FEDERAL LAW OF ERISA—COMPLETE DEFENSES Part 1

Part 1:
ERISA DEFENSES:  29 CFR 2520.102-2

Examine Your Injured Clients Summary Plan Description!!!  Look for a poorly drafted one! 

If you have an injury client whose health plan administered is controlled by the federal law of ERISA. There are several complete defenses that our you can present under ERISA. If you suspect the contract language is poorly drafted in the health plan, you can use the following arguments:

"First and foremost, the language of the plan’s Summary Plan Description (SPD) appears to be very poorly drafted in several respects. Initially, it disregards the mandatory drafting provisions of the CFR’s controlling the style and format of SPD’s. 29 CFR §2520.102-2(a) notes that “technical jargon” and “long complex sentences” should be avoided. Importantly, §2520.102-2(b) provides in pertinent part: 
Any description of exception, limitations, reductions, and other restrictions of plan benefits shall not be minimized, rendered obscure or otherwise made to appear unimportant. . . . The description or summary of restrictive plan provisions need not be disclosed in the summary plan description in close conjunction with the description or summary of benefits, provided that adjacent to the benefit description the page on which the restrictions are described is noted. (emphasis supplied)

A careful review of the union SPD reveals that it does not comply with these mandatory requirements. In the SPD, the Summary of Benefits begins at page 29 and is very comprehensive. There is only a $50 annual deductible and annual maximum benefits of $500,000. The out-of-pocket annual maximum is $1,000. The Subrogation section appears at pp. 46-47 of the SPD. However, the SPD’s subrogation language is full of legal jargon including the title (“subrogation”) and clearly operates as an “exception, reduction or restriction of plan benefits.” Notably, the benefits section of the SPD fails to cross-reference the subrogation provision and its effect. Consequently, based upon the mandatory language of the above CFR, the subrogation section must appear “in close conjunction” with the description or summary of benefits. Since the benefits appear at page 29 and the subrogation provision is at page 46, the SPD fails this mandatory drafting requirement. As such, any action on the subrogation provision may be dismissed on a 12(b)(6) motion.

As authority for the proposition that the SPD requirements of the above CFR are mandatory, I invite your attention to Burke v. Kodak Retirement Income Plan Committee, 336 F.3d 103 (2d Cir. 2003), where the court held as follows:  ERISA further requires that: (1) the SPD's format not mislead or fail to inform participants and beneficiaries about the plan; and (2) any limitations or restrictions of plan benefits must not be minimized, rendered obscure, or otherwise made to appear unimportant. See 29 C.F.R. § 2520.102-2(b). Restrictions on benefits need not be disclosed "in close conjunction with the description or summary of benefits provided that adjacent to the benefit description the page on which the restrictions are described is noted." Id. ("cross-referencing" requirement); see also id. at § 2520.102-2(a) ("the use of clear cross-references [is] usually required" in an SPD)."