Shelby County Health Care Corporation v. The Majestic Star Casino LLC Group Health Benefit Plan

In 2005 Damon Weatherspoon was injured in an automobile accident and received treatment costing $400,000. At the time of the accident, Weatherspoon was enrolled in the Majestic Star Casino LLC Group Health Benefit Plan (the plan administrator) (defendant). Weatherspoon submitted a claim and contracted with the Shelby County Health Care Corporation (the Med) (plaintiff) to pursue his health benefits under the plan. A third party with whom the plan administrator contracted with to investigate claims, Benefit Administrative Systems Ltd. (Benefit Systems), reviewed Weatherspoon’s accident report. The accident report stated that Weatherspoon was driving without insurance and without a license and that Weatherspoon was possibly under the influence of alcohol. Based on this information, Benefit Systems determined that Weatherspoon was ineligible for benefits because of the plan’s illegal-act provision. This provision stated that the plan administrator was not liable to cover costs caused by participating in an illegal act but did not define what constituted an illegal act. Benefit Systems then drafted a letter to inform the Med that Weatherspoon’s claim was denied because he had driven without insurance and without a license. Benefit Systems stated that its decision was not based on the allegation of driving under the influence, because that allegation had not been verified. Benefit Systems sent the letter to the plan administrator for approval and then to the Med. After receiving the letter, the Med filed an action in federal district court against the plan administrator to challenge the decision. The plan administrator argued that the plan’s terms gave it sole discretionary authority to interpret the provisions and determine benefit eligibility. The district court held that Benefit Systems, not the plan administrator, had made the decision to deny Weatherspoon’s benefits. Therefore, the district court reviewed the case using the de novo standard. The district court determined that Weatherspoon should not have been denied benefits, because there was no indication that his injuries had been caused by driving without insurance or a license. The plan administrator appealed.