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Ralph Jones and Betsy Jones v. South Williamsport School District

January 25, 2012

RALPH JONES AND BETSY JONES, PLAINTIFFS
v.
SOUTH WILLIAMSPORT SCHOOL DISTRICT, ET AL., DEFENDANTS



The opinion of the court was delivered by: Chief Judge Kane

MEMORANDUM

Before the Court are two motions: (1) Defendant Blue Cross of Northeastern Pennsylvania's ("Blue Cross") amended motion to dismiss the amended complaint as to all claims against Blue Cross (Doc. No. 26); and (2) Defendants South Williamsport Area School District ("SWASD") and Lycoming County Insurance Consortium Pooled Trust's ("Lycoming Trust") motion for judgment on the pleadings on Count I of Plaintiffs' amended complaint (Doc. No. 31). For the reasons that follow, the Court will grant in part and deny in part Blue Cross's motion, and grant SWASD and Lycoming Trust's motion.

I. BACKGROUND

On June 21, 2011, Plaintiffs Ralph and Betsy Jones initiated this action by filing a complaint against Defendant Blue Cross. (Doc. No. 1.) On August 2, 2011, Plaintiffs filed an amended complaint, adding Defendants SWASD and Lycoming Trust. (Doc. No. 7.) According to their amended complaint,*fn1 Plaintiffs Ralph and Betsy Jones obtained health insurance coverage through Plaintiff Betsy Jones's employer, SWASD. (Id. ¶ 10.) SWASD is the self-administrator and insurer of a health insurance policy issued to Plaintiffs ("the Policy"). (Id. ¶ 8.) Lycoming Trust is the plan administrator of the Policy, and Blue Cross is the claims administrator of the Policy. (Id. ¶ 10.) The Policy is administered pursuant to the terms of an Administrative Services Agreement, executed by Lycoming Trust as the plan administrator and designee of SWASD, and First Priority Life Insurance Company, a licensee of Blue Cross.*fn2

(Doc. No. 27-1.)

On December 10, 2010, Plaintiff Ralph Jones underwent spinal surgery, performed by Rodwan Rajjoub, M.D., at the Williamsport Hospital for a pathologic fracture to the vertebra. (Doc. No. 7 ¶ 17.) Prior to the surgery, Plaintiffs allege that Dr. Rajjoub contacted Blue Cross, and that Blue Cross verified that the surgery, a kyphoplasty, would be covered under the terms of the Policy. (Id. ¶¶ 18-19.) However, after the surgery, Blue Cross determined that the procedure was experimental in nature and denied benefits to Plaintiff Ralph Jones. (Id. ¶¶ 21, 24.) On March 24, 2011, Plaintiffs filed a grievance with SWASD and Blue Cross, requesting an appeal of Blue Cross's determination. (Id. ¶ 23.) Thereafter, Plaintiffs' appeal was denied. Defendant SWASD has not paid Dr. Rajjoub or the Williamsport Hospital for Plaintiff Ralph Jones's surgery. (Id. ¶ 32.)

II. BLUE CROSS'S MOTION TO DISMISS

A. Standard of Review

A motion to dismiss filed pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). In reviewing a motion to dismiss, a court may "consider only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim." Lum, 361 F.3d at 221 n.3. The motion will only be properly granted when, taking all factual allegations and inferences drawn therefrom as true, the moving party is entitled to judgment as a matter of law. Markowitz v. Ne. Land Co., 906 F.2d 100, 103 (3d Cir. 1990). The burden is on the moving party to show that no claim has been stated. Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir. 1980). Thus, the moving party must show that Plaintiff has failed to "set forth sufficient information to outline the elements of his claim or to permit inferences to be drawn that those elements exist." Kost, 1 F.3d at 183 (citations omitted). A court, however, "need not credit a complaint's 'bald assertions' or 'legal conclusions' when deciding a motion to dismiss." Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906, 908 (3d Cir. 1997). While the 12(b)(6) standard does not require "detailed factual allegations," there must be a "'showing,' rather than a blanket assertion of entitlement to relief. . . . '[F]actual allegations must be enough to raise a right to relief above the speculative level.'" Phillips, 515 F.3d at 231-32 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Put otherwise, a civil complaint must "set out 'sufficient factual matter' to show that the claim is facially plausible." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1955 (2009)).

B. Discussion

In their amended complaint, Plaintiffs asserted the following causes of action against Blue Cross: (1) a breach of fiduciary duty claim (Count VI); (2) a claim under the Employee Retirement Income Security Act ("ERISA"), seeking a declaration of Plaintiffs' rights under the Policy pursuant to 29 U.S.C. § 1132(a)(1)(B) (Count VII); (3) an ERISA claim, seeking to recover insurance benefits due and to enforce the Policy pursuant to 29 U.S.C. § 1132(a)(1)(B) (Count IX); (4) a claim for attorney's fees and costs pursuant to 29 U.S.C. § 1132(g)(1) (Count VIII); (5) and a claim for interest pursuant to 29 U.S.C. § 1132(a)(3)(B) (Count X). (Doc. No. 7 ¶¶ 67-96.) Plaintiffs have also informed Blue Cross that they are asserting a breach of contract claim against it based on paragraphs 9, 76, and 80-82 of their amended complaint. (Doc. No. 27-3.) In its amended motion to dismiss, Blue Cross asks the Court to dismiss each of these causes of action. (Doc. No. 26.) The Court will address each claim in turn.

1. Breach of Fiduciary Duty

In Count VI, Plaintiffs allege that Blue Cross breached their fiduciary obligations to Plaintiffs under the Policy by refusing to pay Plaintiffs' claim (Doc. No. 7 ¶ 72.) Blue Cross moved to dismiss this claim, arguing that: (1) Pennsylvania law does not recognize common law tort actions for breach of fiduciary duty in the context of insurance cases; (2) Plaintiffs' fiduciary duty claim also fails under ERISA, as Blue Cross is not a fiduciary under ERISA; and (3) even if Blue Cross were a fiduciary under ERISA, Plaintiffs have not properly pleaded a fiduciary duty claim. (Doc. No. 27 at 9-13.)

First, Blue Cross argues that fiduciary duty claims are not recognized in Pennsylvania in the context of insurance cases. Plaintiffs have offered no response to this argument, and the Court agrees that Plaintiffs cannot state a common law breach of fiduciary duty claim in this case. "In Pennsylvania, there is no separate tort-law cause of action against an insurer for negligence and breach of fiduciary duty: such claims must be brought in contract." Ingersol-Rand Equip. Corp. v. Transp. Ins. Co., 963 F. Supp. 452, 453-54 (M.D. Pa. 1997) (citing Greater N.Y. Mut. Ins. Co. v. North River Ins. Co., 872 F. Supp. 1403, 1406, 1409 (E.D. Pa. 1995), aff'd, 85 F.3d 1088 (3d Cir. 1996); Gedeon v. State Farm Mut. Auto. Ins. Co., 188 A.2d 320, 321 (Pa. 1963); Cowden v. Aetna Cas. & Sur. Co., 134 A.2d 223, 227 (Pa. 1957)). Thus, Plaintiffs do not state a common law breach of fiduciary duty claim against Blue Cross.

Blue Cross next argues that Plaintiffs have also failed to state a claim for breach of fiduciary duty under 29 U.S.C. § 1104(a)(1). (Doc. No. 27 at 11.) An entity is a fiduciary with respect to a plan if it exercises discretionary authority or discretionary control respecting management of the plan or if it has discretionary authority in the administration of the plan. 29 U.S.C. § 1002(21)(A). One who makes determinations as to whether or not a claimant is entitled to benefits under the terms of a plan is a fiduciary. Aetna Health Inc. v. Davila, 542 ...


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