Degrado v. Jefferson Pilot Financial Ins. Co.

• Court: U.S. Court of Appeals — Tenth Circuit
• Writing for the Court: Briscoe
• Citation: Degrado v. Jefferson Pilot Financial Ins. Co., 451 F.3d 1161 (10th Cir. 2006)
• Decision Date: 28 June 2006
• Docket Number: No. 05-1281.,05-1281.
• Parties: John A. DeGRADO, Plaintiff-Appellee, v. JEFFERSON PILOT FINANCIAL INSURANCE COMPANY, a Nebraska corporation, Defendant-Appellant.

451 F.3d 1161

John A. DeGRADO, Plaintiff-Appellee, v. JEFFERSON PILOT FINANCIAL INSURANCE COMPANY, a Nebraska corporation, Defendant-Appellant.

No. 05-1281.

United States Court of Appeals, Tenth Circuit.

June 28, 2006.

COPYRIGHT MATERIAL OMITTED

Michael S. Beaver, Holland & Hart, P.C., Greenwood Village, CO (Marcy G. Glenn, Holland & Hart, P.C., Denver, CO; Todd W. Miller and Catherine C. Crane, Holland & Hart, P.C., Greenwood Village, CO, with him on the briefs), for Defendant-Appellant.

Thomas L. Roberts, Roberts, Levin & Patterson, P.C., Denver, CO (Laura E. Schwartz and Zachary C. Warzel, Roberts, Levin & Patterson, P.C., Denver, CO; Marilee E. Langhoff, Marilee E. Langhoff, P.C., Centennial, CO, with him on the brief), for Plaintiff-Appellee.

Before BRISCOE, BALDOCK, and TYMKOVICH, Circuit Judges.

BRISCOE, Circuit Judge.

Defendant Jefferson Pilot Financial Insurance Company (Jefferson) appeals from the district court's entry of judgment in favor of plaintiff John DeGrado on his claim under § 502(a)(1)(B) of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a)(1)(B), for increased benefits under a long-term disability policy provided by Jefferson to DeGrado's employer. We exercise jurisdiction pursuant to 28 U.S.C. § 1291, reverse the judgment of the district court, and remand to the district court with directions to remand the case to Jefferson for further review of DeGrado's claim.

I.

Factual background

DeGrado is a forty-year-old man who, in 1991, began suffering from ulcerative colitis and/or Crohn's disease. In the early phases of his disease, DeGrado experienced periodic flare-ups of symptoms (e.g., diarrhea, abdominal pain, bloody stools, fatigue) that would last from a few weeks to a few months, and then be followed by periods of remission.

In 1997, DeGrado began working for Sloans Lake Management Corporation (Sloans Lake) as Manager of Strategic Marketing, an executive position that encompassed the sale, marketing, and management of insurance products. DeGrado was compensated by base salary and sales commissions.

On April 14, 1999, DeGrado temporarily stopped working due to symptoms he was experiencing from his disease, as well as extreme fatigue, diffuse pain throughout his body, and chronic insomnia. In July 1999, DeGrado submitted a claim for benefits under a long-term disability policy (the Policy) issued to Sloans Lake by Guarantee Life Insurance Company (Guarantee). Guarantee ultimately paid that claim in early 2000.

DeGrado returned to work on September 20, 1999. At some point in 2000, DeGrado's symptoms began to reappear and gradually worsened. In late November 2000, DeGrado concluded he could not continue to carry out his job duties due to his physical symptoms. Accordingly, DeGrado ceased working and submitted a second disability claim to Jefferson, who by that point had merged with Guarantee and had effectively taken over responsibility for administering and paying claims under the Policy.

After investigating DeGrado's claim, Jefferson, on March 1, 2001, sent a letter to DeGrado rejecting his claim for disability benefits. In the letter, Jefferson concluded that DeGrado's claim was one for a new period of disability beginning on November 28, 2000. However, Jefferson concluded that DeGrado "d[id] not have a severity of impairment to support Total Disability" under the Policy. App. at 496. In support of that conclusion, Jefferson pointed, in part, to notes from DeGrado's visit with Dr. John Sabel on December 4, 2000, during which Dr. Sabel noted that DeGrado's "Crohn's colitis was improved clinically." Id. at 497. Jefferson also emphasized that, although notes from Dr. Stuart Kassan indicated that DeGrado suffered from polyarthritis and seronegative arthritis, "there [we]re no records of joint X-Rays or MRIs in [DeGrado's] file...." Id. Jefferson lastly noted that, during a phone conversation on February 7, 2001, DeGrado himself indicated that his "disabling conditions [we]re [his] Crohn's Disease and Fibromyalgia," rather than any arthritic symptoms. Id. In sum, Jefferson concluded that "the objective medical records d[id] not support that [DeGrado] had a severity of impairment [as of November 28, 2000]... that would prevent [him] from performing the main duties of [his] occupation....." Id. at 498.

DeGrado, proceeding pro se, protested the denial to the Colorado Division of Insurance. Jefferson treated DeGrado's protest as an appeal and, on April 9, 2001, sent DeGrado a letter reaffirming its decision to deny him disability benefits. In particular, Jefferson concluded that DeGrado's Crohn's disease had improved, there were no medical records indicating that DeGrado's polyarthritis and seronegative arthritis rendered him totally disabled, and there was no "objective medical documentation supporting a diagnosis of Fibromyalgia or that this diagnosis precluded [DeGrado] from performing [his] occupation." Id. at 500. Thus, Jefferson again concluded that "the records ... failed to support a severity of impairment ... at the time [DeGrado] stopped working." Id. The letter also stated:

Under this claim, you stopped working on 11/27/00. * * * Although you indicated previously that you felt this should be considered a continuation of your previous claim, all information we have been able to obtain indicates you returned to work full-time after your last claim for longer than 6 months, therefore resulting in a new, separate claim.

Id. at 499 (emphasis added).

DeGrado obtained counsel and, on July 13, 2001, formally appealed Jefferson's decision. Notably, DeGrado did not challenge Jefferson's conclusion that the claim submitted on November 28, 2000, was a "new, separate claim," i.e., independent from DeGrado's first disability claim. Instead, DeGrado challenged only Jefferson's conclusion that he was not totally disabled.

Jefferson initially responded by letter on August 28, 2001, informing DeGrado's counsel that "an Independent Medical Examination... [wa]s necessary prior to [Jefferson's] final review," and that DeGrado would be contacted shortly thereafter to "set up [such an] appointment." Id. at 487. However, for reasons unexplained in the record, DeGrado was never contacted to set up such an examination. Instead, in early September 2001, Jefferson sent DeGrado's medical records to Dr. Jay Benson, a gastroenterologist in Hartford, Connecticut, for a "peer review." Id. at 485. In particular, Jefferson asked Benson to review the records and determine "if there [wa]s severity of impairment that would render ... DeGrado UNABLE TO PERFORM his occupation as a manager of strategic marketing beginning 11-28-2000." Id. at 486.

On October 8, 2001, Dr. Benson sent a one-page letter to Jefferson indicating that he had completed his review of DeGrado's medical records and providing the following opinion regarding DeGrado's condition:

The GI manifestations of [Degrado's] colitis, except during acute flareups, should not produce significant disability. On the other hand, the patient has major functional limitations secondary to seronegative arthritis and a fibromyalgia syndrome that includes extreme fatigue and weakness. The latter limitations have been detailed by the rheumatologist, Dr. Stuart Kassum. The patient's type of colitis is not definite. At various times he has been labeled as ulcerative colitis and Crohn's colitis. From the medical records submitted and without review of the biopsies, there are clinical features favoring each diagnosis. Additional diagnostic steps are available to help clarify this issue. The latter is important since medical treatment options, long-term prognosis, and the role of surgery all vary with the two diagnoses. If the patient does have the working diagnosis of Crohn's colitis, there are additional medical treatment options that have not been used.

Id. at 476 (emphasis added).

At some point before Jefferson received Benson's letter, Jefferson adjuster Susan Wharton prepared a report comparing the financial exposure to the company if DeGrado's disability were treated as "new" or "distinct" from his first disability versus if the disability was treated as "recurrent" (i.e., related to the first disability). According to Wharton's calculations, if DeGrado's claim was treated as a "new" period of disability, thereby meaning benefits would be based on his 2000 earnings, the total potential payout, net of Social Security benefits, would be approximately $2,821,000.00.¹ In contrast, Wharton determined that if DeGrado's claim was treated as "recurrent," thereby meaning benefits would be based on his 1998 earnings, the total potential payout, net of Social Security benefits, would be approximately $610,000.00. Although Wharton's report is undated, the information contained on the report suggests it was prepared at some point prior to October 3, 2001. More specifically, one page of the computer-generated report lists DeGrado's birthdate as "10/3/1965" and his age as "35," clearly suggesting the report was produced prior to October 3, 2001, when DeGrado would have turned 36 years of age. Id. at 472.

On December 13, 2001, Jefferson's Risk Service manager, Ruth Hagemann, sent a letter to DeGrado's counsel resolving DeGrado's formal appeal.² Id. at 467. In her letter, Hagemann concluded, presumably based on Dr. Benson's letter, that DeGrado was "totally disabled." Id. However, contrary to the conclusion reached earlier in the year by the prior claims representative assigned to DeGrado's case, Hagemann concluded that DeGrado had not worked full-time for at least six months since returning to work after his first period of disability:

Information in the file indicates Mr. DeGrado originally was totally disabled from 04/14/1999 to 09/20/1999. His claim was then closed as we were advised he had returned to work full time (09/21/1999). We subsequently were advised that Mr. DeGrado began missing time from work around January 5, 2000, due to...