Court upholds ruling that United Healthcare violated ERISA for years, but denies fees to insured

John Butler sued United Healthcare after it denied inpatient coverage for his wife's treatment of alcoholism.  Even though she had exhausted all other interim measures and forms of treatment and had complied with the insurance policy requirements, and even though her doctors confirmed the necessity of the inpatient treatment, United Healthcare delayed payment for several years.  Butler first pursued administrative remedies and then eventually sued, claiming a violation of ERISA.

The District Judge looked at the factual record and questioned whether United Healthcare had complied with its own policy language and whether it had relied upon an "independent medical examination [IME]" based on the true medical record.  The Judge was incensed when United delayed the case for several more years, while continuing to decline coverage, by seeking additional IME's that were jury-rigged to decide against Butler and coverage.  Almost nine years after the admission occurred, the judge not only ruled that United Healthcare had been "arbitrary and capricious," but also ruled that it owed Butler the cost of the admission and almost $100,000.00 in penalties.  United Healthcare appealed. The Court of Appeals ruled that United Healthcare had failed to give the Butlers a "full and fair" review, that its denial of coverage was arbitrary and wrong,and that its conduct of the case was basically despicable.  Nevertheless, it overturned the statutory $100.00 per day penalty provided by statute because United was not the "plan administrator" by statute:  even though United called itself the "plan administrator," the court held that United meant only that it was the "claims administrator."