Egert v. Connecticut General Life Ins. Co.

• Decision Date: 17 April 1990
• Docket Number: No. 89-2091,89-2091
• Citation: 900 F.2d 1032
• Parties: , 16 Fed.R.Serv.3d 658, 12 Employee Benefits Ca 1407 Abraham EGERT and Christine Kraft-Egert, Plaintiffs-Appellants, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY and Employee Benefit Plan of the Canteen Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1032

900 F.2d 1032

58 USLW 2676, 16 Fed.R.Serv.3d 658,

12 Employee Benefits Ca 1407

Abraham EGERT and Christine Kraft-Egert, Plaintiffs-Appellants, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY and Employee

Benefit Plan of the Canteen Corporation,

Defendants-Appellees.

No. 89-2091.

United States Court of Appeals, Seventh Circuit.

Argued March 1, 1990.

Decided April 17, 1990.

Terence E. Flynn, Gessler, Flynn, Fleischmann, Hughes & Socol, Steven Saltzman, Chicago, Ill., for plaintiffs-appellants.

Jean F. Holloway, James A. Hardgrove, Sidley & Austin, Michael K. Lulich, and Gregory G. Lawton, Modesto, Reynolds & McDermott, Chicago, Ill., for defendants-appellees.

Before CUDAHY, FLAUM and KANNE, Circuit Judges.

CUDAHY, Circuit Judge.

Christine Kraft-Egert wants to bear a child; an ectopic pregnancy and occluded fallopian tube, however, have left her infertile. She has turned to modern medicine--specifically, to in vitro fertilization ("IVF")--to allow her to do artificially what she cannot do naturally. Since she cannot afford the expensive procedure, she has asked her husband's medical insurance carrier, which reimburses the company's employees and their beneficiaries for services that treat "illness" (including pregnancy-related expenses), to cover the IVF treatments. But the carrier has refused to pay for the treatments because IVF will not cure her "illness"--it will not repair her occluded and deteriorated fallopian tubes--although it may permit her to conceive. Christine Kraft-Egert challenges the carrier's decision, complaining that her "illness" is her inability to conceive naturally, not the deterioration of her fallopian tubes. The question presented by this case is whether Christine Kraft-Egert's "illness," within the meaning of her husband's medical insurance plan, describes the occlusion of her fallopian tubes but not her infertility.

I.

A. The Employee Benefit Plan

Canteen Corporation provides its employees with an Employee Benefit Plan (the "Plan") pursuant to the terms of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. sections 1001 et seq. The Plan states that employees (and their spouses) will be reimbursed when "services or supplies provided are recommended by a Physician and are essential for the necessary care and treatment of an Injury or a Sickness." Appendix D at GM5800 11CM3. The Plan further states that "[s]ickness means a physical or mental illness"; pregnancy is expressly included in this same category. Id. at GM5800 9C4. Unfortunately, the Plan does not define "treatment" or "illness." Connecticut General Life Insurance Company ("Connecticut General") processes and adjudicates claims made under the Plan.

To administer the benefits program uniformly, Connecticut General has compiled internal memoranda that outline appropriate applications of the Plan to individual circumstances. The Current Claims Practices (the "CCP"), as the compilation is known, contains a specific memorandum describing Connecticut General's policy regarding infertility; this section instructs Connecticut General claim offices to deny all claims for IVF reimbursement. The memorandum provides, in pertinent part:

The purpose of this memorandum is to clarify our position on how to handle infertility expenses for claim payment.

We will allow for procedures that attempt to rectify the progression of normal bodily function and the attempt to conceive naturally. However, when normal progression is no longer occurring, and appears to be medically incorrectable, it is at this point that artificial means to induce a pregnancy begins (procedures which occur outside of the body). We do not consider artificial means to induce a pregnancy essential for the necessary care and treatment of an illness, therefore expenses should be denied.

. . . . .

All expenses relative to the following procedures should be denied as not essential and necessary care and treatment of an illness, injury or covered pregnancy.

. . . . .

2) INVITRO FERTILIZATION AND EMBRYO TRANSFER.

Appendix C at 7511/94 (emphasis removed).

At the same time, the CCP memorandum authorizes reimbursement for some procedures that treat infertility. For example, Connecticut General reimburses Plan participants for the surgical repair of deteriorated fallopian tubes. Connecticut General justifies its decision to reimburse participants for fallopian tube microsurgery because this procedure allows a participant to conceive naturally after the operation; on the other hand, Connecticut General refuses to reimburse participants for IVF because, even after successful treatments, the participant is still unable to conceive naturally: "Therein lies the 'fine line' involved in treatment of the illness of infertility (in body happening ) versus assisting the body with treatment (outside the body ) because the body's normal progression of attempts at conception are no longer occurring." Id. at 7511/97.

B. Kraft-Egert's Claim for Benefits

In 1979 doctors surgically removed one of Christine Kraft-Egert's fallopian tubes during an ectopic pregnancy; her other tube has been blocked since at least 1986. As a result, she is unable to conceive children naturally. Kraft-Egert, nonetheless, sought medical help for her condition; she visited several doctors who confirmed that her only remaining fallopian tube had been blocked, but advised her that she might be a good candidate for IVF treatments. Subsequently, she underwent at least two IVF attempts, but neither attempt was successful.

After the first treatment, Kraft-Egert submitted a claim to Connecticut General for reimbursement of her IVF-related expenses. Connecticut General summarily denied her claim on January 5, 1987, stating that "treatment was not medically necessary for the care and treatment of an illness, injury, or pregnancy." Appellants' Brief at 15. Kraft-Egert appealed this decision on January 15, 1987, but this course proved to be no more successful. Connecticut General's Assistant Medical Manager, Roy Roper, wrote Kraft-Egert two letters explaining the denial. The first letter, dated January 28, 1987, notified Kraft-Egert that the IVF treatments were not covered:

Connecticut General's internal guidelines governing administration of Canteen Corporation's medical plan, [sic] provide for reimbursement of expenses associated with diagnostic testing or surgery to rule out illness or injury, as it relates to infertility. However, services and related expenses designed to induce pregnancy are not considered treatment for an illness or injury, and therefore, such expenses are not eligible for reimbursement under their group medical plan.

Appellees' Brief at 9. Roper added, however, that he had sent Kraft-Egert's file to Connecticut General's Home Office for final review. Roper's second letter, dated February 25, 1987, informed Kraft-Egert of Connecticut General's final determination denying her claim. Connecticut General subsequently told Kraft-Egert that it would reimburse her for fallopian tube microsurgery but not for IVF treatments.

Claiming that Connecticut General had violated the Plan, Abraham Egert and Christine Kraft-Egert brought suit pursuant to the provisions of ERISA, 29 U.S.C. sections 1132(a)(1)(B) and 1132(a)(3) (1982). The plaintiffs sought specific performance, prejudgment interest and attorney's fees. In an oral ruling delivered on April 28, 1989, the district court concluded that Connecticut General did not act arbitrarily and capriciously in interpreting the Plan to deny coverage for IVF treatments; the court therefore found for the defendants. The plaintiffs appeal from this ruling.

II.

Both parties acknowledge that the Supreme Court's recent decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), controls our review of Connecticut General's final decision. There, the Court held that the "denial of benefits challenged under Sec. 1132(a)(1)(B) 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. 109 S.Ct. at 956 (emphasis supplied). Since, in this case, Connecticut General has express discretionary authority under the Plan to make benefits determinations, the appropriate standard of review is "arbitrary and capricious." Id.; see Reilly v. Blue Cross & Blue Shield United of Wis., 846 F.2d 416, 419 (7th Cir.) (appropriate standard of review is whether the "decision or conduct was arbitrary, capricious or motivated by bad faith"), cert. denied, --- U.S. ----, 109 S.Ct. 145, 102 L.Ed.2d 117 (1988).

Kraft-Egert argues in her reply brief that, in determining whether Connecticut General's denial of her claim was arbitrary and capricious, we should consider the potential conflict of interest faced by Connecticut General. This is not a frivolous concern; indeed, the Supreme Court recognized in Firestone Tire that a conflict of interest "must be weighed as a 'factor[ ] in determining whether there is an abuse of discretion.' Restatement (Second) of Trusts Sec. 187, comment d (1959)." Firestone Tire, 109 S.Ct. at 956-57. Since Connecticut General underwrites large amounts of health insurance (where it is directly liable for payment of benefits) and presumably follows the same interpretations for its own underwritings as for plans where it is the administrator, it may have reason to minimize benefits payments with respect to plans where it is only the administrator. But Kraft-Egert did not express this concern until it was too late. Although she recited in her preliminary brief the Supreme Court's language about conflicts of interest, she did not allege until her reply brief that Connecticut General suffered such a conflict. Circuit Rule 28(f) states directly that "[a] reply brief shall be limited to matter in reply." And our cases on this point consistently declare that arguments...