Federal judge dismisses ERISA amended complaint over denial of COBRA benefits

By Karen Kidd | Mar 24, 2018

SAN FRANCISCO – The amended complaint of two plaintiffs against their former insurance provider in California under the Employee Retirement Income Security Act of 1974 (ERISA) has been dismissed by a federal judge.

Plaintiffs in the case, identified only as Brian H. and Alex H. with Alex being Brian's minor son, were suing California Physicians' Service, also called Blue Shield of California, along with TriNet Group. Their initial claim was filed in a state court in May but was later removed to the U.S. District Court for California's Northern District because their former insurance plan had been subject to ERISA.

In her order dated March 5, U.S. District Court Judge Maxine M. Chesney granted Blue Shield and TriNet's motion to dismiss the complaint following a hearing March 2. Blue Shield and TriNet's motion to dismiss included an alternative to strike because the plaintiffs were no longer plan members and because they had other remedies at hand, according to the motion.

"The court having considered the parties' respective written submissions and the arguments of counsel at the hearing, as well as having explored with counsel any potentially viable basis for amendment, the motion is, for the reasons stated on the record at the hearing, hereby granted," Chesney said in her single-page order.

The case is rooted in Blue Shield's denial of a claim for Alex H.'s care in a residential treatment facility, where he'd been admitted for severe depression and anxiety, according to the Jan. 23 motion to dismiss. The care was provided because the plaintiffs were receiving federal Consolidated Omnibus Budget Reconciliation Act, or COBRA, benefits, according to the motion to dismiss. 

The plaintiff's earlier complaint had been dismissed on preemption grounds under ERISA, which led to their first amended complaint "stating a colorable first cause of action for benefits under ERISA," the motion to dismiss said.

"Blue Shield believes that claim is unmeritorious but does not challenge it at this stage," the motion to dismiss states.

The motion to dismiss was based on Blue Shield and TriNet's claim that the plaintiffs failed to state a claim for relief, that they "do not and cannot allege any wrongful conduct beyond the handling of their own claim for benefits" and that they couldn't prove allegations of breached fiduciary duty.

In their amended claim, the plaintiffs "essentially ask the court to cancel the contract that Brian's former co-employer, TriNet, has chosen to enter into with Blue Shield to provide health care coverage to thousands of TriNet co-employees and their families," the motion said. "What is the conduct that, in plaintiffs' view, compels this drastic judicial intervention in private contracts? It is the same conduct that gave rise to their claim for benefits: Plaintiffs disagree with Blue Shield's claim decision that residential treatment was not medically necessary for Alex."

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Blue Shield TriNet U.S. District Court for the Northern District of California

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