[00:00:00] Speaker 04: Reserved one minute for rebuttal. [00:00:01] Speaker 04: Okay. [00:00:01] Speaker 04: Thank you. [00:00:02] Speaker 04: May it please the court. [00:00:04] Speaker 04: I'd like to make three points this morning. [00:00:06] Speaker 04: First, that the application of the standard review that Stonova was simply an application of well-established Ninth Circuit law. [00:00:14] Speaker 04: It's point by point. [00:00:16] Speaker 04: The district court was wrong. [00:00:18] Speaker 04: Second, [00:00:19] Speaker 04: The pre-existing condition provision in the policy is not clear, plain, and conspicuous. [00:00:24] Speaker 04: It should have been declared void as a matter of law. [00:00:27] Speaker 04: That's a little more complicated because it requires an application of state law to the state statute and an application of federal law, the Saltarelli standard, to the policy itself. [00:00:39] Speaker 04: And it's a minor and very elementary expansion of the common law over at Saltarelli. [00:00:44] Speaker 04: The third point I want to make relates to remedies. [00:00:48] Speaker 04: Succeeding on these two points is success on the merits that warrants an award of fees. [00:00:54] Speaker 04: And on remand, the remand should be very narrow, given the procedural structure of the case. [00:00:59] Speaker 04: So the first issue, of course, is standard of review. [00:01:02] Speaker 01: Standard of review in this- With respect to your third point, I hadn't really thought about that. [00:01:05] Speaker 01: Supposing we agree with you on one of your two points and disagree with you on the other point, where does that leave? [00:01:16] Speaker 01: It depends on what you agree with and disagree with. [00:01:20] Speaker 04: Standard of review gets me a new hearing, but if the pre-existing condition provision is enforced, I'm going to lose. [00:01:31] Speaker 04: So that's a foregone conclusion. [00:01:33] Speaker 04: So I have to win pre-existing condition, but standard of review, I don't have to win. [00:01:37] Speaker 04: It goes one way or the other. [00:01:40] Speaker 02: What if we were to find, Mr. Rosetti, that the standard of review is de novo, as you request, but that the PCL, the pre-existing condition is valid? [00:01:52] Speaker 02: You lose? [00:01:53] Speaker 04: I lose. [00:01:54] Speaker 04: Because the evidence in the administrative record shows that virtually all of O'Connor's conditions are pre-existing. [00:02:00] Speaker 04: Factually, if the pre-existing condition provision is enforced, O'Connor has no chance of winning, as a practical matter. [00:02:08] Speaker 04: Got it. [00:02:09] Speaker 04: So standard review is simply application of existing law to the facts of this case. [00:02:16] Speaker 04: The policy does not reserve discretion. [00:02:19] Speaker 04: The amendatory writer to the policy does not reserve discretion. [00:02:22] Speaker 04: The collateral documents to the policy are not part of the policy. [00:02:25] Speaker 04: That's the whole point of the Zipper Clause. [00:02:28] Speaker 02: Let me ask you about that writer, because I know in it, it specifically says that Lena will be deciding claims for benefits. [00:02:35] Speaker 02: What do we make of that? [00:02:37] Speaker 04: That's virtually the same language that's in Sandy and in Ingram, and was held not to be sufficient to reserve discretion. [00:02:45] Speaker 04: So it doesn't reserve discretion. [00:02:46] Speaker 04: You can compare the language in the writer to the language in the appointment of claim fiduciary, where the appointment of claim fiduciary actually reserves discretion, but the language in the writer doesn't. [00:02:57] Speaker 04: There is a clear difference. [00:02:59] Speaker 04: And the difference is clearly articulated in the case law in Sandy and in Ingram, which have virtually identical facts. [00:03:07] Speaker 04: I think Ingram has virtually the same language, and the court said, no, this isn't good enough, because it isn't. [00:03:13] Speaker 04: So on existing law, that's done. [00:03:15] Speaker 04: The norm, of course, is because if I can incorporate into a policy [00:03:24] Speaker 04: collateral amendments or collateral documents that haven't been formally amended, I can argue that almost anything is part of a policy. [00:03:32] Speaker 04: The reason parties incorporate zipper clauses is to preclude that. [00:03:37] Speaker 04: It works both ways. [00:03:38] Speaker 04: It protects the insurance company and it protects the employee. [00:03:42] Speaker 04: But if it works for the insurance company, it works for me. [00:03:44] Speaker 04: They can't artificially amend the policy. [00:03:48] Speaker 04: They can't end around the procedural requirements for amending the policy. [00:03:54] Speaker 04: Apparently did. [00:03:55] Speaker 04: Winter out and Amara make it clear that if you want to amend the policy, you follow the rules that your amendment specifies. [00:04:02] Speaker 04: They didn't do that. [00:04:03] Speaker 04: So wrong standard review means reversal as a matter of law. [00:04:09] Speaker 04: Then it goes back to the district court. [00:04:11] Speaker 04: The other issue, of course, is the pre-ex. [00:04:13] Speaker 04: Pre-ex is a much more conceptually complicated issue, but it flows logically. [00:04:20] Speaker 04: Policy subject to Delaware law. [00:04:23] Speaker 04: Delaware law requires certain language in a pre-ex. [00:04:26] Speaker 04: This language doesn't track the language. [00:04:29] Speaker 04: We can fight over different points, but the ultimate point is part of this language says a reasonable person would have consulted a physician, which is the language of 3517, is not in substance. [00:04:42] Speaker 04: A reasonable person would have consulted a physician is the language in the policy, is not in some sense the same as medical advice or treatment received, which is the language in the statute. [00:04:53] Speaker 03: But why under Delaware law does that make the entire clause unenforceable rather than just the offending part of it? [00:05:03] Speaker 04: Well, that's it only under Delaware law, there are two possible remedies and one remedy is to avoid the entire clause. [00:05:11] Speaker 04: The other remedy is simply to conform the clause to the statute. [00:05:17] Speaker 04: So if you conform the clause to the statute, which is what Lena asked for, then you have to look at the next step. [00:05:21] Speaker 04: If you're conforming the clause to the statute, is the pre-ex now clear, plain, and conspicuous? [00:05:28] Speaker 04: If a lay person has to read a statute that's not in the policy, [00:05:33] Speaker 04: to understand what it means, how can that be clear, plain, and conspicuous? [00:05:37] Speaker 04: You're going to encounter this recurrently. [00:05:39] Speaker 04: We encounter this in California with the statute that deals with exclusions for alcohol and substance abuse. [00:05:47] Speaker 04: And I've argued in district courts that when the statute doesn't track, when the policy exclusion doesn't track the statute, it's a void. [00:05:55] Speaker 03: So I see. [00:05:56] Speaker 03: So you're saying if you have to excise part [00:06:01] Speaker 03: part of the language, then it can't be clear to the average person reading it. [00:06:08] Speaker 04: Saltarelli said, even though the exclusion was actually in the policy, it was so awkwardly written that nobody could understand it. [00:06:17] Speaker 04: The Lancaster court said the exclusion couldn't be found in the policy, and therefore it was not clear plain and conspicuous. [00:06:24] Speaker 04: I'm simply expanding from Saltarelli and Lancaster and saying, look, if in fact you have to send [00:06:30] Speaker 04: the layperson to read a statute to understand what the exclusion means, how can it be clear, plain, and conspicuous? [00:06:36] Speaker 04: It isn't. [00:06:37] Speaker 04: The layperson's not assumed to go reading statutes and understanding their significance. [00:06:42] Speaker 04: So the logic here is once you apply the statute to conform the language of the pre-ex to the statute, it's no longer clear. [00:06:53] Speaker 04: Because otherwise, you have to have, I mean, by definition, you have to look somewhere else. [00:06:58] Speaker 04: And again, that's a logical extension of Saltarelli and Lancaster, because after all, if a lay person can't find the exclusion, and the defense says, look, it's right there. [00:07:08] Speaker 04: It says we exclude pre-existing conditions, but it doesn't tell you what the pre-ex is if you have to conform it. [00:07:14] Speaker 04: It gives you a false representation of what the pre-ex is. [00:07:18] Speaker 04: The argument I made in the opening brief was, look, [00:07:21] Speaker 04: If the speed sign says you're going 40 and you're driving 35 and you get a ticket because the actual speed limit is 25, you've got to read the statute to know that when the sign says 40, it means 25. [00:07:32] Speaker 04: That's not clear. [00:07:33] Speaker 04: This is clearly not clear because you have to send a lay person to read the statute. [00:07:42] Speaker 04: And even for lawyers, it's not clear. [00:07:43] Speaker 04: Most of the cases in the Ninth Circuit and district courts in the Ninth Circuit that deal with this issue have dealt with [00:07:51] Speaker 04: Language that's not clearly articulated in the text of the policy or not clearly identified in the text of the policy But this is different and the difference is it's not actually in the policy so yes, you have to conform the non-conforming language of the agreement to the statute, but once you do that and [00:08:11] Speaker 04: It's not clear, by definition, because it's not there. [00:08:13] Speaker 02: Counsel, does it matter that the provision that you argued about in your moving papers, the reasonable person provision, that's not the reason, that's not the basis for Lena's denial of coverage? [00:08:29] Speaker 04: Doesn't matter at all. [00:08:30] Speaker 04: The basis for Lena's denial of coverage is the pre-existing condition provision. [00:08:35] Speaker 04: If the provision's not enforceable, their reasons don't stand. [00:08:38] Speaker 04: The reason the provision is not enforceable is because it's not clear plain and conspicuous. [00:08:43] Speaker 04: They want to say, well, we can carve out the part that we're actually relying upon, but that doesn't answer the question of whether a lay person could understand the provision. [00:08:52] Speaker 04: The Ninth Circuit in Saltarelli, this court in Saltarelli didn't say you should have been able to understand it because it wasn't there. [00:08:59] Speaker 04: I have ten seconds left. [00:09:02] Speaker 04: Remedies are I want fees and on remand they can't get a do over because [00:09:08] Speaker 04: They've already had their opportunity. [00:09:09] Speaker 04: They can't offer new evidence and new arguments. [00:09:12] Speaker 04: And I'll reserve my minute. [00:09:13] Speaker 04: OK. [00:09:13] Speaker 03: Yeah, we'll put a minute on the clock for rebuttal. [00:09:16] Speaker 03: Thank you. [00:09:32] Speaker 00: Thank you, Judge Thomas, and may it please the court. [00:09:35] Speaker 00: My name is Caleb Waldenek, and I represent the Life Insurance Company of North America. [00:09:39] Speaker 00: The Supreme Court has stressed the particular importance of enforcing an ERISA plan as written. [00:09:43] Speaker 00: The plaintiff would have this court eliminate and ignore entire provisions of the plan that HRL Laboratories created. [00:09:50] Speaker 00: Because plaintiff's case comes down to, as my friend conceded this morning, to eliminating the pre-existing condition limitation altogether. [00:09:58] Speaker 00: I'd like to start there. [00:09:58] Speaker 00: I am, of course, happy to talk about why the district court was right on the appointment of claim fiduciary. [00:10:06] Speaker 00: On the pre-existing condition limitation, plaintiff is essentially making a facial attack and seeks to eliminate it altogether. [00:10:13] Speaker 00: That's wrong for four reasons. [00:10:15] Speaker 00: One is that the Delaware Insurance Commissioner approved the relevant language over 25 years ago. [00:10:19] Speaker 00: Second is that the limitation in the policy complies with the statute. [00:10:23] Speaker 00: There's certainly judge to all buzz as you pointed out There's no relevant different from the facts here plaintiff isn't we're not arguing that plaintiff should have seen a physician Plaintiff did in fact see a physician multiple times multiple physicians throughout the look-back period counsel Let me interrupt you and just ask you really quickly to address Mr.. Rosati's argument that this is like having someone driving by and [00:10:47] Speaker 02: They think that the speed limit's 40 because that's what's posted. [00:10:50] Speaker 02: But then they get pulled over because the speed limit is really 25. [00:10:54] Speaker 02: So here, I know the example doesn't track exactly because, again, that wasn't the basis for Lena's denial. [00:11:02] Speaker 02: But what is Miss O'Connor to do when trying to determine whether or not the preexisting condition even applies? [00:11:12] Speaker 00: So I think plaintiff has it exactly backwards on that hypothetical. [00:11:15] Speaker 00: It's not that the speed limit's 40, but you get pulled over for going 25. [00:11:19] Speaker 00: Assuming this hypothetical applies, this posted speed limit's more like 30. [00:11:25] Speaker 00: The actual law says 40, but you get pulled over. [00:11:28] Speaker 00: Sorry, it's posted as being 40. [00:11:32] Speaker 00: Then you get pulled over for going 70. [00:11:35] Speaker 00: It doesn't matter here. [00:11:39] Speaker 00: posted speed limit is actually lower or greater, it doesn't make a difference here, and it certainly wouldn't mean that there's no speed limit on the road at all. [00:11:50] Speaker 00: You could reasonably expect that you could go the speed limit that's posted. [00:11:56] Speaker 00: If it turns out the law is actually higher and it's posted as [00:11:59] Speaker 00: 30 and you were going 40, whatever. [00:12:03] Speaker 00: I'm not sorry. [00:12:05] Speaker 00: I understand. [00:12:06] Speaker 00: If you're way over, it doesn't matter. [00:12:09] Speaker 00: And the point that I'm trying to get at is that, if anything, the statute would give plaintiff a little bit more. [00:12:18] Speaker 00: The statute is not giving, is not taking away something that the policy would otherwise give. [00:12:25] Speaker 00: It's not constricting in any way. [00:12:27] Speaker 00: It's liberalizing. [00:12:28] Speaker 00: If you read the policy through the statutory lens, potentially, if there were a relevant difference, it could give plaintiff a little bit more. [00:12:36] Speaker 00: But plaintiff's reasonable expectations are the ones drawn from the four corners of the text. [00:12:41] Speaker 00: The reasonable expectations doctrine is an objective inquiry based on the text of the policy, and any reasonable person reading the policy would know that there's a pre-existing condition limitation. [00:12:51] Speaker 00: It's under a boldface limitations heading in all caps, a boldface pre-existing condition limitation subheading. [00:12:58] Speaker 00: That is what a reasonable expectation person would expect to have. [00:13:02] Speaker 00: If there's some mismatch between the policy and the statute, the limitation doesn't drop out altogether. [00:13:08] Speaker 00: You would simply read the policy through the statutory lens. [00:13:11] Speaker 00: If there's something in the statute that plaintiff is entitled to, plaintiff would receive the benefits of that. [00:13:17] Speaker 00: But if something's within the heartland of a pre-existing addition limitation, as plaintiff, as this case is, the limitation wouldn't go out altogether. [00:13:24] Speaker 00: And plaintiff is inside a single case where the court applied the reasonable expectations doctrine in a way that took away something that either preserved the status quo or gave plaintiff a little bit more. [00:13:39] Speaker 00: All of the cases are about unfairly depriving the insured of what they would have reasonably expected reading the terms of the policy. [00:13:47] Speaker 00: Something's in one point font upside down on the back page. [00:13:51] Speaker 00: There's no way to enforce that. [00:13:53] Speaker 00: That's not what a reasonable person would expect to have. [00:13:56] Speaker 00: But if a statute says that actually we need to not look at that provision, that particular term can't apply, that's not a basis for eliminating the condition altogether. [00:14:09] Speaker 00: And we cited on page 44 of our brief a number of state court decisions [00:14:14] Speaker 00: doing a very similar thing. [00:14:15] Speaker 00: You've got a statute that limits what the policy can do, and the court recognizes we're going to apply the statute, give it the benefit of the statute, but otherwise we're going to enforce the terms as written. [00:14:26] Speaker 00: That's what the reasonable expectations doctrine does, and there's a backstop here. [00:14:29] Speaker 00: It's not that insurers are going to be able to include unfair or, you know, skirt the laws. [00:14:37] Speaker 00: These have to be approved by the commissioner, and the commissioner here [00:14:41] Speaker 00: Approve the form by operational law over 25 years ago. [00:14:45] Speaker 00: There's no evidence to the contrary And the Commissioner is the one that sits atop this extensive regulatory scheme and in section 35 12 in section 27 14 of the Delaware Code it's those standards for approval of forms are shot through with discretion the talk about providing a [00:15:02] Speaker 00: In substance what the statute requires provisions that in the opinion of the commissioner are not less favorable that is a pretty expansive grant of discretion to the commission who's elected by the people of Delaware to to make these decisions and the legislature [00:15:20] Speaker 00: gives the commissioner the power to make those decisions. [00:15:25] Speaker 00: I don't think the court should presume that the commissioner is asleep at the switch. [00:15:28] Speaker 02: Let me ask you this. [00:15:30] Speaker 02: Do you agree with your friend on the other side that if we enforce the limiting provision, the PECL, their case is done? [00:15:40] Speaker 02: Is it dispositive? [00:15:42] Speaker 00: Yes, that is dispositive. [00:15:43] Speaker 00: If this court applies the pre-existing condition limitation, whether through the statutory lens or not, [00:15:47] Speaker 00: This case is over. [00:15:48] Speaker 00: Plaintiff said that on page one of the reply brief. [00:15:51] Speaker 00: There would be no need to reach the standard of review question about de novo or abuse of discretion because Plaintiff received medical treatment on multiple occasions from multiple physicians throughout the look back period for the very same conditions that Plaintiff said are pre-existing. [00:16:07] Speaker 02: What in your mind are the plan documents? [00:16:11] Speaker 00: So the plan here is the policy and the ACF taken together. [00:16:14] Speaker 00: The inventory writer that you pointed out [00:16:17] Speaker 00: It says that Lana has been appointed as the claim fiduciary. [00:16:20] Speaker 00: That is what happened in the appointment of claim fiduciary form. [00:16:23] Speaker 00: That document uses mandatory effective language that Lana shall have discretion, that it is hereby appointed and hereby accepts that appointment. [00:16:32] Speaker 00: The effective dates are in lockstep with the policy. [00:16:35] Speaker 00: Those documents are read together from the start and that forms the plan at the outset. [00:16:41] Speaker 02: Was the ACF attached to the policy? [00:16:43] Speaker 00: It is part of the administrative record so it's attached in that way. [00:16:48] Speaker 00: It does apply to four different policies listed at the bottom of the ACF and so it's part of the administrative record. [00:16:56] Speaker 00: It's with the policy. [00:16:57] Speaker 00: It's certainly approved by Lina. [00:16:59] Speaker 00: And there's, but there's no need for it to actually be an amendment. [00:17:02] Speaker 00: We think it meets the requirements for an amendment to the policy, but there's no need for it to be an amendment because it's from, it's a plan, part of the plan from the outset that's based on the substance of the form with the mandatory effective language. [00:17:16] Speaker 00: It's also the structure of the document. [00:17:19] Speaker 00: It's signed by HRL Laboratories Human Resources Director for the plan. [00:17:23] Speaker 00: It says that he's authorized to amend [00:17:25] Speaker 00: The plan, again, the inventory writer then refers to that conferral, that appointment as a claim fiduciary. [00:17:33] Speaker 00: There's no conflict between the policy and the ACF here. [00:17:37] Speaker 00: They're read together. [00:17:38] Speaker 00: And then the summary plan description puts a bow on all of this. [00:17:42] Speaker 00: And while that's not itself a plan document, it is a relevant consideration. [00:17:46] Speaker 00: It's a mandatory disclosure. [00:17:48] Speaker 00: It's supposed to be sufficiently comprehensive to describe the terms of the plan. [00:17:53] Speaker 00: It's often the only document that is affirmatively sent out to participants. [00:17:57] Speaker 00: It's the summary plan description. [00:17:58] Speaker 00: And here, on page 139 of the record, it shows, it says that Lana has discretion, that it's been appointed as the claim fiduciary. [00:18:06] Speaker 00: So the policy, the ACF, the summary plan description, they're all talking to each other and they're all pointing in the same direction, is that Lana has discretion. [00:18:15] Speaker 00: That's the form, that is the type of plan that HR laboratories created and they have the authority to craft that plan as they see fit. [00:18:27] Speaker 00: And the Seventh Circuit agreed in Rayburn. [00:18:29] Speaker 00: A number of district courts have agreed. [00:18:31] Speaker 00: The Eighth Circuit, although it's a somewhat different decision, agreed that the appointment of claim fiduciary is a valid conferral discretion. [00:18:39] Speaker 00: There's certainly no reason to create a circuit split over the appointment of claim fiduciary, but there's also no need to reach. [00:18:45] Speaker 00: the appointment of claim fiduciary issue. [00:18:47] Speaker 00: On remedies, the idea that because the pre-existing condition limitation in the policy is, if this court were to disagree with me on every step of the analysis that the appointment, the approval by the commissioner doesn't matter, that it violates the statute, that that violation matters, that Delaware law isn't sufficient to resolve the question, that the reasonable expectation doctrine means that the policy drops out altogether. [00:19:14] Speaker 00: That is not something that we could have reasonably anticipated. [00:19:16] Speaker 00: And I don't see anything in this court's case law that says that Lina would have to engage in hypothetical analysis about whether other things are met if down the road the court were to invalidate the terms of the policy. [00:19:33] Speaker 00: That would just be something that we would reconsider. [00:19:36] Speaker 00: I see my time has expired. [00:19:38] Speaker 03: Thank you. [00:19:45] Speaker 04: Thank you again. [00:19:46] Speaker 04: On the appointment of claim fiduciary, it says it's not an amendment. [00:19:49] Speaker 04: It says it authorizes an amendment. [00:19:51] Speaker 04: It is an enabling document just like the document relied upon or not relied upon in Cinelli. [00:19:57] Speaker 04: On the issue of the Delaware Insurance Commissioner, Delaware does not enforce illegal provisions. [00:20:04] Speaker 04: The Delaware Supreme Court talked about this in Monsoluski in 1955. [00:20:08] Speaker 04: It said even though the commissioner approved the form by inaction, we don't enforce illegal provisions. [00:20:17] Speaker 04: So that question is settled law in Delaware. [00:20:19] Speaker 04: If the provision does not conform to law, it's not enforced. [00:20:23] Speaker 04: The issue of what in fact is the pre-existing condition. [00:20:29] Speaker 04: Their argument is, look, we're not relying upon that clause. [00:20:32] Speaker 04: If the pre-exes void. [00:20:34] Speaker 04: The issue is you enforce the statute pursuant to Delaware law, you enforce the policy pursuant to federal law. [00:20:41] Speaker 04: Federal law says a provision that's not clear plain and conspicuous is void. [00:20:45] Speaker 04: Once you declare the provision void, none of it's enforceable. [00:20:49] Speaker 04: That's my point. [00:20:50] Speaker 04: And you should declare the entire provision void because no lay person can find its terms unless they look to the statute. [00:20:59] Speaker 04: Do you have any questions in my? [00:21:00] Speaker 03: Any other questions? [00:21:01] Speaker 03: Thank you very much. [00:21:02] Speaker 03: Thank you. [00:21:03] Speaker 03: I thank both counsel for their very helpful arguments this morning. [00:21:06] Speaker 03: This case is submitted.