Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—N.D. Cal.: Transgender woman’s ERISA claim for facial feminization surgery dismissed, (Jan 20, 2026)

By Tulay Turan, J.D.

Her health insurance plan unambiguously excluded the denied benefit.

Granting a group health insurance plan’s motion to dismiss a transgender woman’s ERISA denial-of-benefits claim, a federal district court in California ruled she failed to state a claim because facial feminization surgery was expressly excluded under the plan’s terms. She did not plausibly plead that the denial of coverage for that procedure violated the terms. The court, however, denied the plan’s motion to dismiss her declaratory relief count, finding her prior settlement agreement, which involved the plan’s denial of benefits related to facial hair removal, did not bar this suit (Cox v. WSP USA Inc. Group Insurance Plan, No. 24-cv-08812-HSG (N.D. Cal. Jan. 16, 2026)).

The plaintiff, a transgender woman with a diagnosis of gender dysphoria, is an employee group health benefit plan member of WSP USA Inc. Group’s Insurance Plan. Aetna Life Insurance Company administers the health benefits under the plan and acts on WSP’s behalf.

Medically necessary care. The plan provides coverage for “medically necessary” care, which Aetna determines by evaluating whether the treatment is “in accordance with generally accepted standards of medical practice.” Aetna separately provides clinical policy bulletins that define what procedures are medically necessary to treat certain conditions, including gender affirming surgery.

Previous lawsuit. The insured previously sued WSP for denying her claim for facial hair removal services as part of her treatment for gender dysphoria. In June 2024, the parties entered into a settlement agreement. She released “any and all claims” related to the disputed claims (“for health benefits related to facial hair removal”) and any claims she asserted “or could have asserted” in that case.

Benefits denied. In March 2024, Aetna denied the insured’s request for facial feminization surgery, contending the procedure was not considered medically necessary under the clinical policy bulletin. She appealed the denial, but Aetna denied it. A few months later, she submitted a second appeal, which Aetna also denied, indicating again that the plan excluded those services.

Second complaint. The insured filed a lawsuit against WSP for denying her benefits in violation of ERISA and for a declaration that the settlement agreement did not bar the current claims. WSP filed motions to seal the settlement agreement and to incorporate exhibits into the complaint. It also filed a motion to dismiss the complaint.

Motion to seal. The court first granted WSP’s motion to seal the identified portions of the settlement agreement attached to the motion to dismiss. It found good cause to seal the insured’s personally identifiable information and the settlement amount.

Motion to incorporate. Next, the court granted WSP’s motion to incorporate the Choice POS II Enhanced HDHP Plan (Benefit Booklet), the Aetna Policy Bulletin for Gender Affirming Surgery (Policy Bulletin), and the settlement agreement, but denied the motion to incorporate the master service agreement, which governed administrative services between WSP and Aetna, and the summary plan description.

Declaratory relief. Finding that the settlement agreement did not bar this suit, the court denied WSP’s motion to dismiss the insured’s declaratory relief count. WSP argued the settlement agreement barred the insured’s new claims since the facial feminization surgery was related to the facial hair removal procedure. The court disagreed.

The claims at issue in this case related to chin surgery. The court found the facts and dates as alleged in the complaint supported the insured’s argument that her claims regarding facial feminization surgery had not ripened when her first lawsuit was being litigated, such that she could not have asserted them there. She did not receive the denial of her second internal appeal until September 2024 but settled her prior claims in June 2024. Accordingly, the record reflected that she had not completed the internal appeal process necessary to make her current claim one that she “could have asserted” against WSP in the original lawsuit.

Plan terms. Turning to the insured’s denial-of-benefits count, the court found she failed to state a claim because facial feminization surgery was expressly excluded under the terms of the plan. She did not plausibly plead that WSP’s denial of coverage for that procedure violated the terms of the plan. The Benefit Booklet explicitly incorporated clinical policy bulletins as controlling. The Policy Bulletin defined the type of facial feminization surgery that she was seeking as “cosmetic” and “not medically necessary.” Under the terms of the plan—which the court said were the starting and ending points of its analysis under ERISA—she failed to state a claim because those procedures were expressly excluded.

Affirmative defense? The court also rejected the insured’s argument that the Policy Bulletin created an exclusion, which she characterized as an affirmative defense. She contended that she was not required to plead around affirmative defenses. However, exclusions laid out in plan documents are not considered affirmative defenses in cases under 29 U.S.C. § 1132 and can be the basis for granting a motion to dismiss. To successfully state a claim, the court said she must identify a specific service that was covered by the plan terms and establish the denial of those benefits. Here, the plan unambiguously excluded the denied benefit. Thus, the court granted WSP’s motion to dismiss the denial-of-benefits count.

Leave to amend. Finally, the court denied the insured an opportunity to amend her complaint, finding she could not cure the deficiencies in the pleading and granting leave to amend would be futile.

The case is No. 24-cv-08812-HSG.

Judge: Gilliam, H., Jr.

Attorneys: Elizabeth Katherine Green (Green Health Law) for Andi Cox. Rachel Christine Agius (Holland & Knight) for WSP USA Inc. Group Insurance Plan.

Companies: WSP USA Inc. Group Insurance Plan

Cases: PensionBenefitPlans EvidenceDiscovery CaliforniaNews GCNNews