Kristy Schwade sues her former employer, Total Plastics, Inc., for healthcare benefits under an Employee Retirement Income Security Act ("ERISA") plan. Arguing that Schwade failed to exhaust administrative remedies, that the suit is time-barred, and that Schwade violated the plan by refusing to sign a subrogation agreement, Total Plastics moves (Doc. 20) for summary judgment.
Schwade noticed one day in May, 2007, that something was profoundly wrong with her five-month-old son, K.S., after he returned from daycare. Although precisely what happened to him remains unspecified, K.S.'s symptoms were consistent with "shaken baby syndrome." The daycare provider later pleaded guilty to aggravated child abuse. Having suffered catastrophic brain damage, K.S. remained in the hospital more than two months and required continuous medical attention thereafter. K.S. died at the age of four in January, 2011.
At the time of K.S.'s injury, Schwade participated in Total Plastics's self-funded ERISA employee health benefit plan ("the Plan"), of which K.S. was a beneficiary. K.S. is eligible for as much as a million dollars in benefits -- if Schwade fulfills the necessary conditions under the Plan.
The Plan's summary includes a detailed subrogation agreement that entitles the Plan to recover "[a]ny amount from the first dollar that the [participant] . . . is entitled to receive as a result of [an] Accident, Illness, or Injury or other medical condition, to the full extent of benefits paid or provided by the Plan." (Doc. 20, Ex. 5 at 60) Additionally, the Plan requires a participant to "execute documents (including a lien agreement) and deliver instruments and papers and do whatever else is necessary to protect the Plan's [subrogation] rights." (Doc. 20, Ex. 5 at 60) If the participant refuses to sign a supplemental subrogation agreement after submitting a claim, "the Plan has no obligation to make any payment for any treatment required as a result of the act or omission of any Other Party." (Doc 20, Ex. 5 at 60)
Under the Plan, "[e]ach time a claim is submitted . . . the Covered Person will receive an Explanation of Benefits  form that will explain how much the Plan paid toward the claim." (Doc. 20, Ex. 5 at 69) The Plan summary lists many reasons the Plan administrator might deny a claim, including "[e]nforcement of subrogation" and failure to "respond to a request for additional information needed to process the claim." (Doc. 20, Ex. 5 at 69-70) As to "additional information," the Plan summary further provides, "Determination Period on Hold: . . . . When claims information is missing, a notice requesting the necessary information will be sent to the Covered Person. The Covered Person then has 45 calendar days within which to provide the missing information." (Doc. 20, Ex. 5 at 69) After forty-five days without the information from the participant, the Plan administrator may deny the claim.
If the Plan administrator denies a claim, under the Plan a participant will receive "[a] claim denial notice, usually referred to as an Explanation of Benefits" that "explain[s] the specific reasons for the denial," "provide[s] a specific reference to pertinent Plan provisions on which the denial was based," and "[p]rovide[s] appropriate information as to the steps the Covered Person can take to submit the claim for appeal." (Doc. 20, Ex. 5 at 70) If a participant wishes to challenge a claim denial, the Plan summary requires that the employee "file the appeal within 180 days of the date [she] received the Explanation of Benefits  form from the Plan showing that the claim was denied." (Doc. 20, Ex. 5 at 70) The Plan summary states that a participant may sue "[a]fter completing all mandatory appeal levels through this Plan," but that "[n]o such action may be filed against the Plan after three years from the date the Plan gives the Covered Person a final determination on their appeal." (Doc. 20, Ex. 5 at 72)
The Plan paid between $26,000 and $35,000 of K.S.'s initial medical expenses, until in late June, 2007, about two months after K.S.'s injury, the Plan administrator sent Schwade a supplemental subrogation agreement. This document informs that the Plan administrator cannot process a claim without "additional information" about K.S.'s injury. After a short questionnaire, the document states that the Plan may "recover payments from ANY settlement due [a participant or beneficiary] when the accident or illness is a result of negligence . . . ." (Doc. 20, Ex. 6) (caps in original) The document closes with a warning that "FAILURE OR REFUSAL TO EXECUTE THIS DOCUMENT RELIEVES THE PLAN OF ANY AND ALL LEGAL, FINANCIAL OR CONTRACTUAL OBLIGATION FOR ANY EXPENSES INCURRED BY THE PARTICIPANT." (Doc. 20, Ex. 6) (caps in original) Because Schwade never returned the supplemental subrogation agreement, the Plan administrator stopped paying K.S.'s claims. Explanations of benefits sent to Schwade between August and November, 2007, state, "[w]e need updated accident information to process your claim. Please call [phone number] or visit [website]." E.g. (Doc. 20, Ex. 9) The claims requiring "updated accident information" accrued between May and August 10, 2007, and embody the money Schwade seeks in this action. For a claim that accrued after August 10, 2007, the explanations of benefits state, "[c]harges incurred after the date coverage ends are not covered." After Schwade quit her Total Plastics job in August, 2007, to attend to K.S., Florida's Medicaid program provided money for K.S.'s care. Schwade concurs that Medicaid covered claims accruing after August 10, 2007.
In June, 2008, Schwade's attorney sent the Plan administrator a letter asking for information. A June 18th response from the Plan administrator is insistent:
[W]e need additional information from the member, [Schwade,] before we can determine benefits. Please have [Schwade] sign the attached Subrogation Agreement and return to us . . . . [P]er [the subrogation provision in the Plan summary] this needs to be signed before we can determine benefits. (Doc. 3, Ex. 4) The attached subrogation agreement again warns that a failure to sign the agreement voids the Plan's obligations to Schwade. A July 1st letter from the Plan administrator quotes the subrogation provision of the Plan summary and states, "At this time no additional charges will be considered until the Subrogation Agreement is received." (Doc. 3, Ex. 5)
Ignoring the Plan summary, the warnings of the Plan administrator, and the impending legal consequences to Schwade if she failed to sign a subrogation agreement, Schwade's attorney in a July 24, 2008, letter complains that "[t]he sole reason" for the absence of claim payments is "Schwade['s] not signing a boiler plate subrogation agreement." (Doc. 3, Ex. 6) Schwade's attorney dismissed the Plan's "subrogation language" as "totally unacceptable" and declined on behalf of Schwade to sign.
In a November 4, 2008, letter, Schwade's attorney claims that the subrogation requirement "appear[s] to prohibit any civil action on K.S.'s behalf because it purports to provide that the Plan would be reimbursed first and in full . . . ." Schwade's attorney offers a deal (and a threat): "We propose that the Plan and [K.S.] share equally (50/50 split) in whatever recovery is obtained after payment of the costs and attorney fees . . . . Without the foregoing agreement, the Plan and Total Plastics essentially has [sic] no chance of a recovery." (Doc. 3 Ex. 7) A March 12, 2009, letter repeats the offer allowing the plan half an award -- half, that is, of what remains after Schwade's attorney receives remuneration in full. Finally, a December 14, 2009, letter states:
[T]he demand for our clients to sign a subrogation agreement that would only benefit Total Plastics without any attorney compensation or reimbursement for the costs was and remains totally unacceptable. I find it hard to believe that such subrogation language is valid under ERISA and [that] the subject "subrogation agreement" is required before the [medical] providers are paid. (Doc. 3, Ex. 9)
Without an agreement with the Plan, Schwade sued the daycare provider, the daycare center, and others.
Tampa General Hospital, which treated K.S., sued (Doc. 2) Schwade for more than $600,000. (Doc.2) Schwade removed to federal court and in November, 2010, submitted a third-party complaint (Doc. 4) against Total Plastics. A January, 2011, order (Doc. 12) remands Tampa General's action against Schwade but retains Schwade's action against Total Plastics. Although her benefits are capped at a million dollars, Schwade sues Total Plastics for more than $1.4 million in expenses allegedly owed under the Plan.
Total Plastics argues (1) that the Plan empowers the Plan administrator to require Schwade to sign a subrogation agreement; (2) that, because Schwade failed to appeal within the Plan's 180-day limitation, Schwade failed to exhaust her administrative remedies; (3) that Schwade failed to plead exhaustion in the complaint; and (4) that Schwade failed to sue within the Plan's three year limitation.*fn1 Schwade responds to Total Plastics's arguments and counters that she is entitled to benefits without a subrogation agreement because signing a subrogation agreement (1) ...