Surrogate Mother Fails to Impose State Definitions to Make Plan Pay for Delivery

A plan participant cannot pick definitions from various state or federal statutes and impose them on an employer-sponsored health plan where the plan left terms undefined, if the plan applies a common and ordinary meaning to those terms when asked to justify a claims denial.

Applying this rule, a Michigan appeals court affirmed a lower state court’s ruling upholding a plan’s benefits denial for a surrogate mother’s delivery of triplets. (Spectrum Health v. Lehr, No. 298688, (Mich. App., Sept. 8, 2011).)

Background

Stephanie Jean Lehr got pregnant with triplets after being implanted with embryos created by another couple. Spectrum Health Hospital (Spectrum) treated Lehr during her pregnancy.

Lehr’s health plan denied coverage for Spectrum’s services because it did not cover charges incurred for deliveries by a surrogate mother.

After Spectrum sued Lehr to get her to pay for its services, Lehr in turn filed an ERISA complaint against NGS American, Inc., the plan’s claim administrator, asserting breach of fiduciary duty, declaratory relief and recovery of insurance benefits.

The Decision

The lower court dismissed Lehr’s case, saying she had no genuine issue of material fact. She appealed. The Michigan appeals court reviewed the trial court’s decision.

Initially, the appeals court got rid of a set of procedural objections to the district court’s ruling. It affirmed that the trial court did not have subject matter jurisdiction over Lehr’s breach-of-fiduciary duty claim under ERISA. But it would not overturn the trial court’s dismissal of Lehr’s claims for benefits and declaratory relief, because those were based on the district court’s review of the merits of the case, and not because the district court said it lacked subject matter jurisdiction over those claims.

The appeals court moved on to the claims decision itself.

Because the plan had reserved discretionary authority for itself in the plan document, the appeals court would review the claims decision under an abuse-of-discretion standard.

There was no definition for the term “surrogate mother” in the plan. Instead, NGS looked to the Merriam-Webster Dictionary and the Wikipedia encyclopedia to define “surrogate mother.”

The use of Wikipedia by the plan was deemed questionable and not allowed by the court (because users can edit Wikipedia’s content). But court considered the Merriam-Webster dictionary to be a legitimate source.

The dictionary defined a surrogate mother as “implantation of a fertilized egg for the purpose of carrying the fetus to term for another woman.” The court said that was an acceptable source for NGS to obtain an ordinary meaning, and the definition NGS used was an acceptable plain and ordinary meaning for “surrogate mother.”

Under recent ERISA case law: (1) ERISA requires that benefit plans must be written in a manner calculated to be understood by the average plan participant; and (2) when interpreting ERISA plan provisions, “a plan administrator must adhere to the plain meaning of its language, as it would be construed by an ordinary person, the court said.

Lehr contended that the claims administrator’s interpretation of “surrogate mother” was arbitrary and capricious because it did not resort to Michigan’s Surrogate Parenting Act’s definition of “surrogate mother.” That definition — at MCL 722.853(h) — says:

“Surrogate mother” means a female who is naturally or artificially inseminated and who subsequently gestates a child conceived through the insemination pursuant to a surrogate parentage contract.

The appeals court said that the trial court should not be obligated to use the Surrogate Parenting Act’s definition outside of the context of that act, which actually might not be the “plain and ordinary meaning” that could be used in an ERISA case.

It also rejected Lehr’s presumption that if a statute defines a term, such a definition must supersede a common or dictionary definition of the term. Therefore, the trial court was not required to apply the Surrogate Parenting Act’s definition of “surrogate mother” and the appeals court held the ERISA plan did not apply an arbitrary or capricious definition.

The court also rejected Lehr’s contention that the Michigan’s Estates and Protected Individuals Code (starting at MCL 700.1101), would define her as the natural mother of the triplets.

This also led the appeals court to reject the notion: (1) that the denial was arbitrary; and (2) that the plan was liable for her pregnancy expenses.