Pacific Shores Hospital v. UBH

When entrusted with a fiduciary duty, fiduciaries must perform their duties with “care, skill, prudence, and diligence under the circumstances” compared with that of a reasonable person in a like position.

Jane Jones, an employee of Wells Fargo, was insured under the company plan (“Plan”). The third-party administrator of the Plan was United Behavioral Health (“UBH”). Jones was hospitalized at Pacific Shores Hospital (“PSH”) for anorexia nervosa. UBH refused to pay for the hospitalization of Jones. The hospital then sued the Plan and UBH, seeking payment for the treatment that Jones received while hospitalized. On review, the Ninth Circuit held that UBH improperly withheld funds, violating its fiduciary duty to Jones. The panel noted that “[a] plan administrator abuses its discretion if it renders a decision without any explanation, construes provisions of the plan in a way that conflict with the plain language of the plan, or fails to develop facts necessary to is determination.” The Plan that Jones was insured under met the UBH guidelines for coverage of PSH costs, but UBH found that Jones’s medical attention did not meet the ten specifications established for continued service under UBH’s guidelines. However, the panel held that UBH was still responsible for coverage because “coverage for acute inpatient treatment is indicated whenever any one of the six criteria for that level of care is met . . . satisf[ying] all ten of the continued service criteria.” Additionally, UBH had a fiduciary duty to Jones under the Employee Retirement Income Security Act of 1974. UBH did not discharge its duty with “care, skill, prudence, or diligence under the circumstances presented” to inquire further in the matter Jones. Accordingly, the panel found that UBH improperly denied benefits to Jones. REVERSED.