In Hawaii Management Alliance Assoc. v. Schmidt, 2008 U.S. Dist. LEXIS 69995 (D. Haw. Sept. 5, 2008), the the insured ("HMAA"), a mutual benefit society, challenged a memorandum issued by the Hawaii Insurance Commissioner which stated granting a plan administrator discretionary authority so as to deprive the insured of a de novo appeal was an unfair or deceptive insurance practice.
The plan provided HMAA had sole discretion to determine all questions of eligibility. The Commissioner informed HMAA that is use of the discretionary clause was an unfair or deceptive practice in the business of insurance. The Commissioner threatened that if HMAA did not remove the clause from its service agreements, the Insurance Division would take "formal action." When the parties could not agree on acceptable language, HMAA sued, alleging that by issuing the memorandum, the Commissioner improperly prohibited the use of discretionary clauses. HMAA moved for summary judgment, arguing the memorandum was pre-empted by ERISA and that the memorandum was promulgated as a rule in violation of the Hawaii Administrative Procedure Act.
The court determined it had no jurisdiction over the claims raised by HMAA because they were premature. First, the memorandum was not a definitive statement of the Insurance Division's position. It was possible the Commissioner could decide not to take any action against HMAA. It was also possible that after HMAA stated its case, the Commissioner could agree the used of the discretionary clause was not an unfair or deception act or practice.
In addition, the Commissioner had not taken any final action. If the Commissioner believed HMAA was using the discretionary clause in violation of the law, he would first have to afford an opportunity to be heard before action could be taken against HMAA. Therefore, the memorandum did not have a direct and immediate effect on HMAA. Consequently, the court did not have jurisdiction to address the merits of HMAA's claims regarding ERISA.
