United States District Court, N.D. Iowa, Western Division
ORDER ON BENEFITS CLAIM REVIEW
LEONARD T. STRAND, CHIEF JUDGE
Avera McKennan (Avera), as assignee of Juan Pablo Garcia
Marquez a/k/a Gilberto Fuentes (Marquez), seeks judicial
review of the denial of Marquez's claim for benefits
under the Meadowvale Dairy Employee Benefit Plan (the Plan),
which is administered by Meadowvale Dairy, LLC (Meadowvale).
This Court has jurisdiction to review Meadowvale's denial
of Marquez's claim under the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. §§ et seq.
Oral argument is not necessary. See N.D. Iowa L.R.
a South Dakota nonprofit corporation that operates a hospital
in Sioux Falls, South Dakota, filed its complaint (Doc. No.
1) on February 12, 2018. After I denied the defendants'
motion to dismiss for lack of standing and failure to exhaust
administrative remedies, the parties submitted merits briefs
(Doc. Nos. 27, 40, 47) and filed a joint administrative
record. Doc. Nos. 22, 40-1. This matter is now
ready for a decision.
Plan is a self-insured employee benefits plan. Doc. No. 17 at
¶ 3. Meadowvale, an Iowa corporation with its principal
place of business in Rock Valley, Iowa, sponsored the Plan on
December 1, 2014. Id. at ¶ 6; Doc. No. 17-3.
The Plan was subsequently amended and restated on February
10, 2016, with an effective date of December 1, 2015. Doc.
Nos. 17 at ¶ 6; Doc. No. 17-1; Doc. No. 17-2. The Plan
is intended to qualify as a welfare benefit plan under ERISA.
Doc. No. 17-3 at 2. Under the terms of the Plan,
A full-time Employee of the Employer who regularly works 30
or more hours per week will be eligible for coverage under
this Plan once he/she completes a waiting period of 60 days
from the date he or she completes at least one hour of
service with the Employer. Participation in the Plan will
begin as of the first day of the month following completion
of the waiting period provided all required election and
enrollment forms are properly submitted to the Plan
Doc. No. 17 at ¶ 7. Coverage begins “as of the
first day of the month following completion of the waiting
period provided all required election and enrollment forms
are properly submitted to the Plan administrator.”
Id. at ¶ 8.
was employed by Meadowvale from September 30, 2015, until
January 2016, when he began receiving treatment for
Guillain-Barre Syndrome, a rapid-onset muscle weakness
disease that ultimately left Marquez paralyzed. Id.
at ¶¶ 9-11. Marquez was treated at Avera, where he
incurred medical expenses in the amount of $760, 713.45,
excluding interest, prior to his death. Id. at
¶ 12. As a full-time employee of Meadowvale, Marquez
enrolled in the Plan. Id. at ¶ 10. As a result,
the Plan submitted payment for some of Marquez' medical
expenses. Id. at 14.
Marquez was being treated, it was discovered that he was an
undocumented immigrant and that he had enrolled in the Plan
using a false name and social security number. On April 12,
2016, the Administrator - through Meadowvale CFO Nathan
Jansen - sent Marquez a letter stating “effective May
13 your coverage under the Plan will be rescinded retroactive
to 9/30/15.” Id. at ¶ 15. The proffered
reason for rescinding coverage was that Marquez had falsely
misrepresented his identity to Meadowvale. Doc. No. 13-1 at
Plan permits rescission of coverage on the following terms:
of Employee Coverage
under the Plan will terminate on the earliest of the
(4) The end of the month in which you cease to be eligible
for coverage under the plan.
(5) The end of the month in which you terminate employment or
cease to be included in an eligible class of Employees.
(6) The date you (or any person seeking coverage on your
behalf) performs an act, practice or omission that
(7) The date you (or any person seeking coverage on your
behalf) makes an intentional misrepresentation of a material
Doc. No. 17-1 at 14.
Termination of Coverage
Except in cases where you fail to pay any required
contribution to the cost of coverage, the Plan will not
retroactively terminate coverage under the Plan unless you
(or a person seeking coverage on your behalf) performs an
act, practice, or omission that constitutes fraud with
respect to the Plan or unless the individual makes an
intentional misrepresentation of material fact. In such
cases, the Plan will provide at least 30 days advance written
notice to the individual affected before coverage will be
retroactively terminated. As provided above, coverage may be
retroactively terminated in cases where required employee
contributions have not been paid by the applicable deadline.
In those cases, no advance written notice is required.
is the assignee of Marquez' rights under the Plan. Doc.
No. 17 at ¶ 1. On May 10, 2016, Marquez purported to
assign “all of [his] rights, remedies, benefits . . .as
well as any and all causes of action that [he] might have now
or in the future against any Payer to the extent of [his]
medical charges, the right to prosecute such cause of action
either in [his] name or in the name of Avera” by
signing a document entitled “Partial Assignment of
Cause of Action, Assignment of Proceeds, Contractual Lien and
Treatment Agreement” (the Assignment). Id. at
¶ 15; see also Doc. No. 17-4. The relevant
language of the assignment is as follows:
Partial Assignment of the Cause of Action, Assignment
of Proceeds and Contractual Lien: I hereby assign,
in so far as permitted by law, all of my rights, remedies,
benefits to the office as well as any and all causes of
action that I might have now or in the future against any
Payer to the extent of my medical charges, the right to
prosecute such cause of action either in my name or in the
name of Avera, and the right to settle or otherwise resolve
such causes of action for my medical charges as Avera sees
fit. I further assign my right to receive any proceeds from
any Payer to Avera and further grant a contractual lien to
Avera with respect to any medical charges. . . . I understand
these assignments of rights and contractual lien may
effectuate, automatically or otherwise, a secured interest
under the applicable uniform commercial code. I intend for
this agreement to effectuate such a lien and hereby authorize
Avera to file the form(s) normally filed with the secretary
of state and other governmental agency in order to perfect
such lien. Except as provided herein, nothing in this
agreement shall be construed as an election or waiver by
Avera to a secured interest under any other statutory lien
Doc. No. 17-4 at 1.
Assignment is signed “Juan Pablo x GM.”
Id. at 4. The Assignment was actually signed by
Marquez' mother, Graciela Marquez, either pursuant to a
medical power of attorney or at Marquez' direction.
Marquez additionally signed a Durable Power of Attorney for
Health Care Decisions granting Graciela the ability to make
health care decisions (Id. at 5); an Authorization
for Release of Protected Health Information to Nominated
Health Care Attorney-In-Fact (Id. at 6); and a form
granting Marquez' “agent, ” among other
powers, “the power and authority to serve as my
personal representative for all purposes of the Health
Insurance Portability and Accountability Act of
1996.” Id. at 7.
assignment, Avera attempted to comply with the internal
appeals process. Doc. Nos. 18-1. Avera first contacted the
Administrator on July 21, 2016, to request, in accordance
with 29 U.S.C. § 1024(b), the documents it would need to
appeal the adverse benefit determination. Id. at
16-18. It appears that Avera's representative did not
identify to Meadowvale that he was acting on behalf of Avera
at that time. Id. at 16 (“Our firm has been
retained by [Marquez] . . .”). The Administrator denied
the request for documentation, citing a lack of proper
written authorization by the beneficiary. Id. at 21.
Plan provides that beneficiaries such as Marquez may appoint
a representative to contact the administrator to resolve a
A Covered Person is permitted to appoint an authorized
representative to act on his or her behalf with respect to a
benefit claim or appeal of a denial. An assignment of
benefits by a Covered Person to a provider will not
constitute appointment of that provider as an authorized
representative. To appoint such a representative, the Covered
Person must complete a form which can be obtained from the
Plan Administrator or the Third-Party Administrator. However,
in connection with a claim involving urgent care, the Plan
will permit a health care professional with knowledge of the
Covered Person's medical condition to act as the Covered
Person's authorized representative without completion of
AR 48. Avera responded on September 12, 2016, with a copy of
the Assignment as well as all other documents referenced
above, arguing that it did in fact have authorization to
request the documentation on behalf of Marquez. Id.
at 23. Although the Administrator denied that the Assignment
was valid or enforceable, it produced the documents on
September 30, 2016. Id. at 44-45. There is a dispute
as to whether the production of documents was timely.
Nevertheless, Avera submitted an appeal to the Administrator
within the Plan's 180-day deadline on October 6, 2016.
Id. at 2-9. Meadowvale denied the appeal on October
31, 2016, and denied a secondary appeal on December 16, 2017.
to the denial of benefits appeal decision, authored by
Meadowvale CEO Sjerp Ysselstein, Avera's appeal was
denied for three reasons:
First, Avera has no right to pursue this appeal because it is
not an authorized representative of Mr. Marquez/Fuentes. An
authorized representative is one who “has been
authorized to act on behalf of a claimant .
. .” 29 C.F.R. § 2560.503-1(b)(4) (emphasis
added). The Plan states that assignment of benefits to a
medical provider does not constitute appointment of that
provider as an authorized representative. See
Meadowvale Dairy Employee Benefit Plan, Plan Document and
Summary Plan Description p. 57. Instead, the Covered Person
must complete a form to designate an authorized
representative. Id. Since no form was completed,
Avera is not authorized to act on behalf of Mr.
Marquez/Fuentes or his estate.
Second, the assignment that Avera has submitted as part of
this appeal is not valid. It was not signed by Mr.
Marquez/Fuentes, and the person who allegedly signed it on
his behalf did not have the power to do so. The power of
attorney submitted by Avera in support of this assignment was
limited to health care decisions only, and was only effective
if Mr. Marquez/Fuentes was “unable, in the judgment of
[his] attending physician, to make . . . health care
decisions.” Further, Meadowvale believes this power of
attorney is invalid under Iowa law because it was witnessed
by an Avera employee. See Iowa Code. Ann. §
Finally, the appeal is denied because Mr. Marquez/Fuentes
submitted a false name and social security number to
Meadowvale. The Plan specifically states that coverage will
be terminated on the date that an employee “performs an
act, practice, or omission that constitutes fraud” or
“makes an intentional misrepresentation of a material
fact. See Meadowvale Dairy Employee Benefit Plan,
Plan Document and Summary plan Description p. 21. Retroactive
rescission under these circumstances is permitted under
federal law. 45 C.F.R. 147.128(a)(1).
Mr. Marquez/Fuentes' lack of proper documentation also
means that Meadowvale could not have legally employed him. As
the Meadowvale Dairy Employee Benefit Plan only covers
employees of Meadowvale, it is clear that Mr. Marquez/Fuentes
made an intentional misrepresentation of a material fact that
Doc. No. 18-3 at 1-2. The resolution of the second appeal,
authored by Ysselsteins' wife, Natalie Ysselstein, was
to the Plan's provisions, the Plan was required to follow