Tenth Circuit Rules Against ‘Rascally’ WABIT

     
     (CN) – The 10th Circuit invoked the age-old feud between Bugs Bunny and Elmer Fudd in a ruling Friday, saying the Wyoming Associated Builders Insurance Trust (WABIT) can’t use a “rascally pretext” to deny health insurance to a worker diagnosed with bone cancer.




     Scott Phelan, 26, was a member of Wyoming Associated Builders when he received the diagnosis. Just before he submitted a large claim for cancer treatment in December 2006, the association terminated his employer’s membership in WABIT, purportedly because the employer had submitted a late payment that wasn’t a cashier’s check.
     Phelan sued his employer, Lock Shop, and the association, demanding equitable relief under the Employee Retirement Income Security Act (ERISA). Equitable relief is usually a form of judgment that doesn’t involve monetary damages. Compensatory damages are not considered equitable relief.
     The district court ordered retroactive reinstatement of Lock Shop’s health-care coverage as an equitable remedy. The association appealed, arguing that it had reasonably interpreted “received” to mean “posted” in determining the payment’s tardiness.
     “While WAB’s interpretation of policy language might have been within some objective zone of reasonableness, it would most certainly not be reasonable to adopt this reasoning as a rascally pretext for avoiding the expensive claim of one of its beneficiaries,” Judge McConnell wrote.
     But that was exactly what the association tried to do, according to the district court.
     “Accepting the district court’s factual determination that Lock Shop’s termination was an attempt to avoid payment on Mr. Phelan’s claim,” McConnell added, “we agree that the termination was arbitrary and capricious and that reinstatement of Lock Shop’s December coverage was an appropriate equitable remedy.”
     The court also rejected the association’s claim that retroactive reinstatement was a legal remedy barred by ERISA, rather than a permissible equitable remedy.
     Judge McConnell acknowledged that retrospective remedies are typically considered legal remedies, but noted that “reinstatement of the Lock Shop policy in this case would have prospective effect.” The remedy applied to all Lock Shop employees, and Phelan’s own claims hinged on a number of contingencies, including Lock Shop’s ability to pay its December premium and the timeliness of Phelan’s claims.
     “All of this shows that the true yardstick of the court’s remedy was not Mr. Phelan’s past injuries but rather WAB’s prospective gain,” the court wrote.
     “By ordering reinstatement,” McConnell added, “the court was not ordering WAB to reimburse Mr. Phelan for his past losses, even if such a reimbursement might very well be one practical consequence of the reinstatement.”

%d bloggers like this: