Lawson v. Fortis Ins. Co.

• Decision Date: 20 June 2001
• Docket Number: No. CIV.A. 00-6538.,CIV.A. 00-6538.
• Citation: 146 F.Supp.2d 737
• Parties: Joseph LAWSON and Tammy Malatak, on behalf of Minor Child Elena Lawson, Plaintiffs, v. FORTIS INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

146 F.Supp.2d 737

Joseph LAWSON and Tammy Malatak, on behalf of Minor Child Elena Lawson, Plaintiffs, v. FORTIS INSURANCE COMPANY, Defendant.

No. CIV.A. 00-6538.

United States District Court, E.D. Pennsylvania.

June 20, 2001.

Michael J. Salmanson, Philadelphia, PA, for Plaintiffs.

James M. Dunn, Andrew F. Susko, White and Williams, Philadelphia, PA, for Defendant.

MEMORANDUM & ORDER

KATZ, Senior District Judge.

This case concerns a preexisting condition exclusion contained in a short-term medical insurance policy issued by defendant Fortis Insurance Company and purchased by plaintiff Joseph Lawson for himself and his daughter Elena Lawson. Plaintiffs bring claims for breach of contract and bad faith. Now before the court are the plaintiffs' motion for partial summary judgment and the defendant's motion for summary judgment.

I. Background

Mr. Lawson obtained the Fortis policy for himself and Elena on October 7, 1998, and the policy became effective two days later on October 9. At issue is the medical expenses incurred by Elena for the diagnosis and ultimately successful treatment of her leukemia during the time that the Fortis policy was in effect. Fortis denied coverage for these expenses on the grounds that the leukemia was a preexisting condition. The policy excludes coverage for a preexisting condition, defined as:

A Sickness, Injury, disease or physical condition for which medical advice or treatment was recommended by a Physician or received from a Physician within the five (5) year period preceding that Covered Person's Effective Date of Coverage.

Pl. Mem. in Supp. of Partial Summ. J., Ex. 1 (Policy) at 3, 10. "Sickness" is defined by the policy as: "An illness, disease or condition which is diagnosed or treated while this policy is in force." Id. at 3. Disease and physical condition are not defined.¹

On October 7, 1998, Elena's mother, plaintiff Tammy Malatak, brought Elena to the emergency room at Palmerton Hospital. According to hospital records, Ms. Malatak reported that Elena "was running a temperature since yesterday, about 102 degrees F." Pl. Mem. in Supp. of Partial Summ. J., Ex. 2. Other symptoms exhibited by Elena included a swollen eye, a dry hacking cough, and a scratchy throat. Id. Ms. Malatak also testified at her deposition that Elena seemed sluggish and that Tylenol had not reduced her fever. Def. Answer to Pl. Mot. for Partial Summ. J., Ex. A at 29, 42-43. Dr. Shailesh Parikh, the emergency room doctor, diagnosed an upper respiratory inflection.² Id. He prescribed antibiotics and allergy medicine, told Ms. Malatak to treat Elena's fever with Tylenol or Advil, and to take Elena to her regular doctor for follow up in one or two days. Id.; Def. Mem. in Supp. of Summ. J., Ex. C at 24. Dr. Parikh also told Ms. Malatak to bring Elena back to emergency room if the fever continued or worsened. Id.

On October 13, 1998, after the policy was effective, Elena again sought medical treatment, this time from Dr. Narendra Ambani. According to the doctor's treatment notes, Elena's symptoms at that time included an on-and-off fever for one week, dizziness, lower back pain, coughing and vomiting five times that day. Pl. Mem. in Supp. of Partial Summ. J., Ex. 3. Dr Ambani diagnosed an upper respiratory infection, gastroenteritis, and possible bronchitis. He continued the medication prescribed by Dr. Parikh. Id. The next day, Elena visited yet another physician, Dr. Mira Slizovskaya. While noting that Elena exhibited signs of bronchitis, Dr. Slizovskaya also felt that her patient "looked sick, out of proportion to [her] physical findings" and ordered a number of tests, including a complete blood count. Def. Mem. in Supp. of Summ. J., Ex. F at 17, 25. The blood count revealed abnormalities and after additional testing, Elena was transferred to Children's Hospital of Philadelphia on October 15, with the preliminary diagnosis of pneumonia, sepsis and leukemia.

After investigation, Fortis denied Elena's application for benefits on the grounds that her leukemia was a preexisting condition within the meaning of its policy. According to Dr. Raymond Brumblay, Fortis' medical director,

The leukemia began and produced symptoms for which the patient was brought to the Palmerton Emergency Department prior to the effective date. While the evaluation there failed to diagnose leukemia, advice and treatment for those symptoms were received from a physician. This meets the policy definition of a pre-existing condition.

Def. Mem. in Supp. of Summ. J., Ex. E.

Dr. Brumblay conceded at his deposition that the symptoms Elena presented at the emergency room October 7 would not suggest to a reasonable physician that, at that time, Elena had leukemia. Pl. Mem. in Supp. of Partial Summ. J., Ex. 7 at 16-17. According to the medical evidence of record, however, these symptoms were consistent with leukemia. See, e.g., Pl. Response to Def. Mot., Ex. 1 (Dr. Beverly Lange Dep.) at 36 (stating that fever may be a sign of infection or leukemia); Pl. Mem. in Supp. of Partial Summ. J., Ex. 7 (Dr. Brumblay Dep.) at 14 (stating that Elena presented symptoms of leukemia at the emergency room, including persistent fever); Def. Mem. in Supp. of Summ. J., Ex. C (Dr. Parikh Dep.) at 22, 32-33 (stating that Elena presented symptoms of a cough and cold at the emergency room, but acknowledging that those symptoms were similar to that of leukemia at an early stage); id., Ex. F (Dr. Silzovskaya Dep.) at 66 (stating that Elena's initial complaints of fever and cough could be attributed to a respiratory infection or leukemia).

The Fortis policy provides a policy holder with the "right to have the denial reviewed and reconsidered" by the company's "Appeal Review Committee." Policy at 11. Mr. Lawson appealed the denial. According to Marilyn Klein, the Fortis employee who handled the appeal, Fortis classifies appeals as either inquires or grievances. Pl. Mem. in Supp. of Partial Summ. J., Ex. 11 at 7. An appeal is classified as an inquiry if "the writer does not understand the basis for the decision that was made," while an appeal is classified as a grievance if the writer "understand[s] the basis for the decision, but ... dispute[s] it." Id. For an inquiry appeal, Fortis' practice was to review the initial determination and if the reviewer felt the decision was correct, to send the policy holder a detailed explanation. Id. at 8. A reviewer could, in her discretion, refer an inquiry to her supervisor, who could, in turn, refer it to a director. Id. Although the record is somewhat confusing regarding the processing of a grievance, it appears to allow for consideration of additional evidence and to encompass several potential levels of review, the highest of which is conducted by Fortis' Grievance Committee. Id. at 8, 25. Ms. Klein and a coworker determined that Mr. Lawson's appeal was an inquiry because Mr. Lawson did not understand that Fortis' definition of preexisting coverage did not require a correct diagnosis of leukemia at the time of treatment, but "simply that the illness that is leukemia was treated by physicians" prior to the effective date of coverage. Pl. Mem. in Supp. of Partial Summ. J., Ex. 12 at 3. Fortis denied the appeal on this basis.

II. Discussion³

Plaintiffs have moved for partial summary judgment on their breach of contract claim. Defendant has moved for summary judgment on the breach of contract claim and plaintiffs' bad faith claim.

A. Breach of Contract

Plaintiffs argue that the policy is ambiguous and therefore, under Pennsylvania law, should be interpreted in their favor. Under plaintiffs' interpretation, because Elena received treatment for an upper respiratory infection and not for leukemia prior to the policy's effective date, the leukemia was not a preexisting condition. On the other hand, defendant argues that the policy is not ambiguous and that Elena's visit to, and treatment at, the emergency room triggered the provisions of the preexisting condition exclusion. Accordingly, the court will first determine whether the preexisting exclusion is ambiguous.

Interpretation of an insurance contract is generally for the court rather than the fact finder. Standard Venetian Blind Co. v. Am. Empire Ins., 503 Pa. 300, 469 A.2d 563, 566 (Pa.1983).⁴ "[T]he interpretation of the scope of coverage of an insurance contract ... [is] a question of law[.]" McMillan v. State Mut. Life Assurance Co. of Am., 922 F.2d 1073, 1074 (3d Cir.1990). If the language of an insurance contract is clear and unambiguous, a court is required to enforce that language. Id. Moreover, a court should, if possible, interpret the policy to avoid ambiguities and give effect to all of its provisions. Medical Protective Co. v. Watkins, 198 F.3d 100, 103 (3d Cir.1999) (citation, punctuation omitted). On the other hand, if a contract is reasonably susceptible to more than one interpretation, it is ambiguous. Id. Ambiguous provisions "must be construed against the insurer and in favor of the insured; any reasonable interpretation offered by the insured, therefore, must control." Id. at 104 (citation, punctuation omitted); see also id. (noting that "[t]his rule has been applied liberally in Pennsylvania"). Pennsylvania courts have offered two justifications for this rule of interpretation. First, insurance policies are contracts of adhesion between two unequal parties "and thus equity requires their interpretation in favor of the weaker party." Id. (citation, punctuation omitted). Second, the well-established rule of contract construction is that ambiguities are interpreted against the party who drafted it. Id.⁵

As noted previously, the policy defines a preexisting condition as:

A Sickness, Injury, disease or physical condition for which medical advice or treatment was recommended by a Physician or received from a Physician within the five (5) year period preceding that Covered Person's Effective Date of Coverage.

Policy at 3. The policy...