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
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.
Item 16, Ex. C, p. 23. The letter also cited Section 32 of the
Workers' Compensation Law, which provided that when a claim has
been filed, the claimant and employer may
sign an agreement settling upon and determining the compensation
due to the claimant, and that that settlement "acts as payment
of Workers' Compensation benefits and payments by [defendant]
are not due and owing for services related to the injury." Item
16, Ex. D, p. 1.
As a result of HealthNow's denial of health insurance
benefits, Mr. Dorato filed this suit.
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 v. NYNEX Pension Plan,
52 F.3d 438, 441 (2d Cir. 1995).