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United States District Court 

For the Northern District of California 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

JEANENE HARLICK, 

Plaintiff, 

v. 

BLUE SHIELD OF CALIFORNIA GROUP 

HEALTH PLAN; PACIFIC CONSTRUCTION 

& MANUFACTURING, INC. GROUP HEALTH 

PLAN, 

Defendants. 

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Case No. 08-3651 SC 

ORDER RE: CROSS MOTIONS FOR 

SUMMARY JUDGMENT

I. INTRODUCTION

 This matter comes before the Court on the parties' crossmotions for summary judgment. On January 15, 2010, Defendant 

California Physicians' Service d/b/a Blue Shield of California 

("Defendant" or "Blue Shield") filed a Motion for Summary Judgment. 

Docket No. 45 ("Def.'s MSJ"). On the same day, Plaintiff Jeanene 

Harlick ("Plaintiff" or "Harlick") filed a Motion for Summary 

Judgment. Docket No. 48 ("Pl.'s MSJ"). Both parties filed 

oppositions and replies. Docket Nos. 53 ("Pl.'s Opp'n"), 54 

("Def.'s Opp'n"), 61 ("Def.'s Reply"), 64 ("Pl.'s Reply). Having 

considered the submissions from both parties, the Court GRANTS Blue 

Shield's Motion for Summary Judgment and DENIES Harlick's Motion 

for Summary Judgment. 

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II. BACKGROUND

A. The Plan

Effective June 1, 2006, Blue Shield and Pacific Construction & 

Manufacturing, Inc. ("Pacific Construction") entered into a Group 

Health Service Contract. Claim File ("CF") at BSC128-149.1 Among 

the benefits available to participants in the Pacific Construction 

Plan was the Blue Shield Spectrum PPO Plan 250 Standard. Id. at 

BSC 150-251 (hereinafter "the Plan").2

 Plaintiff was an employee 

of Pacific Construction who enrolled as a subscriber to the Plan. 

Docket No. 18 ("Am. Compl.") ¶¶ 1-5. The Plan is regulated by the 

Employee Retirement Income Security Act of 1974 ("ERISA"), 88 Stat. 

829, as amended, 29 U.S.C. §§ 1001-1461. Id. ¶ 1. 

The Plan provides that "Blue Shield of California shall have 

the power and discretionary authority to construe and interpret the 

provisions of this Plan, to determine the Benefits of this Plan and 

determine eligibility to receive Benefits under this Plan." CF at 

BSC00241. With regard to mental health benefits, the plan covers 

inpatient services, outpatient or office services, psychological 

testing, and psychosocial support. Id. at BSC00220-222. For 

inpatient services, "[b]enefits are provided for psychiatric 

Inpatient Services in connection with hospitalization or 

psychiatric Partial Hospitalization (day treatment) for the 

 

1

 Pursuant to the Stipulation of the parties, Plaintiff submitted 

for manual filing a CD containing the Claim File of Defendant Blue 

Shield. Docket No. 48-2. All citations will be to the Claim File 

("CF"). 

 

2

 Pacific Construction & Manufacturing Inc. Group Health Plan was 

named as a Defendant in this action, but dismissed from this action 

without prejudice on February 4, 2010, based on Blue Shield's 

acknowledgment that it will be liable for any judgment or 

settlement concerning payment or non-payment to Plaintiff. See

Docket No. 60. 

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treatment of mental illness . . . . Residential Care is not 

covered." Id. A Hospital is defined as: 

(1) a licensed institution primarily engaged in 

providing, for compensation from patients, 

medical, diagnostic and surgical facilities for 

care and treatment of sick and injured persons on 

an Inpatient basis, under the supervision of an 

organized medical staff, and which provides 24-

hour a day nursing service by registered nurses. 

. . . (2) a psychiatric Hospital accredited by 

the Joint Commission on Accreditation of 

Healthcare Organizations; or (3) a psychiatric 

healthcare facility as defined in Section 1250.2 

of the Health and Safety Code. 

Id. at BSC00171. The PPO Plan also provides for up to 100 days per 

year of treatment at a Skilled Nursing Facility ("SNF"), id. at 

BSC202, which is defined as "a facility with a valid license issued 

by the California Department of Health Services as a Skilled 

Nursing Facility or any similar institution licensed under the laws 

of any other state, territory, or foreign country." Id. at 

BSC00173. 

B. Plaintiff Admitted to Castlewood Treatment Center

Plaintiff suffered from an eating disorder, severe depression, 

obsessive compulsive disorder ("OCD"), and severe anxiety. Am. 

Compl. ¶ 7. Plaintiff was admitted to the Castlewood Treatment 

Center ("Castlewood") on April 17, 2006. CF at BSC391. 

Castlewood, located in Missouri, specializes in eating disorders. 

Id. at BSC393. On May 10, 2006, Plaintiff had a feeding tube 

placed in her at St. Luke's Hospital in Missouri to help her gain 

weight. Id. at BSC396. Plaintiff remained in Castlewood for 

approximately 191 days. Pl.'s MSJ at 5. Blue Shield paid for 

Plaintiff's first eleven days at Castlewood from April 17, 2006 to 

April 27, 2006. CF at BSC321. Blue Shield initially regarded 

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Castlewood as a "Preferred Hospital." Id. When Plaintiff 

submitted claims for subsequent treatment at Castlewood, Blue 

Shield denied those claims. See id. at BSC408-09, 413, 563-64, 

567, 662. Plaintiff filed this action alleging that Blue Shield 

improperly denied her claim for benefits. See Am. Compl. 

III. LEGAL STANDARD

A. Standard of Review

"[A] denial of benefits . . . is to be reviewed under a de 

novo standard unless the benefit plan gives the administrator or 

fiduciary discretionary authority to determine eligibility for 

benefits or to construe the terms of the plan." Firestone Tire & 

Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If the plan confers 

such discretion, then the denial is reviewed for an abuse of 

discretion. Metropolitan Life Ins. Co. v. Glenn, 128 S.Ct. 2343, 

2347-48 (2008) ("MetLife"). If the same entity both decides who 

gets benefits and pays for them, then it labors under a 

"structural" conflict of interest. Id. at 2349-50; Saffon v. Wells 

Fargo & Co. Long Term Disability Plan, 522 F.3d 863, 868 (9th Cir. 

2008); Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 965 

(9th Cir. 2006). District courts must weigh this conflict "as a 

factor in determining whether there is an abuse of discretion." 

MetLife, 128 S.Ct. at 2348 (quoting Firestone, 489 U.S. at 115). 

Taking into account the conflict "necessarily entails a more 

complex application of the abuse of discretion standard." Montour 

v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 626 (9th Cir. 

2009). "[T]he court must consider numerous case-specific factors, 

including the administrator's conflict of interest, and reach a 

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decision as to whether discretion has been abused by weighing and 

balancing those factors together." Id. 

The weight the court assigns to the conflict of interest 

depends on the fact and circumstances of the particular case. 

According to the Supreme Court: 

The conflict of interest . . . should prove more 

important (perhaps of great importance) where 

circumstances suggest a higher likelihood that it 

affected the benefits decision, including, but 

not limited to, cases where an insurance company 

has a history of biased claims administration. 

It should prove less important (perhaps to the 

vanishing point) where the administrator has 

taken active steps to reduce potential bias and 

promote accuracy, for example, by walling off 

claims administrators from those interested in 

firm finances, or by imposing management checks 

that penalize inaccurate decisionmaking 

irrespective of whom the inaccuracy benefits. 

MetLife, 128 S.Ct. at 2351 (internal citation omitted). In 

determining whether to view the decision of a conflicted 

administrator with skepticism, district courts may also consider 

"any evidence of malice, of self-dealing, or of a parsimonious 

claims-granting history." Abatie, 458 F.3d at 968. District 

courts may weigh a conflict more heavily "if, for example, the 

administrator provides inconsistent reasons for denial, . . . 

fails adequately to investigate a claim or ask the plaintiff for 

necessary evidence . . . ; fails to credit a claimant's reliable 

evidence . . . ; or has repeatedly denied benefits to deserving 

participants by interpreting plan terms incorrectly or by making 

decisions against the weight of evidence in the record." Id. at 

968-69. 

The district court "may, in its discretion, consider evidence 

outside the administrative record to determine the nature, extent, 

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and effect on the decision-making process of the conflict of 

interest; the decision on the merits though, must rest on the 

administrative record once the conflict (if any) has been 

established . . . ." Id. at 970. On a motion for summary judgment 

in an ERISA case, the traditional rules of summary judgment apply 

to evidence outside of the administrative record, including the 

requirement that the evidence must be viewed in the light most 

favorable to the non-moving party. Nolan v. Heald College, 551 

F.3d 1148, 1150 (9th Cir. 2009). 

IV. DISCUSSION

A. Evidentiary Objections

Blue Shield filed evidentiary objections to a number of 

exhibits filed by Harlick in support of her motion for summary 

judgment. Docket No. 58 ("Def.'s Objections"). Assuming arguendo 

that the challenged evidence is admissible, the Court finds it is 

insufficient to create a genuine issue as to whether Blue Shield's 

denial of benefits to Harlick was improper. Therefore, the Court 

does not need to issue a ruling regarding Blue Shield's objections. 

Harlick filed objections to the Declaration of Joan Russo 

("Russo") filed in support of Blue Shield's Motion for Summary 

Judgment. Docket No. 53-1 ("Pl.'s Objections").3

 Harlick objects 

in a general manner that the statements contained in the Russo 

declaration are an improper attempt to supplement the claim file. 

Id. In this Order, the Court relies on the evidence as presented 

in the Claim File, rather than any particular party's 

 

3

 Russo, a senior manager in the legal department at Blue Shield, 

filed a declaration in support of Blue Shield's Motion for Summary 

Judgment. Docket No. 47. 

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characterization of that evidence, and therefore, the Court does 

not need to rule on Harlick's generalized objection. 

Harlick objects to various statements made by Russo in her 

declaration on the grounds that they either lack foundation or 

contain inadmissible hearsay. Pl.'s Objections at 2-3. "A 

supporting or opposing affidavit must be made on personal 

knowledge, set out facts that would be admissible in evidence, and 

show that the affiant is competent to testify on the matters 

stated." Fed. R. Civ. P. 56(e). Russo is a senior manager in the 

legal department at Blue Shield, and the Court sees no reason to 

question the admissibility of the statements made in paragraphs 3, 

4, 9, 12, 14, and 31 because Russo has personal knowledge of the 

facts stated in those paragraphs. The Court OVERRULES Harlick's 

objections to the statements made in those paragraphs. 

The Court SUSTAINS Plaintiff's objections to the statements 

made on information and belief in paragraphs 15, 16, 17. With 

regard to the exhibits discussed in paragraphs 17, 18, 21, 23, 25, 

and 32, these documents are part of Plaintiff's Claim File and can 

be considered by the Court in reviewing the plan administrator's 

decision to deny Plaintiff's claim for benefits. The Court 

OVERRULES Plaintiff's objections to these exhibits. When 

considering the evidence, the Court will focus on the documents 

themselves, rather than Russo's description of the documents. 

B. Castlewood and the MHPA

Plaintiff contends that the fundamental issue in this case is 

"whether the Blue Shield policy violates California Mental Health 

Parity Law because it does not offer the same levels of treatment 

for mental health conditions as for physical conditions." Pl.'s 

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Opp'n at 6. According to Plaintiff, this question of law should be 

decided de novo. Id. Plaintiff also suggests that the Court 

should apply an abuse of discretion standard tempered with 

skepticism based on the presence of a number of factors, including 

Blue Shield's reliance on a Plan that allegedly violates the 

California Mental Health Parity Act ("MHPA"). Pl.'s Opp'n at 9. 

In this case, the Court does not need to rule on whether 

Harlick's Plan violates the MHPA. One key issue in this case is 

the status of Castlewood. Plaintiff contends that Castlewood is a 

Skilled Nursing Facility ("SNF"). Pl.'s MSJ at 11-12. According 

to Plaintiff, the Plan violates the MHPA because it provides 

coverage at a SNF for the treatment of physical conditions, but not 

for the treatment of mental conditions. Pl.'s MSJ at 2, 11. The 

MHPA provides, in pertinent part, that: 

(a) Every policy of disability insurance that 

covers hospital, medical, or surgical expenses in 

this state . . . shall provide coverage for the 

diagnosis and medically necessary treatment of 

severe mental illnesses of a person of any age 

. . . under the same terms and conditions applied 

to other medical conditions, as specified in 

subdivision (c). 

(b) These benefits shall include the following: 

(1) Outpatient services; (2) Inpatient hospital 

services; (3) Partial hospital services; (4) 

Prescription drugs, if the policy or contract 

includes coverage for prescription drugs. 

(c) The terms and conditions applied to the 

benefits required by this section that shall be 

applied equally to all benefits under the 

disability insurance policy shall include, but 

not be limited to, the following: (1) Maximum 

lifetime benefits; (2) Copayments and 

coinsurance; (3) Individual and family 

deductibles. 

Cal. Ins. Code § 10144.5. As explained below, the Court determines 

that Castlewood is not a SNF as that term is defined in Harlick's 

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Plan. Therefore, the Court does not need to reach Plaintiff's 

argument that the Plan violates the MHPA. Doing so would be 

pointless, because even if the Court agreed with Plaintiff that the 

MHPA requires the Plan to cover treatment at a SNF for both mental 

and physical conditions, Harlick would still not be entitled to 

relief, because there is no question that Castlewood is not a SNF. 

1. Castlewood Is Not a Hospital 

There is no dispute in this case that Castlewood is not a 

Hospital as defined in Harlick's Plan. See Pl.'s Opp'n at 1 ("Blue 

Shield cites and discusses the Plan provisions defining a 

'Hospital.' Plaintiff agrees that Castlewood was not and is not a 

Hospital, as that term is defined in the Plan."). Castlewood is 

not accredited as a hospital or psychiatric hospital by the Joint 

Commission on Accreditation of Health Care Organizations. CF at 

BSC3604. 

2. Castlewood Is Not a SNF 

Plaintiff contends that Castlewood should be regarded as a SNF 

as defined in her Plan. Pl.'s MSJ at 11. Under California law, a 

SNF is "a health facility that provides skilled nursing care and 

supportive care to patients whose primary need is for availability 

of skilled nursing care on an extended basis." Cal. Health & 

Safety Code § 1250(c). The Plan defines a SNF as "a facility with 

a valid license issued by the California Department of Health 

Services as a Skilled Nursing Facility or any similar institution 

licensed under the laws of any other state, territory, or foreign 

country." CF at BSC173. Castlewood, located in Missouri, is 

obviously not a facility licensed by the California Department of 

Health Services. Hence, the question here is whether Castlewood is 

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a similar institution licensed under the laws of the State of 

Missouri. 

In 2006, Castlewood was licensed by the Department of Mental 

Health in Missouri as a Psychiatric Group Home and as a Day 

Program. CF at BSC3602, 3603. Missouri regulations define a 

psychiatric group home as: "a community residential facility with 

less than sixteen (16) residents providing twenty-four (24)-hour 

accommodations, psychiatric supervision, board, storage and 

distribution of medications, protective oversight and psychosocial 

rehabilitation for residents who can benefit from an intense, 

highly structured treatment setting." 9 Mo. Code of State 

Regulations § 40-1.015(2)(JJ). A Day Program is defined, in part, 

as "a place providing a series of interventions, activities and 

instruction delivered by qualified staff for the purpose of 

evaluation, treatment, habilitation or rehabilitation for persons 

with mental disorders, mental illness, mental retardation or 

developmental disabilities." Id. § 40-1.015(2)(J). 

 Missouri licenses SNFs. CF at BSC 3498. In Missouri, a SNF 

is defined as: 

any premises, other than a residential care 

facility, assisted living facility, or an 

intermediate care facility, which is utilized by 

its owner, operator, or manager to provide for 

twenty-four (24) hour accommodation, board and 

skilled nursing care and treatment services to at 

least three (3) residents . . . Skilled nursing 

care and treatment services are those services 

commonly performed by or under the supervision of 

a registered professional nurse for individuals 

requiring twenty-four (24) hours a day care by 

licensed nursing personnel including acts of 

observation, care, and counsel of the aged, ill, 

injured, or infirm, the administration of 

medications and treatments as prescribed by a 

licensed physician or dentist, and other nursing 

functions requiring substantial specialized 

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judgment and skill. 

19 Mo. Code of State Regulations 30-83.010(48). Castlewood is not 

licensed as a SNF. Id. at BSC 3518. 

Plaintiff concedes that Castlewood is not licensed as a SNF, 

but she argues that it would be impossible for Castlewood to obtain 

such a license because, in Missouri, only facilities treating 

physical illnesses are licensed as SNFs. Pl.'s Opp'n at 2-3. This 

argument does not help Plaintiff's case. If it is impossible for 

Castlewood to be licensed as a SNF in Missouri, then the Court 

cannot regard Castlewood as a SNF. 

Plaintiff contends that, while not licensed as a SNF, 

Castlewood is a similar institution. Pl.'s MSJ at 11. Plaintiff 

points out that Castlewood's website lists "[d]aily nursing care" 

as included in Castlewood's treatment program. CF at BSC276. As 

noted above, the Plan defines a SNF as "a facility with a valid 

license issued by the California Department of Health Services as a 

Skilled Nursing Facility or any similar institution licensed under 

the laws of any other state, territory, or foreign country." CF at 

BSC173. 

The Court determines that when the Plan uses the phrase 

"similar institution licensed under the laws of another state," it 

does not mean any licensed institution, but rather institutions in 

other states that are licensed as SNFs. Otherwise the words 

"licensed under the law of any other state" would be superfluous. 

Use of these words means that the determinative factor is whether 

the out-of-state institution is licensed as a SNF. Missouri 

licenses SNFs, but Castlewood is not so licensed; instead, it is 

licensed as a Psychiatric Group Home and a Day Program. Hence, 

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Castlewood is not a "similar institution licensed under the laws of 

any other state." While the fact that Castlewood is not licensed 

as a SNF is sufficient for the Court to conclude that Castlewood is 

not a similar institution, the Court also notes that the 

professional staff listed on Castlewood's website does not include 

any licensed doctors or nurses, see CF at BSC3491-92, and Plaintiff 

has not presented any evidence to the Court showing that 

Castlewood's staff includes nurses. 

Since Castlewood is not a SNF or similar to one, the Court 

does not need to reach Plaintiff's argument that Harlick's Plan 

violates the MHPA. Instead, the Court proceeds to determine the 

standard of review that applies to Blue Shield's denial of 

Harlick's claim for benefits. 

C. Abuse of Discretion Tempered with Skepticism

Here, based on the unambiguous provision in the Plan granting 

Blue Shield discretionary authority, see CF at BSC241, the Court 

must review Blue Shield's denial of benefits for an abuse of 

discretion. However, in determining whether this abuse of 

discretion standard should be "tempered with skepticism," see

Nolan, 551 F.3d at 1155, the Court must take into account a number 

of factors, including Blue's Shield's structural conflict, and the 

fact that a number of Blue Shield's reasons for denying Harlick's 

claim were erroneous. 

Blue Shield agrees that "the Court is required to consider 

Blue Shield's status as the funder of the Plan" in applying the 

abuse of discretion standard. Def.'s Reply at 3. Blue Shield 

contends that the Court should apply an ordinary abuse of 

discretion standard because this structural conflict of interest is 

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not accompanied by any evidence of malice, self-dealing, or a 

parsimonious claims-granting history. Id. at 3-4. The Court 

disagrees. On April 6, 2007, Blue Shield provided a number of 

different explanations for why it denied Harlick's claim, some of 

which turned out to be erroneous. Compare CF at BSC413 with CF at 

BSC387-90, BSC497-500. For example, Blue Shield incorrectly 

informed Harlick she was required to receive prior authorization 

for her treatment at Castlewood, and that the medical necessity of 

being treated at Castlewood had not been established. Id. at 

BSC413. A letter from the Department of Managed Health Care 

("DMHC") to Harlick acknowledges that she was provided with 

"conflicting information" regarding the basis for denial. Id. at 

BSC3397. Based on this conflicting information, the Court should 

weigh Blue Shield's structural conflict more heavily. See Abatie, 

458 F.3d at 968 ("A court may weigh a conflict more heavily if, for 

example, the administrator provides inconsistent reasons for denial 

. . . ."). Accordingly, the Court tempers its review of Blue 

Shield's denial with skepticism. 

D. Reviewing the Record

1. Denial and Appeal 

On or around September 20, 2006, Dr. Bruce Berg, on behalf of 

Blue Shield, denied Plaintiff's claims for treatment at Castlewood 

after April 27, 2006, based on a determination that Castlewood 

provided "residential care," and as such, was not covered by 

Plaintiff's Plan. CF at BSC567, BSC662. The review states that 

Plaintiff's treatment at Castlewood "appears to be residential care 

. . . No notes support that this is a state psychiatric hospital. 

Residential treatment is not a benefit." Id. 

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 Plaintiff's mother, Robin Watson ("Watson"), sent Blue Shield 

an appeal letter on November 13, 2006. See CF at BSC391-92. 

Watson appealed on the basis that her daughter was suffering from 

anorexia, which is a covered mental illness under California's 

MHPA. Id. at BSC391. Watson stated that the Castlewood treatment 

should be considered a "Skilled Nursing" benefit. Id. She stated 

that her daughter was admitted to Castlewood in April because the 

only other appropriate facility had a three-to-four month waiting 

list with no guarantee of admission. Id. at BSC392. Watson 

enclosed letters from the professionals treating her daughter. Id.

at BSC393-97. 

 Upon review, the Grievance Department at Blue Shield sent 

Harlick a letter, on December 12, 2006, upholding its denial of 

Plaintiff's claims for treatment at Castlewood. Id. at BSC 408-09, 

BSC516. Blue Shield's records show that Harlick's claim was 

reviewed by Mary Ann Schweppe, RN, and Dr. David Battin, MD. Id.

at BSC563, 564. Since Dr. Berg's initial denial, Blue Shield 

received admission orders from Castlewood noting that Plaintiff's 

admission status was "residential." Id. at BSC563. The review 

notes that Plaintiff remained in the residential care program at 

Castlewood until August 25, 2006, when she was discharged to a 

"step-down house care program" where she had more autonomy. Id. 

In upholding the denial of Plaintiff's claim for coverage at 

Castlewood, Dr. Battin wrote: "The principal reason is that these 

services are not a covered benefit. As per your health plan's 

Evidence of Coverage (EOC), residential care is not covered for 

mental health services." Id. at BSC564. 

 The letter sent to Harlick on December 12, 2006, states that 

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residential care was not covered under her plan. Id. at BSC408. 

Blue Shield enclosed relevant excerpts from her Plan with the 

appropriate language underlined, and noted that the review was 

based on an evaluation of medical information and records from 

entities including Castlewood Treatment Center. Id. The letter 

informed Plaintiff of her right to request an independent medical 

review through the DMHC. Id. at BSC408-09, BSC516-17. 

 In early January 2007, Blue Shield received additional records 

from Castlewood relating to Harlick. Id. at BSC2586. Dr. Carroll 

Cederburg, MD, reviewed the records and advised that "[s]ervices 

are for residential care and these services are not a benefit – see 

contract section 'Mental Health/Substance Abuse Treatment – 

Inpatient Facility.'" Id.

 Watson responded to Blue Shield on March 6, 2007. Id. at 

BSC410, BSC513. She informed Blue Shield of inaccuracies in the 

December 12, 2006 letter regarding the identity of Harlick's 

primary care physician. Id. The letter reiterates that, under 

California law, insurance companies must provide equal coverage for 

mental and physical illnesses. Id. Watson enclosed a letter from 

Harlick's primary care physician, and requested additional review 

of Harlick's case. Id. at BSC410-12, BSC514-15. 

 Blue Shield's Grievance Department responded to Watson's 

letter on April 6, 2007. Id. at BSC413, BSC505. The letter 

advised that Blue Shield had reviewed additional records, and once 

more upheld the denial of Harlick's claims for treatment at 

Castlewood. Id. The letter provides a number of different reasons 

for denying the claim. First, it states that inpatient psychiatric 

hospital care requires prior authorization, except in emergency 

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situations, and since Harlick travelled to Missouri to be admitted 

to a particular facility, her admission to Castlewood could not be 

considered an emergency. Id. Second, it states that that 

residential care is not a covered benefit. Id. The letter also 

states that Harlick was eligible for coverage for professional 

fees. Id. The information is this letter was based on Dr. David 

Battin's review of Harlick's file in late March, 2007. Id. at 

BSC509. 

 On April 30, 2007, Carolyn Garner, a Lead Coordinator in Blue 

Shield Grievance Department, sent Harlick a letter correcting 

errors in Dr. Battin's review. Id. at BSC387-90, BSC497-500. With 

regard to Dr. Battin's claim that Harlick should have received preauthorization, Garner explains that this requirement only applies 

to services provided in California. Id. Since Castlewood is 

located in Missouri, this requirement did not apply in Harlick's 

case. Id. The letter goes on to explain that Harlick's claims 

were denied because Castlewood is not licensed as an acute care 

hospital or a psychiatric hospital/healthcare facility. Id. at 

BSC388, BSC498. Garner states Castlewood is licensed as a 

residential treatment center. Id. Garner states that Dr. Dorsey 

Dysart, in a letter provided to Blue Shield, described Castlewood's 

care as residential. Id.; see also CF at BSC393. Garner notes 

that the Plan clearly states that residential care is not covered. 

CF at BSC388, BSC498. 

 Garner points out that the April 6, 2007 letter was also 

incorrect when it stated that Harlick's professional fees at 

Castlewood were covered by the Plan. Id. These fees were billed 

as part of the global fee for Harlick's admission to Castlewood. 

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Id. The bills were not sent independently by the providers. Id. 

Therefore no benefits are payable for these therapy services. Id. 

The letter also notes that the MHPA is not implicated because the 

Plan does not provide residential care for mental health conditions 

or medical conditions. Id. at BSC389, 499. 

2. Plaintiff Seeks Further Review 

 On April 9, 2007, Watson sent a letter to California's 

Insurance Commissioner complaining about Blue Shield's denial of 

her daughter's claim. Id. at BSC2213. The letter states that 

Harlick is protected by California's parity law and the insurance 

company is not paying the claim. Id. On April 19, 2007, the 

Department of Insurance notified Watson that the DMHC had 

jurisdiction over the policy of insurance. Id. at BSC312. 

 On May 15, 2007, the DMHC sent a letter to Blue Shield 

requesting information as part of its review of Blue Shield's 

denial of Harlick's claims. Id. at BSC492-93. Joan Russo 

("Russo"), a Senior Manager in the legal department at Blue Shield, 

responded on May 23, 2007. Id. at BSC415. Russo's letter repeats 

the information contained in Garner's April 30, 2007 letter, and 

adds additional information in response to specific requests from 

the DMHC. Id. at BSC415-17. 

 In light of Dr. Solomon's concerns that prior to her admission 

to Castlewood, Harlick was in need of intensive psychiatric and 

nutritional in-patient treatment, the DMHC sought information about 

Plaintiff's in-plan treatment options. Id. at BSC416. Russo 

responded that under Harlick's Plan, the U.S. Behavioral Health 

Plan, California ("USBHPC") was responsible for administering 

claims for services provided in California. Id. Russo attached 

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notes from USBHPC showing that Harlick was authorized for Intensive 

Outpatient treatment at Ohloff Recovery. Id. at BSC454-470. A 

March 7, 2006 note states that Harlick's therapist thought she 

might need a higher level of care, but that the patient "has no RTC 

[residential treatment center] benefits." Id. at BSC463. The DMHC 

also asked whether Plaintiff's physician, Dr. Solomon, had 

requested treatment at Castlewood. Id. at BSC417. Russo responded 

that Blue Shield had no record of any contact by Dr. Solomon. Id.

 On May 25, 2007, the DMHC concluded that Blue Shield was not 

obligated to provide coverage for the services Harlick received at 

Castlewood from April 29, 2006 to August 25, 2006. Id. at BSC3397. 

The DMHC letter states: 

Although you have been provided with conflicting 

information from the Plan regarding its basis for 

denial, Blue Shield has now confirmed that it 

denied coverage because you do not have a benefit 

for residential care. [¶] After reviewing all of 

the information submitted, we are unable to 

direct Blue Shield to cover these services. 

According to the terms of your health plan 

contract, as described in your Evidence of 

Coverage, residential care is excluded from 

coverage. As Castlewood is licensed as a 

residential treatment center, rather than an 

acute in-patient facility, Blue Shield is not 

obligated to provide coverage for this treatment. 

Id. 

 On May 23, 2007, Watson sent Garner a nine-page letter on 

behalf of her daughter concerning the denial of her daughter's 

claims. Id. at BSC371-79. The letter included additional 

information concerning Harlick's treatment at Castlewood from April 

17, 2006 until January 31, 2007. Id. at BSC380-386. 

 Russo responded in a detailed letter on August 3, 2007. Id.

at BSC260-267. The letter reiterates that Castlewood offers a 

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residential treatment program, and Harlick's plan does not cover 

residential care. Id. at BSC260. The Initial Assessment completed 

at the time of Harlick's admission to Castlewood states under 

Recommendations: "RTC for stabilization, normalization of eating . 

. . ." Id. at BSC280. Russo's letter points out that "RTC" is 

shorthand for residential treatment. Id. at BSC 261. 

 In response to Watson's questions, Russo explains that Blue 

Shield paid for Harlick's first eleven days at Castlewood due to a 

coding error. Id. at BSC262. The claim was coded and paid as an 

in-patient hospital claim. Id. Russo points out that Castlewood 

is not a hospital, and Blue Shield paid all of Harlick's claims for 

treatment at the St. Luke's Medical Center, since hospital 

treatment is covered by the Plan. Id. at BSC264. In response to a 

question concerning why Harlick's treatment is not covered as a SNF 

benefit, Russo explains that Castlewood is not licensed in Missouri 

as a SNF. Id. 

3. No Abuse of Discretion

 Reviewing this record with skepticism, the Court cannot 

conclude that Blue Shield abused its discretionary authority to 

interpret the terms of Harlick's Plan and determine her eligibility 

for benefits. Even though Blue's Shield's April 6, 2007 letter 

contains a number of erroneous explanations for the denial, see CF 

at BSC413, Blue Shield quickly corrected the mistakes on April 30, 

2007, see CF at BSC387-90, BSC497-500. Furthermore, from the 

beginning of Blue Shield's correspondence with Harlick and her 

mother, Blue Shield consistently stated that the denial was based 

on the fact that the Plan does not cover residential care. 

 The first doctor to consider Plaintiff's claim stated: "This 

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appears to be residential care. . . . Residential treatment is not 

a benefit." Id. at BSC567, 662. When Plaintiff's mother appealed 

the decision, another doctor, Dr. Battin, confirmed in late 2006 

that residential care is not covered under her Plan. Id. at 

BSC564. After receiving additional records from Castlewood, a 

third doctor, Dr. Cederburg, determined that "[s]ervices are for 

residential care and these services are not a benefit." Id. at 

BSC2586. While some of the information contained in the April 6, 

2007 letter was erroneous, the letter also states that residential 

care was not a covered benefit. Id. at BSC413, 505. In the 

follow-up letter correcting the errors, Blue Shield emphasized that 

treatment at Castlewood was denied because it is a residential 

treatment center. Id. at BSC388, 498. The DMHC agreed that 

"residential care is excluded from coverage." Id. at BSC3397. On 

August 3, 2007, Russo of Blue Shield again emphasized that the 

claim was denied because Castlewood is a residential treatment 

program and the Plan does not cover residential care. Id. at 

BSC260. 

 Reviewing Blue Shield's decision with skepticism, the Court 

finds no abuse of discretion in its determination that Castlewood 

was a residential treatment program. Castlewood is licensed under 

the laws of Missouri as a Psychiatric Group Home and a Day Program. 

CF at BSC3602, 3603. Missouri regulations define a psychiatric 

group home as: "a community residential facility." 9 Mo. Code of 

State Regulations § 40-1.015(2)(JJ) (emphasis added). Under the 

"frequently asked questions" of Castlewood's website, and in 

response to a question concerning whether insurance will pay for 

the treatment, it states that "Castlewood is licensed as a 

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Residential Facility, so it is important to obtain the residential 

benefit and not simply the 'inpatient' benefit as they might be 

different." CF at BSC274, 442, 3482. Harlick's Initial Assessment 

Form indicates that she was being admitted to Castlewood for 

residential care. Id. at BSC280, 739. Harlick signed forms 

acknowledging that Castlewood was not a medical facility, id. at 

BSC726, and acknowledging that she would be responsible for 

administering her own medications, id. at BSC3375. 

 Plaintiff contends that the Plan statement that "[r]esidential 

care is not covered" is ambiguous. Pl.'s MSJ at 12. Plaintiff 

contends that the placement of the sentence in the section of the 

Plan describing "inpatient mental health services" means that the 

intent was to preclude only some kinds of residential care. Id. at 

13-14. Plaintiff faults the Plan for failing to define residential 

care, and for failing to include residential care in the Plan's 

List of Limitations, Exceptions, Exclusions and Reductions. Id. at 

14. 

 "Although an ERISA plan is a contract, ERISA does not contain 

a body of contract law to govern the interpretation and enforcement 

of employee benefit plans." Gilliam v. Nevada Power Co., 488 F.3d 

1189, 1194 (9th Cir. 2007) (internal citations and quotations 

omitted). Courts therefore normally "apply contract principles 

derived from state law . . . guided by the policies expressed in 

ERISA and other federal labor laws." Id. These principles 

comprise a "nationally uniform federal common law" applied in the 

ERISA context. See Saltarelli v. Bob Baker Group Med. Trust, 35 

F.3d 382, 386 (9th Cir. 1994). Under the uniform federal common 

law, courts should interpret plan terms "in an ordinary and popular 

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sense as would a person of average intelligence and experience." 

Babikian v. Paul Revere Life Ins. Co., 63 F.3d 837, 840 (9th Cir. 

1995) (quoting Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 

(9th Cir. 1990)). 

 Here, the Court finds no ambiguity in the Plan's exclusion of 

residential care from coverage. In the section of Plaintiff's Plan 

dealing with mental health benefits, the Plan clearly and 

conspicuously states that "[r]esidential care is not covered." See

CF at BSC220, 222, 225. This statement occurs three times in the 

Plan. The statement is made in the section describing benefits for 

"inpatient mental health services," id. at BSC220, in the section 

describing covered benefits for "Professional (Physician) 

Services," id. at BSC222, and in the section describing "Partial 

Hospitalization Services." Id. at BSC225. Interpreting the phrase 

"[r]esidential care is not covered" in its ordinary and popular 

sense, the phrase is not ambiguous. The Court fails to understand 

how a person of average intelligence and experience could read the 

six pages of the Plan that focus on mental health benefits, see

BSC220-26, and not realize that mental health benefits under the 

Plan do not extend to residential care. 

V. CONCLUSION

 In summary, the Court determines that Castlewood is not a SNF, 

or a "similar institution licensed under the laws of any other 

state," and therefore the Court does not reach Plaintiff's 

contention that the Plan violates California's MPHA. Reviewing 

Blue Shield's denial of benefits with skepticism, the Court 

determines there was no abuse of discretion. Although Blue Shield 

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provided a number of conflicting reasons for denial, it 

consistently informed Harlick that Castlewood was a residential 

treatment facility, and residential care was not covered under her 

Plan. The record supports Blue Shield's determination that 

Castlewood provided residential care to Harlick. The Court finds 

no ambiguity in the Plan concerning the question of whether 

benefits extended to residential care. 

 For the foregoing reasons, the Court GRANTS the Motion for 

Summary Judgment filed by Defendant California Physicians' Service 

d/b/a Blue Shield of California, and DENIES the Motion for Summary 

Judgment filed by Plaintiff Jeanene Harlick. 

IT IS SO ORDERED. 

Dated: March 4, 2010 

UNITED STATES DISTRICT JUDGE

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