Seventh Circuit Revives Suit Over Out-of-Network Claim

, The National Law Journal

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7th Circuit Judge Kenneth Ripple

An appeals court has revived a case testing whether a health insurer breached its fiduciary duty by telling the husband of a policyholder that she should "go ahead" with brain surgery it later declined to pay for because the doctor was out of network.

The full U.S. Court of Appeals for the Seventh Circuit reversed Northern District of Illinois Judge Marvin Aspen’s July 2010 summary judgment for Concert Health Plan on one of James Killian's breach of fiduciary duty claims.

The court instructed the Illinois court to determine whether Killian’s calls to the insurer about the procedure trigged a duty for Concert to disclose whether it would pay for the procedure, whether Concert breached that duty and, if so, was Killian harmed.

Circuit Judge Kenneth Ripple wrote for the majority, applying Seventh Circuit case law to the Employee Retirement Income Security Act (ERISA), that "an insurance company cannot defeat a breach of fiduciary duty claim by asserting that it was unaware that an insured was seeking certain material plan information when the insured called two different numbers that the insurance company itself established to provide the sort of information in question."

Judges Joel Flaum, David Hamilton, Michael Kanne, Ilana Diamond Rovner, John Daniel Tinder, Ann Claire Williams and Diane Wood joined him in Thursday’s ruling in Killian v. Concert Health Plan.

The majority also affirmed summary judgment for Concert on Killian’s denial-of-benefits claim but remanded with instructions for lawyers from both sides to stipulate whether the health care providers were within Concert’s network. If they can’t agree, the court said, the trial judge should decide that issue on the record.

The court instructed the lower court to recalculate Northern District of Illinois Judge Gary Feinerman's December 2010 calculation of $5,880 in statutory damages against health plan administrator Royal Management Corp. Royal was Susan Killian’s former employer.

Judge Daniel Manion, joined by Judge Diane Sykes, wrote that Killian never asked Concert whether the hospital that performed the surgery was in-network. Instead, his call was to let Concert know of the hospitalization, which the plan required policyholders to do.

"James’s statement that Susan was being admitted for brain surgery and Concert’s ‘okaying’ of that procedure as medically necessary, were unrelated to the question of the network status of the providers," Manion wrote. Judge Frank Easterbrook agreed on that point.

Killian’s August 2007 lawsuit challenged Concert's denial of coverage for his late wife Susan's brain cancer treatment. Killian called Concert twice the day his wife was admitted to a hospital in which she underwent brain surgery two days later. He said the first person he talked to told him "go ahead with whatever had to be done" and that he wasn't warned that the hospital was out of network.

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