Allison v. Unum Life Ins. Co. of America

• Decision Date: 25 August 2004
• Docket Number: No. 03-5052.,03-5052.
• Citation: 381 F.3d 1015
• Parties: Peggy I. ALLISON, Plaintiff-Appellant, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

381 F.3d 1015

Peggy I. ALLISON, Plaintiff-Appellant, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant-Appellee.

No. 03-5052.

United States Court of Appeals, Tenth Circuit.

August 25, 2004.

Appeal from the United States District Court for the Northern District of Oklahoma, James H. Payne, Chief Judge.

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Joseph F. Clark, Jr., Tulsa, OK, for Appellant.

Thayla Painter Bohn (with John R. Woodard, III on the brief), Feldman, Franden, Woodard Farris & Bourdreaux, Tulsa, OK, for Appellee.

Before HENRY, HOLLOWAY, and O'BRIEN, Circuit Judges.

HENRY, Circuit Judge.

Peggy Allison challenges the decision by UNUM's claims administrator to deny long-term disability benefits under her employer's group disability plan. Ms. Allison suffers from multiple endocrine neoplasia type I (MEN-I syndrome), a relatively uncommon inherited disease that often causes overactivity and enlargement of certain endocrine glands, including the parathyroid and the pancreas.

After conducting a pre-existing condition review, UNUM denied Ms. Allison long-term disability benefits and rejected Ms. Allison's appeal. Ms. Allison sought further review, claiming that UNUM had miscalculated the date of her eligibility for benefits as February 1, 1998, rather than January 1, 1998. UNUM admitted the error and re-opened the pre-existing condition examination. During this process UNUM requested additional medical information from Ms. Allison. After several failed attempts to obtain this information from Ms. Allison's then-counsel, UNUM again denied her claim for benefits, citing its inability to complete the pre-existing condition review.

Ms. Allison brought a civil suit under 29 U.S.C. § 1132(a)(1)(B), alleging that she was entitled to disability benefits under the plan. She also alleged insurance bad faith under Oklahoma law. Additionally, she sought federal common law consequential and punitive damages for the wrongful denial of benefits; she has subsequently abandoned this claim.

The district court granted UNUM's motion for partial summary judgment, finding that the bad faith claim was preempted by ERISA. As to the § 1132(a)(1)(B) claim, UNUM admitted a conflict of interest, as both payor and administrator of the plan. After receipt of trial briefs, the district court applied the arbitrary and capricious standard of review, found in favor of UNUM, and dismissed Ms. Allison's remaining claim.

Exercising jurisdiction under 28 U.S.C. § 1291, we hold that (1) the district court did not apply the appropriate standard of review when it considered the plan administrator's denial of benefits to Ms. Allison; (2) notwithstanding this error, the district court's dismissal of Ms. Allison's § 1132(a)(1)(B) claim was correct because UNUM has established by substantial evidence that its denial of benefits, based on Ms. Allison's failure to present proof of her claim, was reasonable; and (3) the district court correctly found that ERISA preempts Ms. Allison's bad faith claim.

I. BACKGROUND

A. Factual History

In March 1997, Ms. Allison began working for the Sapulpa Herald, a subsidiary of Community Newspaper Holdings, Inc. Ms. Allison's benefits under the employee health insurance policy and the group disability policy became effective on January 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." Aplt's Supl.App. vol. II, at 48.

The policy provides the following details regarding a pre-existing condition:

You have a pre-existing condition if:

—you received medical treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines in the 6 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 6 months just prior to your effective date of coverage; and

—the disability begins in the first 24 months after your effective date of coverage unless you have been treatment free for 12 consecutive months after your effective date of coverage.

Id. at 48. The Plan also requires a claimant to supply a proof of claim and/or proof of continuing disability:

In some cases, you will be required to give UNUM authorization to obtain additional medical information and to provide non-medical information as part of your proof of claim, or proof of continuing disability. UNUM will deny your claim, or stop sending you payments, if the appropriate information is not submitted.

Id. at 32.

The parties agree that Ms. Allison is completely disabled as a result of MEN-I. Ms. Allison contends that she first sought medical help from Dr. Donald Johnson for her condition on January 30, 1998. Aplt's Br. at 3. Dr. Johnson's notes described Ms. Allison's prior medical history: "Two years ago had a parathyroid adenoma surgically removed. She had a hysterectomy in July of 1980 for carcinoma in situ." Aplt's Supl. App. vol. II, at 155.

Dr. Johnson referred Ms. Allison to Dr. Thomas Schiller for an endoscopy. Dr. Schiller diagnosed Ms. Allison as suffering from chronic gastritis. He noted that "she has a history of ulcer disease and has been previously diagnosed as having MEA1." Id. at 153 (Consultation Report dated February 3, 1998). MEA1 is the abbreviation for Multiple Endocrine Adenomatosis, also referred to as MEN-I.

One entry in her medical records dated March 24, 1999, indicated Ms. Allison suffered from "years of nausea and heartburn" and "multiple benign tumors." Id. at 234. On June 25, 1999, Ms. Allison completed a short-term disability claim, stating that her "pancreas has tumors on it, nothing can be done." Id. at 265 (Disability Claim, dated June 25, 1999). She indicated that she "hadn't ever been treated before" for this condition, she experienced "bad pain" and had been suffering from similar symptoms "all [her] life," and that she was "[a]dvised that [her] condition would only get worse." Id. She indicated her last date of work was May 31, 1999. Id. She also stated she never had the "same or a similar condition in the past." Id. UNUM documented the diagnosis as "pancreatic cancer" and approved Ms. Allison's claim for short-term benefits. Id. at 281, 287-88.

Later records indicated she had "at least ten tumors," id. at 143; "multiple small tumors;" id. at 167; 219 (Physician's Statement, dated August 19, 1999, noting "pancreatic tumors"); and that surgery was not recommended. Id. at 143, 167. Subsequent reports determined there "was no clearly demonstrable pancreatic lesion," but another lesion was visible and a biopsy established it was not malignant. See id. at 165. According to her long-term disability (LTD) claim, she had been suffering problems related to this condition, specifically severe dyspepsia (heartburn) since February 1998. See id. at 215 (Long Term Disability Claim, Employee's Statement, dated May 31, 1999). The LTD claim made no further mention of the tumors.

Because the condition occurred during the first 24 months of coverage, and because Ms. Allison had not been "treatment free" for the first twelve months of coverage, UNUM undertook a pre-existing condition review to determine whether or not Ms. Allison had received medical treatment for this condition for the six months prior to the Plan's effective date. Ms. Allison signed the requested authorization forms, and supplied the name of Dr. Johnson on a "Supplemental Information Questionnaire." As requested, Ms. Allison provided the names of several additional doctors and facilities who treated her condition, all of whom were seen after Ms. Allison's coverage began in 1998.

UNUM's Pre-existing Condition Medical Review dated November 7, 1999, performed by Disability Specialist Pyper Green, noted that Ms. Allison's disabling conditions (noted as "Pancreatic Cancer" "MEN syndrome" and "Hepatitis C") were neither "caused by, contributed [to] by or resulted from" the conditions for which Ms. Allison sought treatment on January 30, and February 4, 1998, namely "[g]astritis, weakness, bronchitis, anorexi[a], [and] severe dyspepsia." Id. at 118. Ms. Green's review concluded that there was "[n]o evidence of treatment for related problems during the dates in question of 8-1-97 to 1-31-98." Id. at 118.

In spite of this conclusion, on December 16, 1999, UNUM, in a letter signed by Ms. Green, denied Ms. Allison LTD benefits, stating that Ms. Allison was "treated by Dr. Johnson on 1/30/98 for a condition which caused, contributed to or resulted in the condition for which [she is] now claiming disability." Id. at 95.

Ms. Allison sought a review of the denial of benefits. On March 30, 2000, after a review of the denial of benefits, UNUM concluded the denial was proper. UNUM cited the January 30, 1998 visit to Dr. Johnson as having "fall[en] within the pre-existing time period of August 1, 1997 to February 1, 1998." Id. at 81. UNUM's "medical department reviewed the file and concluded that Ms. Allison's loss of work capacity is due to abdominal pain which began in January 1998 and progressively worsened to the point where she was no longer able to work." Id.

During the subsequent appeal, Ms. Allison's counsel pointed out UNUM's error in determining Ms. Allison's eligibility for benefits: UNUM had inadvertently determined that Ms. Allison's eligibility for benefits began February 1, 1998, rather than January 1, 1998. Three months after acknowledgment of the error, on October 5, 2000, Matthew Roop, UNUM's Senior Appeals Specialist, indicated he had completed an "initial review" of Ms. Allison's appeal. Id. at 69. He requested a list of all the physicians and all facilities from whom Ms. Allison received treatment since January 1, 1996. Mr. Roop also enclosed a blank medical release authorization, identical to the one previously completed by Ms. Allison.

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