GRSM Obtains Complete Dismissal of Stop-Loss Reimbursement Claims in ERISA Dispute

The court held that the plaintiff health plan failed to state plausible claims under both ERISA Section 502(a)(3) and state contract law for more than $2.5 million in disputed stop-loss reimbursement. The ruling turned on the court’s interpretation of unambiguous stop-loss policy language defining when medical expenses are “incurred” and which participants qualify as “covered persons” eligible for reimbursement.

The dispute arose when a plan participant’s health coverage terminated due to non-payment, but his hospitalization, which began while he was still covered, continued for more than three months after termination. The health plan paid substantial post-termination medical bills and sought reimbursement from GRSM’s client, arguing the expenses should be covered under creative theories involving DRG bundling and policy “run-in” provisions.

The GRSM team successfully demonstrated that the stop-loss policy’s plain language excluded post-termination expenses for ineligible participants. The court agreed that the plaintiff’s ERISA claim impermissibly sought legal relief, monetary reimbursement characterized as “quintessentially an action at law,” rather than the equitable relief required under Section 502(a)(3). On the breach of contract claim, the court held that once the participant’s eligibility ended, all subsequent medical expenses fell outside the policy’s coverage as a matter of law, and the court rejected the plaintiff’s DRG and run-in arguments as inconsistent with the policy’s unambiguous terms.

The GRSM team argued that any amendment would be futile given the policy’s clear language and the allegations in the complaint. The court agreed, granting dismissal with prejudice. This final dismissal bars the plaintiff from re-pleading these claims and completely removes GRSM’s client from the litigation without incurring any discovery costs.