Townley v. Aetna Health Inc.

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
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ERIN TOWNLEY,
Plaintiff,
Case No. 4:24-cv-3513
v.
AETNA LIFE INSURANCE COMPANY,
Defendant.
MEMORANDUM AND ORDER1
This is an ERISA case, seeking reimbursement for medical costs Plaintiff Erin
Townley (“Plaintiff” or “Townley”) incurred after the birth of her child. Pending
before the Court is Defendant Aetna Life Insurance Company’s (“Defendant” or
“Aetna”) motion to dismiss, ECF No. 31. Based on a careful review of the pleadings,
motion,2 and applicable law, the Court grants the motion because Plaintiff did not
satisfy the policy’s coverage requirements and cannot cure this defect.
I. 	BACKGROUND
These facts are taken from Plaintiff’s first amended complaint and are
presumed to be true. Townley gave birth by cesarean section in early May 2023.
1 On October 29, 2024, based on the parties’ consent, the case was transferred to this Court to
conduct all proceedings pursuant to 28 U.S.C. § 636(c). Transfer Order, ECF No. 12.
2 Plaintiff filed a response, ECF No. 35. Defendant filed a reply, ECF No. 36. Some exhibits
supporting the instant motion were filed under seal. ECF No. 32-2.
United States District Court
Southern District of Texas
ENTERED
December 31, 2025
Nathan Ochsner, Clerk
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ECF No. 28 ¶¶ 18, 24. At the time, she was a beneficiary of an employer-sponsored
health insurance plan (“Plan”) that Aetna administered and had discretion to
interpret. Id. ¶ 16–17. Plaintiff’s newborn immediately received medically necessary
care, at a cost of approximately $7,000. Id. ¶ 18. Townley filed a claim under the
Plan to cover those costs. Id. ¶ 20. Aetna denied the claim, reaffirming that denial
through both steps of its internal appeal process. Id. ¶¶ 21, 27–29.
Townley sued in Texas state court, proceeding pro se. ECF No. 1-3 at 2–8.
She alleged breach of contract, promissory estoppel, and violation of the Texas
Deceptive Trade Practices Act. Id. at 6–7. Defendant removed the case to federal
court. ECF No. 1 at 2. Plaintiff sought remand, ECF No. 5, but was unsuccessful,
Order, ECF No. 18. She then obtained counsel, ECF Nos. 26–27, and filed her first
amended complaint with a copy of the Plan attached, ECF Nos. 28, 28-1. She now
alleges that Aetna’s denials violate ERISA section 502(a). Id. ¶¶ 36–45. Defendant
filed the instant motion to dismiss, ECF No. 31.
II. 	LEGAL STANDARD FOR RULE 12(b)(6) DISMISSAL.
A court may dismiss a complaint for “failure to state a claim upon which relief
can be granted.” Fed. R. Civ. P. 12(b)(6). Motions to dismiss under Rule 12(b)(6)
“are viewed with disfavor and rarely granted.” Hodge v. Engleman, 90 F.4th 840,
843 (5th Cir. 2024). “Under Federal Rule of Civil Procedure 8(a)(2), a pleading must
contain a ‘short and plain statement of the claim showing that the pleader is entitled
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to relief.’” ADR Int'l Ltd. v. Inst. for Supply Mgmt. Inc., 667 F. Supp. 3d 411, 419
(S.D. Tex. 2023) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009)).
A motion to dismiss “tests the legal sufficiency of the claims alleged in the
complaint.” 	Stolte v. Securian Life Ins. Co., 621 F. Supp.3d 1034, 1039 (N.D.
Ca. 2022) (citations omitted). When reviewing a motion to dismiss, the court must
accept as true the Plaintiff’s factual allegations and may dismiss a claim “only where
there is no cognizable legal theory” or there is an absence of “sufficient factual
matter to state a facially plausible claim to relief.” Id. (citations omitted). A claim is
plausible when the pleaded factual content allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged. Id. (citing Ashcroft
v. Iqbal, 556 U.S. 662, 677-78, 129 S. Ct. 1937, 173 L.Ed.2d 868 (2009)); ADR Int'l
Ltd., 667 F. Supp.3d at 419 (quoting Bowlby v. City of Aberdeen, Miss., 681 F.3d
215, 	219 	(5th 	Cir. 	2012)). 	“[A] 	complaint 	‘does 	not 	need 	detailed 	factual
allegations,’ but must provide the plaintiff’s grounds for entitlement to relief—
including factual allegations that when assumed to be true ‘raise a right to relief
above the speculative level.’” Id. (quoting Cuvillier v. Taylor, 503 F.3d 397, 401
(5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007))).
“The ultimate question ‘is whether the complaint states a valid claim when
viewed in the light most favorable to the plaintiff.’” Id. (quoting Brown v. Bd. of
Trustees Sealy Indep. Sch. Dist., 871 F. Supp.2d 581, 590 (S.D. Tex. 2012)).
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“[C]ourts are required to dismiss, pursuant to [Rule 12(b)(6)], claims based on
invalid legal theories, even though they may be otherwise well-pleaded.” 	Id.
(quoting Farshchi v. Wells Fargo Bank, N.A., Civ. Action No. H-15-1692, 2016 WL
2858903, at *2 (S.D. Tex. May 13, 2016) (citing Flynn v. State Farm Fire & Cas.
Ins. Co. (Tex.), 605 F. Supp.2d 811, 820 (W.D. Tex. 2009))).
In deciding a Rule 12(b)(6) motion, courts are limited to considering the
complaint and documents attached to it, as well as documents attached to a
Rule 12(b)(6) motion that are both referred to in the complaint and central to the
plaintiff’s claim. George v. SI Group, Inc., 36 F.4th 611, 619 (5th Cir. 2022).
III. 	DEFENDANT IS ENTITLED TO DISMISSAL BECAUSE THE PLAN
DOES NOT PROVIDE COVERAGE TO A NEWBORN UNLESS THE
CHILD IS ADDED TO THE POLICY WITHIN THIRTY-ONE DAYS
AFTER BIRTH.
In her amended complaint, Plaintiff alleges that Aetna’s denial of benefits was
based on a flawed interpretation of the Plan’s automatic newborn coverage provision
and was a violation of ERISA and was arbitrary and capricious. Pl.’s Am. Compl.,
ECF No. 28 ¶¶ 31, 33, 44. Alternatively, Plaintiff alleges that the Newborns’ and
Mothers’ Health Protection Act (“NMHPA”) entitles her to automatic coverage. Id.
¶¶ 25, 31. Aetna argues, in essence, that it is entitled to dismissal because its reading
of the Plan was legally correct and therefore not arbitrary and capricious and
Plaintiff’s complaint fails to allege a legally viable claim. ECF No. 31. Defendant
further asserts that the NMHPA is inapplicable because it only applies when the Plan
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provides coverage and there is no such provision under the Plan. ECF No. 31
at 5, 13.
A. 	Judicial Review of The Plan Administrator’s Discretionary Benefits
Determination: Abuse of Discretion.
When an insurance plan administrator has discretion to determine eligibility
or interpret plan terms, judicial review of the administrator’s benefits determination
is done under an abuse of discretion standard. Krishna v. Nat'l Union Fire Ins. Co.
of Pittsburgh, PA., 676 F. Supp.3d 494, 502 (S.D. Tex. 2023), aff'd sub nom. Krishna
v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pennsylvania, No. 23-20289, 2024 WL
1049474 (5th Cir. Mar. 11, 2024) (citing Anderson v. Cytec Indus., Inc., 619 F.3d
505, 512 (5th Cir. 2010)). In the context of ERISA, this standard is equivalent to
arbitrary and capricious review. Id. “‘A decision is arbitrary if it is ‘made without a
rational 	connection 	between 	the 	known 	facts 	and 	the 	decision.’” 	Id. 	(citing
Anderson, 619 F.3d at 512 (citing Ellis v. Liberty Life Assurance Company of
Boston, 394 F.3d 262, 273 (5th Cir. 2004), cert. denied, 545 U.S. 1128, 125 S. Ct.
294, 162 L.Ed. 867 (2005))). In addition, the administrator’s decision must be
supported by substantial evidence, which is more than a scintilla but less than a
preponderance, and is such evidence as a reasonable mind might accept as adequate
to support a conclusion. Id. (citations omitted). The court’s review need only assure
that the administrator’s decision is on a continuum of reasonableness. Id. at 502–03
(quoting Anderson, 619 F.3d at 512).
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The preliminary question in reviewing a plan administrator’s determination
under an abuse of discretion standard is whether the administrator’s interpretation
was legally correct. Id. at 509 (citing Encompass Office Solutions, Inc. v. Louisiana
Health Service & Indemnity Co., 919 F.3d 266, 282 (5th Cir. 2019)). In doing so,
courts consider: (1) whether the administrator has given the plan a uniform
construction; (2) whether the interpretation is consistent with a fair reading of the
plan; and (3) any unanticipated costs resulting from different interpretations of the
plan. Id. (quoting Gosselink v. American Telephone & Telegraph, Inc., 272 F.3d 722,
726 (5th Cir. 2001)). If the plan interpretation was legally correct, the inquiry ends
and there was no abuse of discretion based on the plan administrator’s interpretation
of the plan. Id. (quoting Encompass, 919 F.3d at 282).3
B. 	Aetna Has Discretion To Interpret the Plan And Its Determination Was
Legally Correct.
Defendant asserts that Townley’s claim fails because it is premised on a
fundamental misunderstanding of both the Plan’s coverage and the law. ECF No. 31
at 5, 14–16. Plaintiff alleges her child was automatically covered for the first thirty-
one days after birth through Townley’s in-force coverage under the Plan; therefore,
3 However, if a plan interpretation is not legally correct, the court then applies a factor-based
analysis to determine whether the legally incorrect interpretation nevertheless falls within the
administrator’s discretion: (1) the internal consistency of the plan under the administrator’s
interpretation; (2) any relevant regulations formulated by the appropriate administrative agencies;
and (3) the factual background of the determination and any inferences of lack of good faith.” Id.
(internal quotations omitted).
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Aetna’s denial was arbitrary and capricious and violated ERISA. ECF No. 28 ¶¶ 19,
28, 41–44. To analyze the parties’ arguments, the Court turns to the Plan documents.
Stolte, 621 F. Supp. 3d at 1042.
Here, according to the Plan, Aetna had discretion both as to eligibility
determination and plan term interpretation. ECF No. 28-1 at 51 (“Aetna has full
discretionary authority . . . to determine eligibility for benefits . . . and to construe
terms of the Plan with respect to benefits”). 4 Thus, the Court’s review of Townley’s
claim must first determine whether Aetna’s decision was legally correct. Of the
factors to assess whether the administrator’s decision is legally correct, the parties
only dispute whether Aetna’s “interpretation is consistent with a fair reading of the
plan.” Krishna, 676 F.Supp.3d at 509. In reviewing whether the administrator’s
interpretation is based on a fair reading of the plan, the Court must give the insurance
contract language “its ordinary and generally accepted meaning.” Id. at 510–11
(quoting Green v. Life Ins. Co. of N. Am., 754 F.3d 324, 331 (5th Cir. 2014)).
If there is ambiguity, courts generally construe it against the drafter, except
where the plan gives the administrator discretionary plan interpretation authority. Id.
at 511 (quoting Green, 754 F.3d at 331; citing Smith v. Life Insurance Company of
North America, 459 F. App’x 480, 484 (5th Cir. 2012)). In that case, courts may only
4 The Court may consider the Plan because it is attached to Plaintiff’s First Amended Complaint.
George, 36 F.4th at 619.
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determine if the administrator’s interpretation was reasonable. Id. (citing Smith, 459
F. App’x at 484)). Since the Plan gives Aetna discretionary authority to interpret the
Plan, in the event of any ambiguity, the Court is limited to evaluating whether
Aetna’s interpretation was reasonable. Id.; ECF No. 28-1 at 51.
The Plan’s provision addressing maternity and related newborn care states:
Covered services include pregnancy (prenatal) care, care after delivery
and obstetrical services. After your child is born, covered services
include:
• 	No less than 48 hours of inpatient care in a hospital after a vaginal
delivery
• 	No less than 96 hours of inpatient care in a hospital after a cesarean
delivery
ECF No. 28-1 at 12 (emphases in original to designate defined terms). The Plan in
turn defines “covered service” as “benefits, subject to varying cost shares, covered
under the plan.” Id. at 56. The Plan also explains the process of adding new
dependents, with coverage starting “on the date of the event for new dependents that
join [the] plan” by birth. Id. at 47. The Plan includes a requirement that Aetna “must
receive a completed enrollment form not more than 31 days after the event date.” Id.
The Court finds no ambiguity in these terms. An ordinary, plain language
interpretation of these terms is that the Plan covers hospital inpatient care for the
mother for at least 48 hours after a vaginal delivery and 96 hours after a cesarean
delivery. A newborn dependent can be added to the Plan with coverage retroactive
to its birth as long as Aetna receives a completed enrollment form no more than 31
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days after the baby is born. This reading is consistent with Aetna’s interpretation.
ECF No. 31 at 5 (“the plan provides coverage for newborn children only if the child
is enrolled in a plan within 31 days of birth”). The Court therefore concludes that
Aetna’s interpretation of these unambiguous terms “is consistent with a fair reading
of the plan” and was legally correct. Krishna, 676 F.Supp.3d at 509.
Plaintiff’s allegations in her complaint are contrary to the plain language of
the Plan. See Stolte, 621 F. Supp. 3d at 1047. Plaintiff alleges that the Plan requires
automatic coverage for the newborn for 31 days following birth, regardless of
whether the child is added to the policy. Pl.’s First Am. Compl., ¶18-19. Plaintiff’s
reading ignores the provision that requires the child to be enrolled within 31 days
for coverage to relate back to birth. ECF No. 28-1 at 47. Plaintiff does not allege that
her child was enrolled within the deadline. Thus, Plaintiff’s allegations fail to
provide her with a plausible claim for relief. ADR Int'l Ltd., 667 F. Supp. 3d at 419
(citing Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570)). Construing the
allegations in the light most favorable to Plaintiff, the Court cannot conclude that
Defendant is liable for the misconduct alleged. Plaintiff’s allegations that the
Defendant 	acted 	arbitrarily 	in 	denying 	coverage 	because 	the 	newborn 	was
automatically covered for 31 days despite the fact that the child was never enrolled
in the Plan is contrary to the plain reading of the Plan. As harsh as this result may
be, no plausible reading of the complaint and Plan documents can support a different
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result.
Moreover, Aetna’s decision was based on and supported by substantial
evidence establishing the Plaintiff’s child was not enrolled. Plaintiff admits in her
complaint that Aetna stated its
records indicate [Plaintiff’s child] is not enrolled for benefits on the
submitted date(s) of service. If member is a newborn, ensure you enroll
the dependent within the time required under your Plan.
ECF No. 28 ¶ 21. Likewise, Aetna’s determination response to Townley’s first-level
appeal, id. ¶¶ 27–28, informed her:
We do not show enrollment for [Plaintiff’s child] under your Aetna
medical plan. If a patient has not been enrolled under the Aetna plan as
a member, they are ineligible for benefit coverage. If claims are
received for patients that are not covered under the plan, the claims are
rejected. Therefore, none of the providers’ claims can be allowed for
benefit consideration at this time. Your plan sponsor . . . is responsible
for enrollment and eligibility. Therefore, we recommend for you to
contact 	[your 	plan 	sponsor’s] 	human 	resources 	department 	for
assistance with 	[Plaintiff’s 	child]’s 	enrollment 	under 	your Aetna
medical plan.
ECF No. 32-2 at 6 (Aetna’s August 2023 letter to Plaintiff explaining its denial of
claims submitted on behalf of Plaintiff’s child from its May 2023 birth).5 Plaintiff
does not contend otherwise. The Court finds that denying a claim based on evidence
showing the newborn was not covered under the Plan to be firmly on the requisite
5 The Court may properly consider this sealed exhibit—Aetna’s response to Townley’s first-level
appeal—in deciding the instant motion because it is attached to Defendant’s motion, quoted in
Plaintiff’s First Amended Complaint, and is central to her claim as it provides the language
underpinning her case. ECF No. 28 ¶¶ 21, 27–28.
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“continuum of reasonableness.” Krishna, 676 F. Supp. 3d at 513. Thus, Plaintiff’s
ERISA claim is not legally viable based on her facts as alleged because she fails to
plausibly plead that Aetna’s determination was an abuse of discretion and cannot
survive dismissal. ADR Int'l Ltd., 667 F. Supp. 3d at 419.
C. 	NMHPA Does Not Require Coverage of Benefits 	To Non-Covered
Persons.
Townley’s alternative position relying on the NMHPA fares little better.
Townley argues Aetna’s denial was based on an incorrect interpretation of “the
Plan’s automatic newborn coverage provision under [the] NMHPA, which requires
Newborn Coverage.” ECF No. 28 at ¶ 31. Plaintiff’s argument is without merit.
The statute provides a
group health plan . . . may not . . .
(i) 	restrict benefits for any hospital length of stay in connection with
childbirth for the mother or newborn child, flowing a normal
vaginal delivery, to less than 48 hours, or
(ii) 	restrict benefits for any hospital length of stay in connection with
childbirth for the mother or newborn child, following a cesarean
section, to less than 96 hours . . .
(c)(2) This section shall not apply with respect to any group health
plan . . . which does not provide benefits for hospital lengths of stay in
connection with childbirth for a mother or her newborn child.
29 U.S.C. § 1185(a)(1)(A) & (c)(2).
By the plain terms of the statute, the NMHPA does not require coverage of
benefits to a person who is not otherwise covered under the plan. As Aetna states,
enrollment is required for benefit coverage eligibility. ECF No. 32-2 at 6. Nothing
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in the NMHPA requires automatic coverage for non-beneficiaries. Plaintiff fails to
cite a case, nor is the Court able to discern any authorities, holding otherwise.
Therefore, Plaintiff’s NMHPA argument is based upon an invalid legal theory and
cannot survive dismissal. ADR Int'l Ltd., 667 F. Supp. 3d at 419.
IV. 	AMENDMENT WOULD BE FUTILE.
Plaintiff requests leave to amend should the court grant Defendant’s motion.
ECF No. 35 at 11. The Court, however, concludes that Plaintiff’s ERISA and
NMHPA claims cannot be saved by any amendment. Based on the undisputed text
of the Plan documents, no new factual allegations could change this analysis unless
Plaintiff can plausibly claim that she enrolled her newborn before the expiration of
the 31-day deadline. Any new allegation that the newborn was enrolled in time
would conflict with the evidence of record. Because no new allegations could change
the outcome in this case, the Court finds that amendment is futile and denies leave
to amend.
V. 	CONCLUSION
As alleged, Plaintiff fails to state a plausible claim for relief. Her interpretation
of the Plan ignores a critical provision that requires enrollment of the newborn child
within 31 days of birth for coverage. Her NMHPA claim fails for the same reason.
The statute does not apply if there is no coverage under the Plan. Therefore, Aetna’s
motion to dismiss, ECF No. 31, is GRANTED. The Court finds that amendment
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would be futile and this lawsuit is DISMISSED WITH PREJUDICE.
Signed at Houston, Texas, on December 31, 2025.
______________________________
Dena Hanovice Palermo
United States Magistrate Judge
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