¶ 3, 11. And although plaintiff originally filed his complaint asserting a state claim under a breach of contract theory, by his motion to amend, he ostensibly agrees with defendant that his claim pursuant to his health benefits contract involves an employee benefit plan governed by ERISA.

When assessing defendant's denial of ERISA benefits, the court must first determine the proper standard of review. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court held that:

a denial of benefits challenged under § 1132(a)(1)(B) [of 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.

Where the plan "confers upon a plan administrator the discretionary authority to determine eligibility, [courts] will not disturb the administrator's ultimate conclusion unless it is `arbitrary and capricious.'" Pagan ...


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