Court Opinion

ID: 6343118
Source: CourtListenerOpinion
Date Created: 2022-05-23 20:00:44.035246+00
Date Added: 2024-06-11T14:21:41.287529
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                                File Name: 22a0206n.06

                                           No. 21-3695

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT
                                                                                FILED
                                                         )                  May 23, 2022
LISA ZAHURANEC,                                                         DEBORAH S. HUNT, Clerk
                                                         )
       Plaintiff-Appellant,                              )
                                                         )   ON APPEAL FROM UNITED
v.                                                       )   STATES DISTRICT COURT FOR
                                                         )   THE NORTHERN DISTRICT OF
CIGNA HEALTHCARE, INC., et al.,                          )   OHIO
       Defendants-Appellees.                             )
                                                         )

Before: SILER, BUSH, and MURPHY, Circuit Judges.

       SILER, Circuit Judge. Lisa Zahuranec appeals the district court’s order granting the

motions to dismiss brought by CIGNA Healthcare, Inc., Jessica Breon, R.N., and Rajesh Davda,

M.D. For the following reasons, we AFFIRM.

                                                 I.

       Lisa Zahuranec was an employee of the Horseshoe Casino Cleveland, an entity affiliated

with Caesars Entertainment Operating Company, Inc. (“Caesars”). As part of her employment,

the Horseshoe Casino Cleveland offered Zahuranec a welfare benefit plan that included health

insurance. In mid-2012, Zahuranec started her position and enrolled in the plan, governed by the

Employee Retirement Income Security Act of 1974 (“ERISA”). See 29 U.S.C. §§ 1001–1461.

Caesars self-funded the plan and was the plan administrator. CIGNA Healthcare, Inc. (“CIGNA”)

processed claims for the plan’s health benefits, as the claims administrator.

       Early in 2013, Zahuranec began consulting her physician about undergoing bariatric

surgery for weight loss intervention. Her physician requested pre-authorization from CIGNA for
No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

the procedure. CIGNA’s employees, Jessica Breon, R.N. (“Nurse Breon”) and Rajesh Davda,

M.D. (“Dr. Davda”), were assigned to review Zahuranec’s file. CIGNA denied Zahuranec’s

request for pre-authorization because bariatric surgery was not covered until at least one year after

the policy’s effective date. So Zahuranec waited. In mid-2013—a full year after the policy’s

effective date—Zahuranec’s physician submitted another request for pre-authorization. Nurse

Breon reviewed the request, and CIGNA again denied coverage. CIGNA indicated that Zahuranec

had failed to comply with the policy’s requirement that bariatric surgery be “medically necessary.”

To be covered for bariatric surgery, the policy required the procedure be “medically necessary,”

as outlined by several criteria. At the time, Zahuranec failed to satisfy one of those criterions,

namely, prior participation in a “weight-management program for a minimum of 3 consecutive

months.”

       A few months later, Zahuranec’s physician supplemented the medical records and again

requested pre-authorization. This time, CIGNA approved Zahuranec for bariatric surgery, despite

several deficiencies in her records. For instance, one of the policy’s “medical-necessity” criteria

for bariatric surgery required Zahuranec to show that “within the previous 6 months” she had

undergone a “separate medical evaluation from a physician other than the surgeon recommending

surgery,” but by the time CIGNA approved the surgery, her most recent evaluation had been

performed ten months earlier. Also, because her BMI was below 40.0, Zahuranec was required to

show “at least one clinically significant obesity-related ailment (co-morbidity),” yet she hadn’t

been diagnosed with any. Similarly, the policy required Zahuranec’s physician-supervised weight-

management program last a “minimum of 3 consecutive months,” but Zahuranec’s records only

showed that she had visited a dietician in February, March, and October.

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       After CIGNA approved the procedure, Zahuranec underwent bariatric surgery in late-2013.

Zahuranec suffered severe complications, allegedly because she was not medically qualified for

the procedure. And she claims she never would have undergone the procedure had CIGNA not

approved it because she would not have been able to afford the operation. Several years later, in

late-2017, Zahuranec filed a medical malpractice suit against the physicians who performed her

surgery. See Compl., Zahuranec v. Rogula, No. CV-17-885085 (Ohio Ct. Com. Pl. Aug. 25, 2017).

In mid-2018—on behalf of the plan—CIGNA’s third-party administrator filed a Notice of Lien in

Zahuranec’s state-court action and demanded reimbursement for the costs of the surgery. CIGNA

relied on the policy’s “Subrogation/Right of Reimbursement” provisions, which granted the plan

a subrogation lien and the right to be reimbursed to the extent of “benefits” paid by the plan.

       In mid-2019, Zahuranec settled and dismissed her malpractice action. See J. Entry,

Zahuranec v. Rogula, No. CV-17-885085 (Ohio Ct. Com. Pl. June 24, 2019). In response to

CIGNA’s demands for reimbursement, Zahuranec sued CIGNA in the Cuyahoga County Court of

Common Pleas for breach of contract. CIGNA removed the action to the United States District

Court for the Northern District of Ohio. Zahuranec amended her complaint to add state-law claims

for breach of contract, breach of fiduciary duty, and equitable estoppel against CIGNA and Caesars

and for “breach of their duties” against Dr. Davda and Nurse Breon. CIGNA moved to dismiss

Zahuranec’s first amended complaint.       CIGNA argued Zahuranec’s claims were expressly

preempted by ERISA, pursuant to 29 U.S.C. § 1144(a), and completely preempted by ERISA,

pursuant to 29 U.S.C. § 1132(a)(1)(B). The district court partially agreed. The court found that

Zahuranec’s claims were completely preempted by ERISA—but therefore could not be expressly

preempted by it—and denied CIGNA’s motion in order to allow Zahuranec to amend her

complaint in the language of ERISA.

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No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

       In her second amended complaint, Zahuranec brought three ERISA claims, mirroring the

state-law claims in her first amended complaint. First, Zahuranec brought claims against Caesars

and CIGNA under § 1132(a)(1)(B) to “enforce her right[]” not to reimburse the plan. She alleged

that Caesars and CIGNA breached the policy when they wrongly approved her procedure, and,

therefore, that the plan is not entitled to reimbursement. Second, she brought claims against

Caesars, CIGNA, Dr. Davda, and Nurse Breon under § 1132(a)(3) for breach of fiduciary duty.

Zahuranec alleged they breached their fiduciary duties by wrongly approving a surgery that did

not satisfy the policy’s “medical-necessity” criteria for bariatric surgery. Third, Zahuranec bought

claims against Caesars and CIGNA under § 1132(a)(3) for equitable estoppel. She alleged Caesars

and CIGNA should be estopped from seeking reimbursement because they promised her the

surgery was “medically necessary” when it wasn’t. As relief, Zahuranec requested a declaratory

judgment and equitable relief “determining she is not required to reimburse the plan,” plus

compensatory and punitive damages.

       Early in 2021, the district court dismissed without prejudice Zahuranec’s claims against

Caesars because Zahuranec had not served Caesars. Shortly after, CIGNA, Dr. Davda, and Nurse

Breon moved to dismiss Zahuranec’s second amended complaint. The district court granted the

motions in full. Zahuranec appeals the district court’s order.

                                                  II.

       We review de novo a district court’s order granting a Rule 12(b)(6) motion to dismiss for

failure to state a claim. Hensley Mfg., Inc. v. ProPride, Inc., 579 F.3d 603, 608–09 (6th Cir. 2009).

To survive a motion to dismiss, the plaintiff must allege “sufficient factual matter, accepted as

true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In our review, we consider

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not only the complaint but also documents incorporated by reference and matters subject to judicial

notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). We may affirm

the district court’s decision on any grounds. Hensley Mfg., 579 F.3d at 609.

                                                  III.

   A.       Section 1132(a)(1)(B)

         Zahuranec brings her first claim against CIGNA under § 1132(a)(1)(B). That statute

provides a participant of an ERISA-governed plan the ability “to recover benefits due to him under

the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to

future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). Zahuranec asserts that she

is “enforce[ing] [her] right under the terms of [her] plan” not to reimburse the plan. She points to

the policy’s “Subrogation/Right of Reimbursement” provisions as the basis for that right. Those

provisions essentially allow the plan to recoup the costs of a procedure when a third party is

responsible for the expense. But because her procedure didn’t satisfy the policy “medical-

necessity” criteria for bariatric surgery, Zahuranec argues, the procedure wouldn’t have been a

“benefit” in the first place and therefore should not be subject to the policy’s “Subrogation/Right

of Reimbursement” provisions.

         A participant’s claim to “enforce [her] rights under the terms of the plan,” is essentially an

ERISA breach-of-contract claim. See, e.g., Hutchison v. Fifth Third Bancorp., 469 F.3d 583, 588–

89 (6th Cir. 2006). But an ERISA breach-of-contract claim is no ordinary breach-of-contract

claim.    Standards of review are often determinative.          If the plan gives an administrator

“discretionary authority” to construe the terms of the policy, we review the administrator’s

interpretation under the deferential arbitrary-and-capricious standard.          Clemons v. Norton

Healthcare Inc. Ret. Plan, 890 F.3d 254, 264 (6th Cir. 2018) (quoting Firestone Tire & Rubber

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No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

Co. v. Bruch, 489 U.S. 101, 115 (1989)). If, on the other hand, the plan lacks this discretionary

authority, we review the administrator’s interpretation de novo. Wallace v. Oakwood Healthcare,

Inc., 954 F.3d 879, 889 & n.5 (6th Cir. 2020). And we review the district court’s conclusions on

these issues de novo. Id at 889.

       The district court did not apply a standard of review to Zahuranec’s claim, and the parties

do not rely on one. Because the policy’s “Subrogation/Right of Reimbursement” provisions are

clear and unambiguous, we may proceed regardless of the standard of review. See Clemons,

890 F.3d at 269.

       The policy’s “Subrogation/Right of Reimbursement” provisions state:

               If a Participant incurs a Covered Expense for which, in the opinion of the
       plan or its claim administrator, another party may be responsible or for which the
       Participant may receive payment as described above:
                1. Subrogation: The plan shall, to the extent permitted by law, be subrogated
       to all rights, claims or interests that a Participant may have against such party and
       shall automatically have a lien upon the proceeds of any recovery by a Participant
       from such party to the extent of any benefits paid under the plan. A Participant or
       his/her representative shall execute such documents as may be required to secure
       the plan’s subrogation rights.
               2. Right of Reimbursement: The plan is also granted a right of
       reimbursement from the proceeds of any recovery whether by settlement, judgment,
       or otherwise. This right of reimbursement is cumulative with and not exclusive of
       the subrogation right granted in paragraph 1, but only to the extent of the benefits
       provided by the plan.

To execute these rights, the policy provides:

       By accepting benefits under this plan, a Participant:
       • grants a lien and assigns to the plan an amount equal to the benefits paid under
       the plan against any recovery made by or on behalf of the Participant which is
       binding on any attorney or other party who represents the Participant whether or
       not an agent of the Participant or of any insurance company or other financially
       responsible party against whom a Participant may have a claim provided said
       attorney, insurance carrier or other party has been notified by the plan or its agents;
       • agrees that this lien shall constitute a charge against the proceeds of any recovery
       and the plan shall be entitled to assert a security interest thereon; [and]

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No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

       • agrees to hold the proceeds of any recovery in trust for the benefit of the plan to
       the extent of any payment made by the plan.

       From these provisions, we can ascertain three general limitations on the plan’s right to

pursue a subrogation lien and be reimbursed. First, a participant must have “incur[red] a Covered

Expense.” Second, a third party must be determined responsible for that expense, or the participant

must be able to receive payment for that expense. Third, the plan may only pursue “benefits”

“paid under the plan” and “provided by the plan.” If all three of these requirements are met, the

plan is entitled to pursue its lien and recoup its costs from Zahuranec.

       Zahuranec does not dispute the second requirement, that her malpractice settlement

encompasses the costs of her bariatric surgery. So the only issue is whether Zahuranec “incur[red]

a Covered Expense” and whether the plan “paid” and “provided” her “benefits.” We take these

questions in order.

               i.      Did Zahuranec “incur a Covered Expense”?

       Intuitively, before the plan may be reimbursed, Zahuranec must have “incur[red] a Covered

Expense.” The policy defines “Covered Expenses” as “expenses that 1) are incurred after the

person becomes insured for these benefits, and 2) are recommended by a physician and are

Medically Necessary for the care and treatment of an Injury or a Sickness, as determined by

Cigna.” Neither the district court nor the parties addressed this provision. As the policy provides,

the plan has a right to pursue a subrogation lien and be reimbursed “[i]f a Participant incurs a

Covered Expense”—which is defined in part as a “Medically Necessary” expense.

       Although she never relies on the language of a “Covered Expense,” Zahuranec complains

of a purported incongruity, which implicates that language. She argues had the plan denied her

benefits and she sued to recover them, she would’ve been required to prove her surgery was

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No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

“Medically Necessary” (thus, a “Covered Expense”), and we would not have rejected her claim

solely based on CIGNA’s “determination” that the procedure wasn’t “Medically Necessary”—so

shouldn’t the same be true for CIGNA’s “determination” that it was? Zahuranec asserts CIGNA

must prove the plan properly granted coverage before it can be reimbursed for the expense.

       Zahuranec’s argument is based on a fundamental misunderstanding about her claim. While

courts will review a plan’s decision to deny benefits de novo or under the arbitrary-and-capricious

standard, depending on the plan’s “discretionary authority” to determine eligibility, see Firestone

Tire & Rubber Co., 489 U.S. at 109–15, Zahuranec is not seeking to “recover benefits due to [her]

under the terms of [her] plan.” 29 U.S.C. § 1132(a)(1)(B). She believes she wasn’t due benefits

at all. Instead, Zahuranec is seeking to enforce her “rights under the terms of [her] plan.” Id. She

claims to have the right to prevent the plan from being reimbursed for the cost of a surgery that

does not satisfy the policy’s “medical-necessity” criteria for that procedure. The question therefore

is not whether CIGNA erred or somehow abused its discretion when it “determined” her surgery

was a “Medically Necessary” “Covered Expense,” but whether the policy limits the plan’s right to

be reimbursed based on that determination. And the policy unambiguously does not.

       A “Covered Expense” is an expense that is “Medically Necessary . . ., as determined by

Cigna.” A specific procedure’s “medical-necessity” criteria are “intended to provide guidance”

as part of “[c]overage determinations.” But the determination is ultimately a discretionary decision

made by the plan’s “Medical Director.” So while the plan is not obligated to cover surgeries that

do not satisfy a procedure’s “medical-necessity” criteria, the policy does not prevent the plan from

being reimbursed if a participant requests it to do so and the plan “determine[s]” the procedure is

“Medically Necessary.” See Clemons, 890 F.3d at 269 (“Mindful that we are judges—not . . . the

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No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

‘fairness police’—we ask one question, and one question only: Is the Plan language clear? If it is,

we must enforce it, no matter how unfair or bizarre it might seem.”).

        CIGNA “determined” Zahuranec’s bariatric surgery was “Medically Necessary” when it

approved her procedure.        Zahuranec therefore “incur[red] a Covered Expense” when she

underwent bariatric surgery. So far, the first and second requirements are met.

        ii. Did the plan “pay” and “provide” Zahuranec “benefits”?

        The central dispute between the parties has always been whether Zahuranec received

“benefits” under the policy. Zahuranec argues her medical records did not support a conclusion

that her surgery was “medically necessary” under the policy’s bariatric-surgery criteria, and so her

procedure was not a “benefit.” CIGNA argues “benefits” are simply expenses paid for a participant

under an insurance policy, irrespective of the policy’s coverage guidelines.

        The term “benefit” is undefined in Zahuranec’s policy. We apply “traditional principles of

contract interpretation” when a term of an ERISA plan is undefined. Adams v. Anheuser-Busch

Cos., Inc., 758 F.3d 743, 748 (6th Cir. 2014). We determine the meaning of the term by looking

to the plain and ordinary meaning of the word. Id. (citation omitted).

        Under the plain meaning of the word, benefits are expenses paid for a beneficiary through

an insurance policy. Black’s Law Dictionary defines “benefit,” in relevant, part as “[f]inancial

assistance that is received from an . . . insurance . . . program . . . in time of sickness, disability, or

unemployment.” Benefit, BLACK’S LAW DICTIONARY (11th ed. 2019). This definition aligns with

the policy’s surrounding use of the word as something that may be “accept[ed]” and “paid.”

Conversely, whether a procedure is “medically necessary” under the policy is just a question of

coverage. So whether a procedure is “medically necessary” does not determine what a benefit is—

only when it’s paid.

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No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

         Zahuranec argues the policy excludes all non-“Medically-Necessary” procedures and so

the plan could not have “paid” or “provided” benefits for her bariatric surgery because the

procedure did not satisfy the policy’s “medical-necessity” criteria. But CIGNA had “determined”

Zahuranec’s surgery was “Medically Necessary” when it approved the procedure. So the cost of

her surgery was not excluded from the policy and was “paid” and “provided” by the plan.

         To recap, as alleged in Zahuranec’s complaint, after CIGNA determined that Zahuranec’s

bariatric surgery was “Medically Necessary,” Zahuranec (1) underwent bariatric surgery and

“incur[red] a Covered Expense,” (2) the plan “paid” and “provided” “benefits” for the surgery,

and (3) a third party is responsible for the cost. All three requirements under the policy’s

“Subrogation/Right of Reimbursement” provisions are satisfied. The plan is entitled to pursue its

subrogation lien and be reimbursed by Zahuranec. We affirm the district court’s dismissal of this

claim.

   B.       Breach of Fiduciary Duty

         In her second amended complaint, Zahuranec also brought claims against CIGNA, Dr.

Davda, and Nurse Breon for breach of their fiduciary duties under § 1132(a)(3). In addition to her

claim against CIGNA, it is unclear whether Zahuranec also appeals her fiduciary-duty claims

against Dr. Davda and Nurse Breon. She therefore waived review of these claims. See Rose v.

State Farm Fire & Cas. Co., 766 F.3d 532, 540 (6th Cir. 2014). But, regardless, Zahuranec

attributes the same misrepresentation to CIGNA, Dr. Davda, and Nurse Breon—that her bariatric

surgery was “medically necessary.” Zahuranec maintains the decision to approve her surgery

amounted to a material misrepresentation that the procedure was “medically necessary.” She

claims she would not have undergone bariatric surgery without CIGNA’s approval of the

procedure as “medically necessary.”

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No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

       ERISA governs employee benefit programs “to promote the interests of employees and

their beneficiaries[.]” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). ERISA accomplishes

this purpose by imposing “strict fiduciary standards of care in the administration of all aspects of

[benefit] plans[.]” Akers v. Palmer, 71 F.3d 226, 229 (6th Cir. 1995) (citation omitted). To uphold

these duties, we have recognized an ERISA breach-of-fiduciary claim under § 1132(a)(3), where

a fiduciary provides a participant with “materially misleading information.” James v. Pirelli

Armstrong Tire Corp., 305 F.3d 439, 449 (6th Cir. 2002). To establish a fiduciary-duty claim

based on a misrepresentation, the plaintiff must allege (1) the defendant was acting in a fiduciary

capacity when it made the representations, (2) the representations were false and material, and

(3) the plaintiff reasonably relied on those misrepresentations to her detriment. See id.; see also

Moore v. Lafayette Life Ins. Co., 458 F.3d 416, 434–35 (6th Cir. 2006).                  A material

misrepresentation is a false statement that is substantially likely to “mislead a reasonable employee

in making an adequately informed decision in pursuing . . . benefits to which she may be entitled.”

Krohn v. Huron Mem. Hosp., 173 F.3d 542, 547 (6th Cir. 1999). “A fiduciary breaches his duty

by providing plan participants with materially misleading information, ‘regardless of whether the

fiduciary’s statements or omissions were made negligently or intentionally.’” James, 305 F.3d at

449 (citation omitted).

       Whether Zahuranec’s bariatric surgery was “medically necessary” was just a question of

coverage. The policy defines “Medical Necessity” in order to determine when the plan will cover

a procedure, but the plan warns beneficiaries that “[c]overage [p]olicies are not recommendations

for treatment and should never be used as treatment guidelines.” Based on the policy language,

when CIGNA approved Zahuranec’s surgery, it at most represented the procedure would be paid.

Zahuranec did not detrimentally rely on that representation, nor was it truly false; the plan paid for

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No. 21-3695, Zahuranec v. CIGNA Healthcare Inc., et al.

her surgery.    Notably, had CIGNA made a so-called “mixed eligibility[-]and[-]treatment

decision[],”—acting as, say, the claims administrator and the employer of Zahuranec’s treating

physician—it would not have been performing a fiduciary function under ERISA in the first place.

Aetna Health Inc. v. Davila, 542 U.S. 200, 218–21 (2004) (citing Pegram v. Herdrich, 530 U.S.

211, 229 (2000)). Zahuranec implicitly accepts this distinction, herself. She claims she would not

have undergone bariatric surgery without CIGNA’s approval, not because CIGNA made a

treatment decision, but because the procedure was too expensive otherwise. Zahuranec did not

detrimentally rely on CIGNA’s decision to approve her for bariatric surgery because the plan paid

for that procedure. We affirm the district court’s decision to dismiss this claim.

   C.      Equitable Estoppel

        Zahuranec lastly brought an equitable estoppel claim against CIGNA under § 1132(a)(3).

She requests we estop CIGNA from pursuing its subrogation lien and seeking reimbursement on

behalf of the plan because CIGNA “promise[d]” that Zahuranec’s surgery was “Medically

Necessary” when it wasn’t. To establish a claim for equitable estoppel under ERISA, a plaintiff

must allege (1) conduct or language amounting a representation of material fact; (2) the party to

be estopped was aware of the true facts; (3) the party to be estopped intended the representation

be acted on, or the party asserting the claim reasonably believed the party to be estopped so

intended; (4) the party asserting the claim was unaware of the true facts; and (5) the party asserting

the claim reasonably relied on the representation to her detriment. Moore, 458 F.3d at 428 (quoting

Sprague v. Gen. Motors Corp., 133 F.3d 388, 403 (6th Cir. 1998)).

        Once again, Zahuranec failed to allege she detrimentally relied on CIGNA’s “promise”

that her bariatric surgery was “Medically Necessary.” See Deschamps v. Bridgestone Ams., Inc.

Salaried Emps. Ret. Plan, 840 F.3d 267, 279 (6th Cir. 2016) (adopting the “reliance”-analysis from

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an equitable estoppel claim for a fiduciary-duty claim). When CIGNA approved Zahuranec’s

surgery, it represented only that her procedure was covered under the policy. Zahuranec underwent

bariatric surgery, and the plan paid for her procedure. Equity does not demand we preclude

CIGNA from pursuing the plan’s right to be reimbursed for a procedure Zahuranec requested,

CIGNA approved, and the plan paid. We affirm the district court’s decision to dismiss this claim.

                                        CONCLUSION

       For one central reason, we AFFIRM the district court: the plan was not Zahuranec’s

physician. Cf. Pegram, 530 U.S. at 236 (“ERISA was not enacted out of concern that physicians

were too poor to be sued[.]”).

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