| Keyword |
Case |
Docket |
Date: Filed /
Added |
(130148 bytes)
(105193 bytes)
| SHIRLEY O. FOUGHT, | |
| v. | |
| UNUM LIFE INSURANCE COMPANY OF AMERICA, |
Kathryn D. Lucero (Kerri L. Peck, with her on the brief), Foster, Johnson, McDonald, Lucero, Koinis, LLP, Albuquerque, New Mexico, for Defendant-Appellee
.
A severe staph infection that followed elective heart surgery hospitalized and disabled Ms. Fought. UNUM's plan administrator denied coverage by concluding that Ms. Fought suffered from a pre-existing coronary artery condition that "caused," "contributed to," or "resulted" in Ms. Fought's disability, citing language in the plan. After exhausting the company's internal appeals process, Ms. Fought brought a civil suit under 29 U.S.C. § 1132(a)(1)(B), alleging that she was entitled to disability benefits under the plan. UNUM admitted to a conflict of interest, as both payor and administrator of the plan. The magistrate judge denied discovery regarding the extent of UNUM's conflict of interest. The district court then granted summary judgment in favor of UNUM.
Exercising jurisdiction under 28 U.S.C. § 1291, we hold that the district court did not apply the appropriate standard of review when it considered the plan administrator's denial of benefits to Ms. Fought. Applying the correct standard of review, we reverse the grant of summary judgment in favor of UNUM and remand to the district court for further proceedings.
A. Undisputed Facts
On May 18, 1998, Ms. Fought enrolled in her employer's group long-term
disability plan, which was issued by UNUM with an effective date of June 1,
1998. The policy, under a provision entitled "What disabilities are not covered
under your plan?" states: "Your plan does not cover any disabilities caused by,
contributed to by, or resulting from your . . . pre-existing condition." Aple's
Supp. App. at 341-42.
The policy does not define the terms "caused by, contributed to by, or
resulting from." The policy provides the following details regarding a pre-existing condition:
You have a pre-existing condition when you apply for
coverage when you first become eligible if:
- you received medical treatment, consultation, care or
services including diagnostic measure or took prescribed
drugs or medicines in the 3 months just prior to your
effective date of coverage; or you had symptoms for which
an ordinarily prudent person would have consulted a
health care provider in the 3 months just prior to your
effective date of coverage; and
- the disability begins in the first 12 months after your
effective date of coverage.
Id. at 342.
Prior to her enrollment in the plan, Ms. Fought had been diagnosed and
treated for coronary artery disease. In August 1998, approximately three months
after her enrollment in the plan, Ms. Fought underwent angioplasty. On March 8,
1999, she was admitted for unstable angina syndrome, and on March 15, 1999,
she underwent an elective coronary artery revascularization surgery. During
surgery, the doctors discovered that Ms. Fought's sternum was narrow and
osteoporotic, requiring a special procedure to close the surgical wound. Her
doctors noted that "her postoperative course was anticipated to be quite
challenging[,] given the concerns about the wound." Aplt's App. at 79. She was
discharged six days after surgery on March 22, 1999. "At the time of [her]
discharge, there [was] no evidence of infection," and "her wounds were healing
well." Id. at 83; 166.
Three weeks later, the incision from Ms. Fought's wound became
"dehisced," or split open. On April 8, 1999, she was readmitted for care of her
dehisced sternal wound and a possible infection. Aple's Supp. App. at 97.
At this time, her wound cultures tested positive for a "few" Klebsiella
pheumonia bacteria. She was placed on antibiotics and given intensive wound
care to prevent infection. After a hospital stay of five days, and a "dramatic
improvement in the appearance of the wound," she was sent to a skilled nursing
facility. Aplt's App. at 85. At the time, the "wound appearance looked
satisfactory." Id. at 85. She was discharged from the facility on April 19, 1999.
On May 7, 1999, Ms. Fought complained of right-side chest pain. She was
readmitted to the hospital on May 11,1999, with a white blood cell count of
12,000 and a low grade fever. Two exposed sternal wires were detected. Her
sternal wound and blood cultures were positive for both Klebsiella pneumonia
and methicillin-resistant Staphylococcus aureus in the sternal wound and
methicillin- resistant Staphylococcus aureus in the blood stream. Id. at 139.
Ms. Fought was placed in the Intensive Care Unit. Over the next two
months, she underwent various operative procedures, was intubated, and received
hemodyanmic monitoring, nutritional support, and sedation. One surgery
involved extensive sternal wound reconstruction and required Ms. Fought to be
placed on a ventilator. She was discharged on July 15, 1999, when she was
transferred to another facility for intensive wound care.
On September 13, 1999, UNUM denied coverage under the long-term
disability plan, having determined that Ms. Fought's pre-existing condition
"caused, contributed to, or resulted in the condition(s) for which [she was]
claiming disability." Aplt's App. at 33-34 (Letter to Ms. Fought from Anne
Dionne, Disability Benefit Specialist, dated Sept. 13, 1999). Ms. Fought
submitted a formal request to have her claim reopened, see id. at 143
(Letter from
Ms. Fought to Ann Dionne, dated Oct. 19, 1999), as well as letters from three
doctors certifying that the staph infection was neither a pre-existing condition nor
related to her pre-existing coronary artery disease. Id. at 156 (Note from Dr.
Robert T. Ferraro, dated Oct. 19, 1999) ("[T]he staph infection which is the basis
for multiple wounds on chest is not related to coronary artery disease. This is a
separate, unrelated diagnosis without preceding history.") (emphasis added);
id.
at 154 (Note from Dr. Robert Dubroff, dated Oct. 22, 1999) ("[Ms.] Fought is
totally disabled due to her heart condition. The staph infection was not a pre-existing
condition.") (emphasis added); id. at 155 (Note from Dr. Neil T. Chen,
undated) ("[Ms.] Fought's chest & abdominal wounds/infection is [sic] not a
preexisting condition.") (emphasis in original). UNUM's medical department
reviewed Dr. Ferraro's letter,(1) but the
company declined to reverse its previous
decision, stating that although "the staph infection itself was not present during
the pre-existing condition period (3/1/98-5/31/98), it was the result of surgery
that was performed for a cardiac condition that was present, diagnosed and
treated during that time frame." Id. at 147-48 (Letter to Ms. Fought from Anne
Dionne, dated Oct. 25, 1999).
Ms. Fought then retained legal counsel, who contacted UNUM's Long-Term Disability
Quality Review Section, and informed the company that Ms.
Fought was appealing the denial of coverage. See id. at 159. After a
review,
UNUM again denied coverage, stating that "the staph infection was the result of
surgery performed for a cardiac condition that was caused by, contributed to by,
or resulted from the cardiac condition that was present, diagnosed and treated
during the pre-existing period." Id. at 150 (Letter from John J. Schifano, Senior
Benefit Analyst, dated Dec. 2, 1999).
Finally, Ms. Fought contacted the New Mexico Public Relations
Commission, which corresponded with UNUM concerning Ms. Fought's
situation. Responding to the state agency's inquiry, UNUM explained that the
staph infection was the result of coronary bypass surgery, which was performed
to treat her pre-existing condition. "She would not have had to have the surgery,
later developing an infection, if she did not have the cardiac conditions which
were present and treated for during the pre-existing period." Id. at 158 (Letter
from Theresa-Ann Uminga, Senior Complaints Specialist, to James A. Chavez,
Ms. Fought's Attorney, dated Feb. 11, 2000).
B. Procedural History
In August 2001, Ms. Fought filed suit in federal district court alleging
UNUM violated 29 U.S.C. § 1132 in denying her claim for benefits. UNUM
admitted that it operated under a conflict of interest, id. at 12 (Memorandum
Opinion and Order Granting Defendant's Motion for Summary Judgment, filed
May 31, 2002), because it both administers claims and is the payor of those
claims. Ms. Fought requested discovery to allow inquiry into the extent of
UNUM's conflict of interest. The magistrate judge denied this request.
UNUM moved for summary judgment. The district court, acknowledging
the conflict of interest, proceeded to interpret the contract language "caused by,
contributed to by, or resulting from" as meaning "related to" and "foreseeable
complication of" a pre-existing condition. The district court ruled that the "staph
infection [was] related to the coronary artery disease as a foreseeable
complication of treatment." Aplt's App. at 14. On that basis, the district court
granted UNUM's motion for summary judgment, concluding that UNUM's
decisions to deny Ms. Fought long-term disability benefits were not arbitrary or
capricious, and ordered Ms. Fought to pay UNUM's costs.
Ms. Fought now appeals.
II. A NALYSIS
UNUM's long-term disability plan is governed by the Employee
Retirement and Income Security Act (ERISA), 29 U.S.C. § 1001 et seq.
"ERISA
was enacted to promote the interests of employees and their beneficiaries in
employee benefit plans, and to protect contractually defined benefits." Firestone
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113 (1989) (citations and internal
quotation marks omitted); see also 29 U.S.C. § 1001(b) ("It is hereby declared
to
be the policy of this chapter to protect . . . the interests of participants in
employee benefit plans and their beneficiaries . . . by establishing standards of
conduct, responsibility, and obligation for fiduciaries of employee benefit
plans.").
In seeking coverage under her long-term disability benefit plan, Ms. Fought
advances three arguments. First, she argues that the district court erred by using
the wrong standard of review when it reviewed UNUM's decision. Second, she
argues that UNUM's denial of benefits was, in any event, an unreasonable
interpretation under the plan. Finally, she argues that the district court failed to
consider UNUM's obligation to draft plan provisions in a manner calculated to be
understood by the average plan participant.
We begin with the appropriate standard of review, discussing (1) the
"sliding scale" standard of review, (2) the two-tier approach to determining how
far we "slide" upon that "scale," and (3) the application of the reduced deference
standard in this case.
We then combine our analysis of Ms. Fought's second and third arguments.
Given our standard of review, we first analyze whether the plan administrator's
construction of the plan language is a reasonable one. In so doing, we consider
(a) the plan's pre-existing exclusion clause, (b) the role of causation in
interpreting the pre-existing exclusion clause, (c) the Department of Labor's
regulations and a published example regarding pre-existing conditions, (d)
relevant circuit and district court case law involving similar questions, and (e)
whether clearer exclusionary language may have been available to UNUM.
Finally, we examine whether, given the record evidence and our reduced
deference standard of review, UNUM's application of the pre-existing condition
exclusion was supported by a preponderance of the evidence.
A. The Standard of Review
"Summary judgment orders are reviewed de novo, using the same standards
as applied by the district court." Pitman v. Blue Cross & Blue Shield of Okla,
217 F.3d 1291, 1295 (10th Cir. 2000). Accordingly, like the district court, we
must review UNUM's decision to deny benefits to Ms. Fought, and we must
determine the appropriate standard to be applied.
The Supreme Court provided important guidance regarding the standard of
review in ERISA benefits cases in Firestone, 489 U.S. at 113-15. The Court
noted that deference to expert administrators is grounded in the most fundamental
premises of trust law. If a disinterested party exercising discretionary powers has
looked at evidence and rendered a decision, it is not only reasonable but a wise
conservation of judicial resources not to have judges replicate the administrator's
work. See id.
Recognizing that parties to a contract can agree to vest discretionary
authority in an administrator, the Supreme Court held that "a denial of benefits
challenged under § 1132(a)(1)(B) [ERISA] 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." Id. at 115. There is no dispute that here the plan expressly gives UNUM,
as plan administrator, the discretion to determine whether to deny a claimant
insurance benefits under the plan. Aplt's. App. at 31. Therefore, because the
plan grants UNUM discretion, "[a] court reviewing a challenge to a denial of
employee benefits . . . applies an 'arbitrary and capricious' standard to a plan
administrator's actions." Charter Canyon Treatment Ctr. v. Pool Co., 153 F.3d
1132, 1135 (10th Cir. 1998). In reviewing a plan administrator's decision under
the arbitrary and capricious standard, "the federal courts are limited to the
'administrative record' the materials compiled by the administrator in the
course of making his decision." Hall v. UNUM Life Ins. Co. of Am., 300 F.3d
1197, 1201 (10th Cir. 2002).
The possibility of an administrator operating under a conflict of interest,
however, changes the analysis. Caldwell v. Life Ins. Co. of N. Am., 287 F.3d
1276, 1282 (10th Cir. 2002) ("Indicia of arbitrary and capricious decisions
include . . . conflict of interest by the fiduciary."). Thus, "if a benefit plan gives
discretion to an administrator or fiduciary who is operating under a conflict of
interest, that conflict must be weighed as a 'facto[r] in determining whether there
is an abuse of discretion.'" Firestone, 489 U.S. at 115 (quoting Restatement
(Second) of Trusts § 187, cmt. d (1959)).(2) "The rationale for this approach is
clear. A conflicted fiduciary may favor, consciously or unconsciously, its
interests over the interests of the plan beneficiaries." Brown v. Blue Cross &
Blue Shield, Inc., 898 F.2d 1556, 1565 (11th Cir. 1990); see also
Pitman, 217
F.3d at 1296 ("'[W]hen an insurance company serves as ERISA fiduciary . . . , it
is exercising discretion over a situation for which it incurs direct, immediate
expense as a result of benefit determinations favorable to plan participants.'")
(quoting Brown, 898 F.2d at 1561).
Following Firestone, the various circuit courts attempted to put the Court's
instructions into practice. "Since Firestone, all of the circuit courts agree that a
conflict of interest triggers a less deferential standard of review. The courts,
however, differ over how this lesser degree of deference alters their review
process." Chambers v. Family Health Plan Corp., 100 F.3d 818, 825
(10th Cir.
1996).
1. Sliding Scale
In Chambers, we identified two basic approaches that had emerged in
interpreting Firestone: the "sliding scale" approach and the "presumptively void"
approach. We explicitly adopted the former. Id. at 826-27.
"Under [the sliding scale] approach, the reviewing court will always apply
an arbitrary and capricious standard, but the court must decrease the level of
deference given to the conflicted administrator's decision in proportion to the
seriousness of the conflict." Id. at 825; see also Ladd v. ITT Corp., 148
F.3d
753, 754 (7th Cir. 1998) (noting that when "the administrator has a conflict of
interest, then, though the standard of review is nominally the same, the judicial
inquiry is more searching"); Spangler v. UNUM Life Ins. Co. of Am., 38 F. Supp.
2d 952, 955-56 (N.D. Okla. 1999) (noting that where conflict of interest is
"apparent," further discovery is not required; "the court's review is a little more
searching . . . and the court is not as quick to defer to the administrator's
discretion"). "[F]lexibility in the scope of judicial review need not require a
proliferation of different standards of review; the arbitrary and capricious
standard may be a range, not a point. There may be in effect a sliding scale of
judicial review of trustees' decisions." Van Boxel v. Journal Co. Employees'
Pension Trust, 836 F.2d 1048, 1052 (7th Cir. 1987); Chambers, 100 F.3d at
826
(quoting Van Boxel for same proposition). Therefore, we recognize that "the
wholesale importation of the arbitrary and capricious standard into ERISA is
unwarranted." Firestone, 489 U.S. at 109.
To say that there is a sliding scale of deference, however, merely begs the
question: how much less deference ought a reviewing court afford? Our past
opinions in this area do not clearly address this question. See, e.g., McGraw v.
Prudential Ins. Co. of Am., 137 F.3d 1253, 1258 (10th Cir. 1998) (recognizing the
arbitrary and capricious standard as "inherently flexible" in that "the degree of
deference . . . will be decreased on a sliding scale in proportion to the extent of
conflict" without providing guidance as to what a deference reduction entails).
Our failure to articulate clearly the requirements of a less deferential arbitrary
and capricious standard has left district courts in this circuit without direction
and has encouraged litigation.(3)
2. Defining the sliding scale: a two-tier approach
In light of this lack of clarity, we capitalize on this opportunity to elaborate
more fully what a less deferential standard of review entails. We adopt the
following two-tiered standard for reducing deference in instances in which a
fiduciary has a conflict of interest because it (1) adheres to ERISA common law,
(2) promotes sound public policy, and (3) provides clearer guidance to lower
courts, lawyers, and potential litigants.
Under the first tier, in every case in which the plan administrator operates
under a conflict of interest, the plan administrator bears the burden of proving the
reasonableness of its decision pursuant to this court's traditional arbitrary and
capricious standard. Under the second tier, the court must determine whether the
conflict of interest at issue is so severe as to warrant an additional reduction in
deference.
a. First tier
Under the first tier, "if a benefit plan gives discretion to an administrator .
. . who is operating under a conflict of interest, that conflict must be weighed as a
factor in determining whether there is an abuse of discretion." Firestone, 489
U.S. at 115 (internal quotations omitted). When reviewing a plan administrator's
decision made under any conflict of interest, therefore, the reviewing court must
afford the administrator less deference, see id., without placing such an onerous
burden on the administrator as to make voluntarily provided benefits cost
prohibitive. See Kathryn J. Kennedy, Judicial Standard of Review in ERISA
Benefit Claim Cases, 50 Am. U.L. Rev. 1083, 1087-88 (2001) (hereinafter,
Kennedy, Judicial Standard).
Professor Kennedy suggests a procedure for decreasing deference for first-
tier cases that we find persuasive.
[T]o further protect participants and beneficiaries in such conflict of
interest contexts, [courts should] shift[] the burden to the fiduciary to
justify the reasonableness of its decision. This puts the plan
administrator on notice that its decisions will be judged for their
reasonableness and provides the courts with a record that must show
that the conflict of interest did not taint such decision. Such a result is
still consistent with the Firestone admonition to consider as a factor
any conflict of interest, but provides more direction for the courts in
the application of the reasonableness standard.
Id. at 1174.
This burden shifting approach for first-tier cases has numerous advantages.
First, it comports with our post-Firestone holdings that, even in cases of conflict
of interest, the arbitrary and capricious standard provides the appropriate level of
review. See Chambers, 100 F.3d at 827. Second, it provides clear direction to
district courts, lawyers, and potential litigants. Third, it provides the less
deferential review that we must accord a conflicted plan administrator without
unduly raising insurance costs. See Sandoval v. Aetna Life & Cas. Ins. Co.,
967
F.2d 377, 380 (10th Cir. 1992) ("A primary goal of ERISA was to provide a
method for workers and beneficiaries to resolve disputes over benefits
inexpensively and expeditiously."). Thus, in all cases in which a plan
administrator acted while subject to a conflict of interest, the plan administrator
should bear the burden to prove the reasonableness of its actions, pursuant to our
arbitrary and capricious standard of review.
b. Second tier While not every type of conflict of interest will require further
deference
reduction, our previous jurisprudence requires that we "decreas[e] the level of
deference in proportion to the severity of the conflict." Jones v. Kodak Med.
Assistance Plan, 169 F.3d 1287, 1291 (10th Cir. 1999). Thus, in certain types of
cases merely shifting the burden ("first-tier" cases) will not adequately increase
the level of judicial scrutiny in proportion to the severity of the conflict of
interest. Therefore, in addition to shifting the burden of proof in all conflict
cases, the reviewing court must grant even less deference to the plan
administrator in those types of cases where a sufficiently serious conflict of
interest exists ("second-tier" cases). Cf. Chambers, 100 F.3d at 827 ("[T]he
arbitrary and capricious standard is sufficiently flexible to allow a reviewing
court to adjust for the circumstances alleged, such as trustee bias in favor of a
third-party or self-dealing by the trustee.") (quotation marks omitted).
In particular, when a plan administrator, who also serves as the third party
insurer, has denied coverage, an additional reduction in deference is appropriate:
the denial of coverage may be upheld only if the plan administrator/third party
insurer establishes by a preponderance of the evidence that the denial is
warranted. See Kennedy, Judicial Standard, 50 Am. U.L. Rev. at 1174
(commenting on the shifting of the burden of proof to fiduciaries with conflicts
of interest). Although we need not determine every instance in which a conflict
of sufficient severity requires a further deference reduction, we do hold that such
a sufficiently severe conflict exists where, as in the present case, the third-party
insurer acts as the plan administrator and denies coverage for the insured.
We note that at least two other courts of appeals, in considering this type
of conflict, suggest that UNUM does not face an especially serious conflict of
interest and requires only a small reduction in deference. For instance, the Fifth
Circuit states in dicta:
When a minimal basis for a conflict is established, we review the
decision with only a modicum less deference than we otherwise
would. In the instant case, the district court held that UNUM had an
"inherent conflict of interest" because it was both the insurer and the
plan administrator, which determined whether to pay claims under
the Policy. Accordingly, the district court found that UNUM's
decision to deny Lain's claim was subject to a "modicum less
deference."
Lain v. UNUM Life Ins. Co. of Am., 279 F.3d 337, 343 (5th Cir. 2002)
(internal citations and some quotation marks omitted). The Fourth Circuit suggests a similar
approach:
In cases like this one, when the plan administrator is also the plan's
insurer, a conflict of interest exists. To safeguard against the
potential for bias on the part of the insurer, a reviewing court must
shift the standard of review to the extent necessary to counteract
evidence of undue influence. We find virtually no evidence of self-dealing in the record, and
therefore agree with the district court that
the appropriate standard of review remains abuse of discretion, albeit
with a concomitant skepticism of unsupported statements of UNUM
representatives.
Jones v. UNUM Life Ins. Co. of Am., 57 Fed. Appx. 159, 160 (4th Cir.
2003) (unpublished) (citations omitted).
We find neither Lain nor Jones persuasive. Here, the plan
administrator
directly profits from the denial of claims, due to its dual position as third-party
insurer and plan administrator. Indeed, UNUM faces a more severe conflict of
interest than that facing other conflicted plan administrators because UNUM is
not subject to countervailing pressures that work in favor of insureds. For
instance, a reduced conflict of interest exists in cases in which the employer, or
the employee's union, acts as the plan administrator, because they must balance
their incentive to deny claimsand thus decrease premiumswith their desire to
prevent declining employee morale, to retain skilled employees, and to mollify
demands for wage increases. See Smathers v. Multi-Tool, Inc./Multi-Plastics,
Inc. Employee Health & Welfare Plan, 298 F.3d 191, 197 (3d Cir. 2002) ("[T]he
risk of a conflict of interest is decreased where the administrator and funder of
the plan is the employer, rather than an insurance company, because the employer
has incentives to avoid the loss of morale and higher wage demands that could
result from denials of benefits.") (internal quotation marks omitted).
The serious nature of the conflict of interest faced by third-party
insurer/plan administrators such as UNUM, "puts the plan administrator on notice
that its decisions will be judged for their reasonableness and provides the courts
with a record that must show that the conflict of interest did not taint such
decision." Kennedy, Judicial Standard, at 1174. We thus modify our traditional
arbitrary and capricious analysis in these cases to require support for the
administrator's decision to deny coverage by a preponderance of the evidence,
rather than the traditional requirement of substantial evidence. Sandoval, 967
F.2d at 380 n.4. Preponderance of the evidence presents a higher standard of
proof than substantial evidence. Id. at 382 (holding that substantial evidence "is
such evidence that a reasonable mind might accept as adequate to support the
conclusion reached by the [decisionmaker] . . . . [and] requires more than a
scintilla but less than a preponderance") (internal quotation marks omitted).
Application of this heightened standard of review comports with
established law.(4) Under ERISA, an insurer
bears the burden to prove facts
supporting an exclusion of coverage. McGee v. Equicor-Equitable HCA Corp.,
953 F.2d 1192, 1205 (10th Cir. 1992). Federal courts treat insurer claims of
policy exclusions as affirmative defenses. See 5 Charles alan Wright &
Arthur r. Miller, Federal Practice and Procedure: Civil 2d § 1271 (1990)
("[F]ederal courts have treated as [an] affirmative defense[] for purposes of Rule
8(c) . . . [a] claim by an insurer that the loss suffered by the insured was excepted
by the policy's terms."). Thus, as an affirmative defense, an exclusion of
coverage requires that the insurer provide proof by a preponderance of the
evidence. See, e.g., Brownlow v. Aman, 740 F.2d 1476, 1486-88 (10th Cir. 1984)
(holding that a defendant must prove its affirmative defenses by a preponderance
of the evidence); Cleary v. Knapp Shoes, Inc., 924 F. Supp. 309, 315 (D. Mass.
1996) ("[A] plan administrator attempting to establish exclusion from coverage
has the burden to establish by a preponderance of evidence that a covered
employee's illness or medical condition is excludable.") (internal quotation marks
omitted).
3. The district court's application of the standard of review
Here, the district court noted that UNUM had admitted its inherent conflict
of interest. Aplt's App. at 12-13. The court then stated that it was "[f]ully
recognizing" that conflict. Id. at 13. UNUM argues that the district court's use
of the word "fully" in the order indicates that the district court engaged in the
appropriate re-calibration along the sliding scale, while Ms. Fought argues that
the district court did not reduce its deference in recognition of the conflict.
We certainly do not question the district court's awareness of a conflict.
However, it is not completely clear how the district court's full "recognition" of
the conflict of interest affected its review of the plan administrator's decision to
deny benefits to Ms. Fought.
Immediately after recognizing the conflict, the district court provided the
following description of its analysis: "[T]he guiding inquiry must be whether the
plan administrator's decision was objectively reasonable given the administrative
recordnot whether a different reasonable decision could have been made."
Aplt's App. at 13. This statement is difficult to distinguish from pure arbitrary
and capricious deference:
When reviewing under the arbitrary and capricious standard, [t]he
Administrator['s] decision need not be the only logical one nor even
the best one. It need only be sufficiently supported by facts within
[his] knowledge to counter a claim that it was arbitrary or capricious.
The decision will be upheld unless it is not grounded on any
reasonable basis.
Kimber v. Thiokol Corp., 196 F.3d 1092, 1098 (10th Cir. 1999) (internal citations
and quotation marks omitted). Notably, in Kimber, upon which the district court
relied, see Aplt's App. at 13, the court had considered and rejected the
possibility that the administrator's conflict of interest required it to slide away
from the pure arbitrary and capricious standard. See Kimber, 196 F.3d at 1098
("[T]here is insufficient evidence of a conflict of interest and review with
deference is appropriate.").
The Kimber court's "reasonable basis" language, echoed by the district
court here, is thus not the proper inquiry in this case. In Kimber, there was
insufficient evidence of a conflict of interest. Here, the conflict was clear and
uncontested. Under the standard we have set forth in this opinion, UNUM was
required to justify its decision to exclude coverage by a preponderance of the
evidence. Under that standard, we now proceed to consider the district court's
grant of summary judgment to UNUM. In so doing, we examine the language of
the plan and the evidence on which UNUM relies in denying Ms. Fought's claims
for benefits.
B. The Plan's Language
The policy at issue here, as noted above, includes the following language
relevant to this appeal: "Your plan does not cover any disabilities caused by,
contributed to by, or resulting from your . . . pre-existing condition." Aple's
Supp. App. at 341-42.
You have a pre-existing condition when you apply for coverage when
you first become eligible if:
- you received medical treatment, consultation, care or
services including diagnostic measures or took prescribed
drugs or medicines in the 3 months just prior to your
effective date of coverage; or you had symptoms for which
an ordinarily prudent person would have consulted a
health care provider in the 3 months just prior to your
effective date of coverage; and
- the disability begins in the first 12 months after your
effective date of coverage.
Id. at 342.
Applying our more searching and less deferential standard of review in
light of UNUM's admitted conflict of interest, we must determine whether
UNUM established by a preponderance of the evidence that Ms. Fought's claim
was not covered by the plan.
"We are mindful that the objective in construing a health care
agreement, as with general contract terms, is to ascertain and carry out
the true intention of the parties. However, we do so giving the
language its common and ordinary meaning as a reasonable person in
the position of the [plan] participant, not the actual participant, would
have understood the words to mean."
Pitman, 217 F.3d at 1298 (quoting Blair v. Metropolitan Life Ins. Co.,
974 F.2d
1219, 1221 (10th Cir. 1992) (internal quotation marks omitted)).
1. The role of causation in interpreting the pre-existing
condition
clause
"Cause" means "[t]o be the cause of," which is "[s]omething that produces
an effect, result, or consequence." Webster's II New Riverside University
Dictionary 239 (1988). "Contributed" is defined broadly as "[t]o act as a
determining factor." Id. at 306. "Results" means "to happen or exist as
a result
of a cause." Id. at 1002.
Ms. Fought argues that UNUM impermissibly extended the language of the
policy such that it excludes coverage for disabilities that result from surgery, not
those that result from pre-existing conditions. The major difficulty presented by
this case is that UNUM's policy excludes coverage for disabilities caused by
pre-existing conditions, whereas it seeks here to apply its policy as if it excludes
coverage for disabilities caused by complications from surgery for pre-existing
conditions. Surgery is not, of course, a pre-existing condition, but at most a
necessary consequence of a pre-existing condition. In essence, therefore, this
case becomes a matter of where we draw the line on chains of causation.
UNUM responds that the broad language of the pre-existing condition
dictates a similarly broad interpretation of the exclusion: the exclusion does not
require that the disabling condition be the sole or direct result of the pre-existing
condition. Here, UNUM applies the limitation because it believes the disabling
condition was "caused by, contributed to, or resulted from" Ms. Fought's pre-existing condition.
Based on the common ordinary meaning of the terms "cause,"
"contribute," and "result," UNUM contends, the "exclusion merely requires that
[Ms.] Fought's pre-existing heart condition be 'something' that brought about the
disabling condition or that played a significant part in bringing about the
disabling condition, or that the disabling condition arose as a consequence of the
pre-existing condition." Aple's Br. at 25.
In practice, however, UNUM's arguments rely upon classic but/for
causation: But for the coronary artery disease, none of the rest of the chain of
events would have happened. Or, as Ms. Fought herself put it: "It is kind of like
saying 'If I hadn't went outside in the rain, I wouldn't have got struck by
lightening. [sic]'" Aplt's App. at 157 (Letter to New Mexico Public Relations
Commission, dated Jan. 31, 2000).
As Ms. Fought persuasively argues, the chain of non-proximate causation
that UNUM asserts in her case is attenuated to the point of absurdity:
[UNUM's] argument necessarily goes something like
this: but for the pre-existing coronary artery disease,
Ms. Fought probably would not have the surgery; but
for the surgery, Ms. Fought would not have had a
surgical wound; but for the surgical wound, Ms.
Fought's previously undetectable osteoporotic sternum
would not have prevented her doctors from closing her
wound in a more conventional manner, which might
have given the wound greater stability and resistence to
the lateral tension in the wound exerted by Ms. Fought's
large breasts; but for the combination of the surgical
wound, Ms. Fought's osteoporotic sternum and her large
breasts, the wound probably would not have dehisced,
thereby providing an entry point for the staph infection
several weeks after the surgery; and, but for the fact that
the staph infection was resistant to antibiotics, entered
Ms. Fought's bloodstream, and eventually spread to
other parts of her body, Ms. Fought would not be
disabled.
Aplt's Br. at 21-22.
While the steps of causation are undoubtedly drawn out for effect, the
larger point is a valid one. For Ms. Fought, there were at least five intervening
stages between the pre-existing coronary artery disease and the disability: The
failure of non-surgical alternatives, initially successful elective surgery, later
complications from that surgery, initially successful treatment of those
complications, and finally a drug resistant infection due to those complications,
which in itself may have been caused by the intervening presence of
Staphylococcus aureus due to faulty sterilization, sanitation, etc. UNUM seems
to suggest that it need not cover anything for which it can construct a but/for
story. If we were to accept this contention, we would effectively render
meaningless the notion of the pre-existing condition clause by distending the
breadth of the exclusion.
2. Department of Labor's regulations and example
The Department of Labor's regulations also undermine UNUM's
interpretation of the plan. Those regulations provide the following example
regarding the scope of a pre-existing condition exclusion:(5)
Example 4. (i) Individual D, who is subject to a preexisting
exclusion imposed by Employer U's plan, has diabetes, as well as a
foot condition caused by poor circulation and retinal degeneration
(both of which are conditions that may be directly attributed to
diabetes). After enrolling in the plan, D stumbles and breaks a leg.
(ii) In this Example 4, the leg fracture is not a condition related to
D's diabetes, even though poor circulation in D's extremities and
poor vision may have contributed towards the accident. However,
any additional medical services that may be needed because of D's
preexisting diabetic condition that would not be needed by another
patient with a broken leg who does not have diabetes may be subject
to the preexisting condition exclusion imposed under Employer U's
plan.
29 C.F.R. § 2590.701-3 (a)(i)(C), Example 4.
In addition, the Practicing Law Institute provided these guidelines in
interpreting § 2590.701-3:
Thus, before imposing a preexisting condition limitation, plan sponsors
must carefully evaluate whether a particular condition is "directly
attributable" to the preexisting condition. Medical conditions which
merely "contribute towards" accidents or illnesses, but are not "directly
attributable" to the preexisting condition may not be excluded. This
causal connection requirement will undoubtedly open the door for
arguments that preexisting conditions were not the "proximate cause"
of a particular injury or sickness -- e.g., treatment of pneumonia for an
individual who was previously diagnosed with AIDS.
John R. Hickman, Insurance Law: What Every Lawyer and Businessperson Needs
to Know, Health Insurance Basics: ERISA, FMLA, ADA, ADEA, COBRA,
HIPAA, and PARCA, 584 PLI/Lit 413, 487 (May 1998).
When applying the above example from § 2590.701-3 to Ms. Fought's
case, we determine that UNUM's expansive reading of the exclusion may be
overly broad: The exclusion cannot merely require that the pre-existing condition
be one in a series of factors that contributes to the disabling condition; the
disabling condition must be substantially or directly attributable to the pre-existing condition.
See also Webster's II New Riverside Dictionary 306
(defining contribute as to mean "to act as a determining factor"). Ms. Fought's
staph infection is not a condition related to her coronary artery disease, even
though her unstable angina, which was related to her coronary artery disease,
undoubtedly contributed to the need for surgery. To read the exclusion as
broadly as UNUM, counters the essential tenets of contract law: Exclusions must
be interpreted narrowly. See 29 C.F.R. § 2590.701-3 (a)(i)(C), Example 4
(applying narrow definition of "contributed towards"); Frerking, 760 F. Supp. at
881 (noting that in the context of plans governed by ERISA, "[i]t is also well-established that the
burden is upon the insurer to demonstrate that the insured's
claim falls within the terms of an exclusionary clause, and that such clauses are
interpreted narrowly").
3. Illustrative cases
The few cases that have focused on the application of proximate cause to
exclusions for pre-existing conditions are not inapposite. In Cash v. Wal-Mart
Group Health Plan, 107 F.3d 637 (8th Cir. 1997), the plaintiff was diagnosed
with diverticular disease. He later developed diverticulitis. The Eighth Circuit
held the denial of benefits was reasonable, because the diverticulitis was a
complication and secondary condition of the presence of diverticula in the wall of
the colon. Id. at 643. In other words, the diverticular disease was a "necessary
precursor" to the later illness of diverticulitis. Id. Here, in contrast, Mr.
Fought's coronary condition was not a prerequisite to the onset of the staph
infection: There is no necessary precursor link.
Similarly, in Holsey v. UNUM Life Ins. Co. of Am., 944 F. Supp. 573, 579
(E.D. Mich. 1996), relied upon by the district court, "[Plaintiff's] blindness was
caused by, contributed to by or resulted from diabetes where blindness was
related to diabetes and glaucoma was a well-known complication of diabetes;
preexisting condition exclusion enforced." Aplt's App. at 14. Holsey, like
Cash,
clearly describes a situation where an insurer denied coverage for the results of
diabetes, not for the complications from treatment or surgery for diabetes.
Blindness certainly is a well-known complication of diabetes. Staph infections
are not, so far as we are aware, a well-known complication of coronary artery
disease. The district court also cited to Currie v. Metropolitan Life Ins. Co.,
No. CIV-A-1665, 1998 WL 214761, at *3-4 (E.D. La. April 29, 1998), and noted
the Currie court "reject[ed the] argument that plaintiff was suffering from a
different sickness or injury when she received treatment within the pre-existing
period; all treatment stemmed from prior car wreck; preexisting condition
exclusion enforced." Aplt's App. at 14. The plaintiff in Currie was disabled
because of back pain. She had been treated for back pain after a car accident that
had occurred before she was covered by the insurance policy, so the insurer
denied coverage for a pre-existing condition. She tried to claim that she was at
that point suffering from a different kind of back pain, whereas the back pain for
which she had received treatment was from a different cause; but the court held
that all of the back pain had arisen from the car accident. This scenario,
however, has nothing in common with Ms. Fought's case. The question is not
whether her disability arose from a different surgery or a different form of heart
disease but simply whether the causal connection between the disease and the
disability is insufficiently proximate.
Next, in Reinert v. Giorgio Foods, Inc., 15 F. Supp. 2d 589 (E.D. Pa.
1998), the plaintiff, Ms. Giorgio, suffered from three pre-existing conditions
before she became eligible for plan benefits: diabetes, Charcot joint disease, and
diabetic neuropathy. She later suffered from a series of ulcerations on her left
foot. Two of the ulcerations were manifestations of her pre-existing conditions.
A third ulceration developed from an insulin needle that became embedded in the
plaintiff's foot. The needle ulceration was a "separate and distinct injury which
was aggravated by those underlying conditions." Id. The court found
improper
the denial of benefits for the treatment of this injury.
The court recognized, however, that the distinction between the ulcers was
subtle. Ulcerations similar to those suffered by Ms. Giorgio were frequently
caused by continuing deterioration of the bones and tissue in her foot, which was
in turn caused by the diabetes, Charcot joint disease, and diabetic neuropathy.
Thus, applying a strict arbitrary and capricious standard, with no conflict of
interest present, the court determined that the improper denial of benefits as to
the third ulcer was not arbitrary and capricious.
Here, UNUM cannot point to such nuances. The staph infection was a
separate and distinct injury, not a manifestation of the underlying coronary
disease.
Finally, and most importantly, in Vander Pas v. UNUM Life Ins. Co. of
Am., 7 F. Supp. 2d 1011 (E.D. Wisc. 1998), the plaintiff had suffered from a pre-existing
heart condition for which he took the drug Coumadin. Coumadin puts a
patient at risk for a subdural hematoma. The patient did suffer a subdural
hematoma, and UNUM attempted to deny coverage on the theory that the pre-existing heart
condition had caused him to take Coumadin, which had then
caused the hematoma. The district court in Vander Pas described the chain of
causality as "attenuated: [T]he plaintiff's atrial fibrillation caused him to take
Coumadin, which brought about his subdural hematoma, which produced his
disability." Id. at 1018. The court faulted UNUM for not providing a "proximate
cause analysis," among other failings. Id. The district court therefore denied
UNUM's motion for summary judgment.
UNUM attempts to distinguish Vander Pas by asserting that the court did
not actually rule against UNUM on the basis of lack of proximate cause, but
because UNUM "had not set forth that, or any, explanation of a chain of
causation." Aple's Br. at 15 (bold-faced type in original). This misreads Vander
Pas. The court clearly based its decision on UNUM's failure to explain how the
treatment itself, Coumadin, was the "pre-existing condition." Vander Pas, 7 F.
Supp. 2d at 1018. In other words, the district court properly required UNUM to
show that the proximate cause of the disability (taking Coumadin) pre-existed.
That the patient would not have been taking Coumadin but for the pre-existing
heart condition did not make the pre-existing condition the "cause" of the
disability. See id. ("[T]he proposition that Coumadin played a part in causing
plaintiff's subdural hematoma . . . is not equivalent to a studied conclusion that
plaintiff's use of Coumadin satisfies the definition for 'pre-existing condition,' or
that his disability was 'caused by, contributed to by, or result[ed] from' the use of
Coumadin."). Similarly here, UNUM must demonstrate that the proximate cause
of the disability, here, the staph infection, was a pre-existing condition.
4. Availability of clearer language
Ms. Fought next argues that there is certainly a clearer way to write a
contract that would exclude coverage for complications from surgery. Indeed,
she notes a district court case from this circuit that considered a contract with
precisely that language: "Pursuant to the Plan, long-term disability benefits . . .
are not payable for any[] . . . [d]isability caused or contributed to by a Preexisting
Condition or medical or surgical treatment of a Preexisting Condition." Kaus
v.
Standard Ins. Co., 985 F. Supp. 1277, 1279 (D. Kan. 1997) (emphasis added),
aff'd, No. 97-3378, 1998 WL 778055 (10th Cir. Nov. 5, 1998); see also
Reinert,
15 F. Supp. 2d at 595 (suggesting the redrafting of the exclusion to encompass
"all conditions relating to pre-existing illnesses" so as to avoid similar claims).
In addition, the exclusion might be drafted to cover bacterial infections. See,
e.g., Lewin v. Metropolitan Life Ins. Co., 394 F.2d 608, 609 (3d Cir. 1968)
(applying accident insurance policy). The district court acknowledged that the
language "may be clearer in Kaus" but it reasoned that the contract language here
is "broad enough to encompass the treatment received in this case." Aplt's App.
at 15.
UNUM is a sophisticated party, and the plan's language is, on the whole,
careful and thorough. The existence of policies, as in Kaus, that specifically
deny coverage on the basis of complications from surgery lends support to the
argument that it is unreasonable as a matter of law to conclude that the general
language in Ms. Fought's contract encompasses the same result. UNUM had
every opportunity to add the words "or medical or surgical treatment of a
Preexisting Condition," Kaus, 985 F. Supp. at 1279, but it did not do so. It is
unreasonable to allow it to do so post facto, to the detriment of Ms. Fought and
other insureds.
Given the Department's regulations invoking proximate cause, the
illustration above, and the availability of clearer language, we conclude that the
language of the exclusion provision in the contract should not be extended to the
degree that UNUM attempts to do here. See 29 C.F.R. § 2590.701-3 (a)(i)(C),
Example 4; Frerking, 760 F. Supp. at 881 (citing caselaw requiring a narrow
interpretation of exclusion clauses).
C. Sufficiency of the evidence
Our inquiry does not end here, however. We still must determine whether
the improper denial of benefits was supported by a preponderance of the evidence.
In denying disability benefits to Ms. Fought, UNUM relied in part on the
discharge report presented by Dr. Waljii. Dr. Waljii's report indicated that,
during the heart bypass surgery, he discovered that Ms. Fought's sternum was
"narrow and "very osteoporotic." Aplt's App. at 79. Dr. Waljii attempted to
"reapproximate the sternum," using wires that tore through it. Id. He removed
the wires and reapproximated the sternum using a surgical procedure called
"Robichek reinforcement." Id. The remainder of the wound was closed in a
"standard three layer closure." Id. He reported:
Because of the large and pendulous breasts as well as significant
adiposity, the lower portion of the skin incision was also at risk of
dehiscence as indeed was the full sternum. Clearly her post-operative
course was anticipated to be quite challenging given the concerns about
the wound as indeed her other medical problems.
Id.
Ms. Fought returned to the hospital a few weeks later for "wound care of
this sternal dehiscence and quite possibly sternal infection." Aplt's App. at 53.
She was sent to a nursing facility a few days later. Approximately three weeks
later she was readmitted because of increased wound pain. After two exposed
sternal wires were detected, the methicillin-resistant Staphylococcus aureus
infection was diagnosed in her bloodstream.
Ms. Fought's initial application for long term disability, filed in June 1999,
while she was hospitalized, indicates that she was unable to work since the time of
her open heart surgery. Her application's physician statement indicated that she
had coronary artery disease, that she underwent bypass surgery, and that she
continued to be hospitalized due to the sternal wound infection. As described
above and as the medical records indicate, Ms. Fought was hospitalized for two
months and underwent several operations and procedures as a result of the
inability to clear up the staph infection.
UNUM's in-house pre-existing medical review concluded that the
conditions were "most likely caused by, contributed to, or resulted from [Ms.
Fought's previously diagnosed severe hypertension and mod/severe left ventricle
hypertrophy.]" Aplt's App. at 72. The in-house review took one day to complete
and yielded a one-paragraph opinion that indicated that "[m]edical records from
this period could further strengthen this opinion." Id. UNUM acknowledges that
the staph infection was not present during the pre-existing time period, but that it
resulted from the surgery "that was performed for a cardiac condition that was
present . . . during that time frame." Aplt's App. at 147.
In support of her argument, Ms. Fought presents notes from three doctors
indicating that the staph infection was a separate condition, unrelated to the
coronary artery disease, without a preceding history. See Aplt's App. at 156.
(Note from Dr. Robert T. Ferraro, dated Oct. 19, 1999) ("[T]he staph infection
which is the basis for multiple wounds on chest is not related to coronary artery
disease. This is a separate, unrelated diagnosis without preceding history."); id. at
154 (Note from Dr. Robert Dubroff, dated Oct. 22, 1999) ("[Ms.] Fought is totally
disabled due to her heart condition. The staph infection was not a pre-existing
condition."); id. at 155 (Note from Dr. Neil T. Chen, undated) ("[Ms.] Fought's
chest and abdominal wounds/infection is [sic] not a preexisting condition.").
(emphasis in original). Two of the three physicians were treating physicians.
UNUM counters that the notes do not state that the staph infection caused
her disabling condition, in fact, one note indicates that the disability was "due to
her heart condition." Id. at 154. UNUM thus contends its reliance on the medical
records, in conjunction with the medical notes, supports the plan administrator's
conclusion that it was the coronary artery disease that set in motion the staph
infection.
We acknowledge that, in some instances, the presence of conflicting
evidence in the record may establish that a plan administrator's decision was
reasonable. See Sandoval, 967 F.2d at 382. However, here, applying the new
standard, UNUM must establish by a preponderance of the evidence that its denial
of benefits was warranted by the plan language and the evidence. Moreover, the
only arguably conflicting evidence here is the note from Dr. Dubroff that states
both that Ms. Fought may be disabled "due to her heart condition" and that her
"staph infection was not a pre-existing condition." Aplt's App. at 154. The bulk
of Ms. Fought's medical records indicate that she was recovering well from the
surgery; the onset of the staph infection, which originated from an unknown
origin, was the debilitating condition. UNUM is unable to offer "more than a
scintilla" of evidence, Sandoval, 967 F.2d at 382, that the staph infection was a
manifestation of the pre-existing coronary artery condition, that it was caused by
the pre-existing condition, or that it was substantially contributed to by or resulted
from the pre-existing condition.
In addition, despite its apparent and admitted conflict of interest, UNUM
undertook no independent evaluation or investigation. We note that, while not
required, independent medical examinations are often helpful. Where a conflict of
interest exists, the Seventh Circuit encourages, if not requires, such an inquiry:
"When it is possible to question the fiduciaries' loyalty, they are obliged at a
minimum to engage in an intensive and scrupulous independent investigation of
their options to insure that they act in the best interests of the plan beneficiaries."
Hightshue v. AIG Life Ins. Co., 135 F.3d 1144, 1148 (7th Cir. 1998) (internal
quotation marks omitted). "Seeking independent expert advice is evidence of a
thorough investigation." Id.; see also Woo v. Deluxe Corp.,
144 F.3d 1157, 1161
(8th Cir. 1998) (holding that administrator erred in failing to obtain an
independent review of the claim by an expert when treating physician determined
applicant was disabled and when there was evidence of an uncommon disease).
Where, as here, a conflict of interest may impede the plan administrator's
impartiality, the administrator best promotes the purposes of ERISA by obtaining
an independent evaluation. See 29 U.S.C. § 1001(b).
In sum, we cannot say that, given UNUM's conflict of interest, and our
modified sliding scale review, that UNUM has justified its denial of benefits by a
preponderance of the evidence. UNUM's repeated denials of Ms. Fought's claims
merely echo the terms of the pre-existing condition plan language, and offer at
most thin support from the record before us.
III. CONCLUSION
We thus hold that the plan's language here does not reasonably apply to the attenuated chain of events between Ms. Fought's pre-existing coronary artery disease and her disabling staph infection and that UNUM's denial of benefits was not supported by a preponderance of the evidence. Accordingly, we REVERSE the district court's grant of summary judgment to UNUM and REMAND for further proceedings consistent with this opinion.(6)
1. The letter from UNUM does not mention the other doctors' letters, saying only that "Dr. Ferraro's note was reviewed by our medical department." Aplt's App. at 147. Apparently, the other two doctors' letters were faxed to UNUM on October 25, 1999, the very day that UNUM sent Ms. Fought the letter confirming its denial of disability benefits. See id. at 146. "Plan administrators, of course, may not arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of a treating physician." Black & Decker Disability Plan v. Nord, 123 S. Ct. 1965, 1972 (2003). We note that UNUM's subsequent review, see Aplt's App. at 150, appeared to include consideration of Ms. Fought's additional doctors' notes.
We also note that the parties do not argue that the plan administrator misallocated the weight it gave to the treating physician's opinion, so the admonishments of Black & Decker do not apply. See Black & Decker, 123 S. Ct. at 1972 ("[W]e hold [that] courts have no warrant to require administrators automatically to accord special weight to the opinions of a claimant's physician; nor may courts impose on plan administrators a discrete burden of explanation when they credit reliable evidence that conflicts with a treating physician's evaluation.").
2. We continue to treat the terms "arbitrary and capricious" and "abuse of discretion" as interchangeable in this context. See Chambers v. Family Health Plan Corp., 100 F.3d 818, 825 n.1 (10th Cir. 1996) ("Some circuit courts have recently distinguished between these two standards and have concluded that the abuse of discretion standard is more appropriate. Most courts, however, have held that this is a distinction without a difference. We agree and adhere to the arbitrary and capricious standard of review.") (internal citations and quotation marks omitted).
3. Our review of the law reveals a similar lack of direction from other circuits. See, e.g., Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 390-93 (3d. Cir. 2000) (holding, without providing further guidance, that the deference accorded the fiduciary will be lessened by the degree necessary to neutralize influence resulting from conflict); Vega v. Nat'l Life Ins. Servs., Inc., 188 F.3d 287, 296 (5th Cir. 1999) (stating only that the "deference [provided to the administrator] will be lessened to the degree necessary to neutralize any untoward influence resulting from the conflict"); Borda v. Hardy, Lewis, Pollard & Page, P.C., 138 F.3d 1062, 1069 (6th Cir. 1998) (concluding that the fiduciary will be entitled to some deference, but that "application of the standard should be shaped by the circumstances of the inherent conflict of interest"); Mers v. Marriott Int'l Group Accidental Death & Dismemberment Plan, 144 F.3d 1014, 1020 n.1 (7th Cir. 1998) (recognizing that "[t]he arbitrary and capricious standard does not pose an all-or-nothing choice between full deference or none"); Woo v. Deluxe Corp., 144 F.3d 1157, 1161-62 (8th Cir. 1998) (describing the sliding scale as extremely flexible in that courts may adjust for all relevant circumstances). The Third Circuit states this well:
We acknowledge that there is something intellectually unsatisfying, or at least discomforting, in describing our review as a "heightened arbitrary and capricious" standard. The locution is somewhat awkward. The routine legal meaning of an "arbitrary and capricious" decision is that used, quite understandably, by the district court: a decision "without reason, unsupported by substantial evidence or erroneous as a matter of law." Once the conflict becomes a "factor" however, it is not clear how the process required by the typical arbitrary and capricious review changes.
Pinto, 214 F.3d at 392.
4. There is correlating line of authority which places the burden on the insurer to establish that the denial of benefits fell within the narrowly construed exclusionary clause. See Caffey v. UNUM Life Ins. Co., 302 F.3d 576, 580 (6th Cir. 2002) ("ERISA places the burden of proving an exclusion from coverage in an ERISA-regulated welfare plan on the plan administrator."); Frerking v. Blue Cross-Blue Shield of Kan., 760 F. Supp. 877, 881 (D. Kan. 1991) (noting that "[i]t is also well-established that the burden is upon the insurer to demonstrate that the insured's claim falls within the terms of the exclusionary clause, and that such clauses are interpreted narrowly") (citing Tex. E. Transmission Corp. v. Marine Office-Appleton & Cox Corp., 579 F.2d 561, 564 (10th Cir. 1978) and Milliken v. Fidelity & Cas. Co., 338 F.2d 35, 41 & n.13 (10th Cir. 1964)); Cleary v. Knapp Shoes, Inc., 924 F. Supp. 309, 315 (D. Mass. 1996) (noting that "it is a general rule of insurance law that the insurer bears the burden of showing that a covered injury falls within an exclusion provision") (citing McGee v. Equicor-Equitable HCA Corp., 953 F.2d 1192, 1205 (10th Cir. 1992)).
5. Those regulations generally provide that "a group health plan, and a health insurance issuer offering group health insurance coverage, may impose, with respect to a participant or beneficiary, a preexisting condition exclusion only if the requirements of this paragraph (a) are satisfied." 29 C.F.R. § 2590.701-3(a)(i). Those regulations include the length of time during which the condition was treated and the kind of treatment that has been received for the condition. See id.
6. Because we reverse the district court's grant of summary judgment in favor of UNUM, we also vacate the district court's order that UNUM recover its costs of action from Ms. Fought.
| Keyword |
Case |
Docket |
Date: Filed /
Added |
(130148 bytes)
(105193 bytes)