Lococo v. Medical Sav. Ins. Co.

• Decision Date: 23 June 2008
• Docket Number: No. 07-3973.,07-3973.
• Citation: 530 F.3d 442
• Parties: Linda LoCOCO, Individually and as Executrix of the estate of and on behalf of Joseph S. LoCoco, Plaintiff-Appellant, v. MEDICAL SAVINGS INSURANCE CO., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

530 F.3d 442

Linda LoCOCO, Individually and as Executrix of the estate of and on behalf of Joseph S. LoCoco, Plaintiff-Appellant, v. MEDICAL SAVINGS INSURANCE CO., Defendant-Appellee.

No. 07-3973.

United States Court of Appeals, Sixth Circuit.

Argued: April 22, 2008.

Decided and Filed: June 23, 2008.

ARGUED: Richard Lee Lancione, Lancione & Lloyd Law Office, Bellaire, Ohio, for Appellant. Douglas N. Godshall, Hanna, Campbell & Powell, LLP, Akron, Ohio, for Appellee. ON BRIEF: Richard Lee Lancione, Lancione & Lloyd Law Office, Bellaire, Ohio, for Appellant. Douglas N. Godshall, Hanna, Campbell & Powell, LLP, Akron, Ohio, for Appellee.

Before: GILMAN, ROGERS, and McKEAGUE, Circuit Judges.

OPINION

ROGERS, Circuit Judge.

Plaintiff Linda LoCoco appeals the grant of summary judgment in favor of defendant Medical Savings Insurance Co. in this suit over medical benefits coverage. Shortly before her husband's health insurance coverage from Medical Savings became effective, he was treated for a respiratory ailment that was later diagnosed as lung cancer. Medical Savings denied coverage for the cancer for the first year of the policy, concluding that the disease was a "pre-existing condition." Medical Savings later cancelled subsequent coverage for failure to pay premiums. Plaintiff then brought suit, claiming that the denial was improper because the cancer was not diagnosed until after the policy took effect and that the cancellation was ineffective for lack of notice. Because the terms of the policy provided both for the denial of benefits and the automatic termination of coverage under these circumstances, we affirm the grant of summary judgment.

I.

During the summer of 2001, Joseph LoCoco, the insured, began to experience pain in his chest. By November of that year, he was also suffering from a dry cough. During a November 26, 2001 visit, Mr. LoCoco's family doctor, Dr. Satinder Bhullar, ordered a chest X-ray "just to see if there was any process going on in the lungs." It does not appear, however, that Mr. LoCoco had this X-ray taken. Dr. Bhullar also noted that Mr. LoCoco was still a pack-a-day smoker, despite his being previously advised to quit smoking. Because of Mr. LoCoco's cigarette habit and chest pain, Dr. Bhullar believed that Mr. LoCoco could be a candidate for lung cancer "at any time."

Prior to this point, Mr. LoCoco and his wife had gone without insurance for "years and years." But, recognizing that they "were getting older" and that "[e]verybody needs it," the LoCocos applied for health insurance from Medical Savings on May 8, 2002. They did not mention on their application that Mr. LoCoco had recently been experiencing respiratory difficulties. Medical Savings accepted the LoCocos' application, issuing illness insurance effective May 29, 2002.

Shortly after his applying for insurance, Mr. LoCoco's health began to deteriorate. On May 14, 2002, he was admitted to a local emergency room, complaining of a cough and shortness of breath. An X-ray of Mr. LoCoco's chest revealed what appeared to be a "cloud" in his left lung. Based on these findings, follow-up films were suggested, "as an obstructive endobronchial lesion [could not] be ruled out." The LoCocos were told that a CAT scan was necessary because the abnormal X-ray concerned his doctors. However, Mr. LoCoco was diagnosed only as having pneumonia at this time.

The next day, Mr. LoCoco visited Dr. Bhullar, who ordered a CAT scan to determine "if there's a mass in the lung." "Whenever you see something like [pneumonia] in a smoker, you have to follow up for cancer of the lung." This is because, Dr. Bhullar explained, pneumonia can sometimes follow lung cancer. "The cancer often causes an obstruction of the airway. Secretions collect behind it and the lung tissue tends to get infected[,] causing pneumonia." He acknowledged, however, that many smokers who develop pneumonia do not also have lung cancer.

Mr. LoCoco's CAT scan did not reveal whether there was, in fact, cancer in his lungs. It showed only left upper lobe consolidation/collapse in the lungs, along with possible swelling of the lymph nodes and narrowing of the left upper lobe airway. A bronchoscopy was consequently suggested for further evaluation. According to another physician who treated Mr. LoCoco, this procedure is only ordered when there are "very strong indications" of disease. Dr. Bhullar also referred Mr. LoCoco to Dr. Attila Lenkey, a pulmonologist who often treated patients with lung cancer.

Mr. LoCoco first consulted with Dr. Lenkey on May 29, 2002, the date on which his policy went into effect. During that visit, Mr. LoCoco related that he was having increased problems breathing, was experiencing a dry cough, and had some streaking of blood when coughing. On physical examination, Mr. LoCoco's lymph nodes appeared normal, though Dr. Lenkey did notice that Mr. LoCoco made abnormal noises when breathing. All in all, Dr. Lenkey concluded that it was "[n]ot a very abnormal physical exam." Nonetheless, Dr. Lenkey was still of the opinion that the emergency room X-ray "certainly looked suggestive of a tumor in the left upper lung." Moreover, given Mr. LoCoco's smoking habit, symptoms, and X-ray and CAT scan results, lung cancer was "up high" on Dr. Lenkey's list of diagnoses.

The following day, Dr. Lenkey performed a bronchoscopy on Mr. LoCoco. That procedure confirmed what the earlier X-ray and CAT scan had suggested — that Mr. LoCoco had a "[l]arge polypoid lesion" in his lungs. Dr. Lenkey biopsied the lesion for laboratory analysis. While Dr. Lenkey could not yet be certain that the lesion was cancerous, he was "highly suspicious" that Mr. LoCoco had lung cancer. During a follow-up visit on June 5, 2002, Dr. Lenkey "first told [the LoCocos] with some certainty that [Mr. LoCoco] had cancer." Plaintiff testified that she had not believed that Mr. LoCoco had lung cancer prior to this date because "he was never sick, never hospitalized." On June 19, Mr. LoCoco was given a definitive diagnosis.

As Mr. LoCoco incurred medical bills for his treatment, he submitted them to Medical Savings for payment. However, on September 4, 2002, Medical Savings informed the LoCocos that Mr. LoCoco's cancer was a "pre-existing condition," and, under the terms of the policy, would not be covered for the first twelve months of his insurance. This denial was confirmed in a January 15, 2003 letter. A little over a month later, Medical Savings cancelled coverage entirely due to the LoCocos' failure to pay their premiums. The LoCocos' premiums were to be automatically withdrawn from their checking account around the 15th of every month. When Medical Savings attempted to withdraw payment for the LoCocos' January premium, however, that withdrawal was returned for lack of sufficient funds. Medical Savings purports to have notified the LoCocos of the withdrawal's return in a January 22, 2003 letter. Having not received payment by the end of that February, Medical Savings cancelled the LoCocos' coverage. Plaintiff denies that the LoCocos ever received notification of non-payment from Medical Savings. According to her deposition, the LoCocos were unaware of the cancellation until several months later, when Medical Savings "sent all [of their] money back."

After battling his cancer for almost a year, Mr. LoCoco passed away in the spring of 2003. Prior to his passing, Mr. LoCoco had required extensive medical care. One of those medical providers subsequently sued Mrs. LoCoco over the non-payment of bills associated with this care. She then brought suit, individually and on behalf of Mr. LoCoco's estate, against Medical Savings in the Belmont County (Ohio) Court of Common Pleas. In her complaint, plaintiff alleged that Medical Savings had improperly denied coverage and cancelled the policy, and that it had acted in bad faith in taking both actions. According to plaintiff, Medical Savings owed her $124,000 in medical benefits, plus interests and costs. Shortly thereafter, Medical Savings removed the case to federal district court on the basis of diversity jurisdiction. The parties consented to have the case referred to a magistrate judge. Medical Savings moved for summary judgment on all claims against it.

The magistrate judge granted Medical Savings's motion on June 26, 2007. Because Mr. LoCoco's lung cancer was "an illness for which medical advice was recommended prior to the effective date of the policy, i.e., May 29, 2002," the magistrate judge held that it constituted a "pre-existing condition," and was thus excluded from coverage by the terms of the policy. In so holding, the magistrate judge concluded that it is irrelevant that Mr. LoCoco was not actually diagnosed with lung cancer until after the policy went into effect. The magistrate judge similarly rejected plaintiff's claim that Medical Savings had improperly terminated the policy. Because plaintiff did not dispute that the premium went unpaid and because the terms of the insurance contract did not require notification prior to such a cancellation, the magistrate judge held that there were no genuine issues of material fact with respect to this claim. Finally, the magistrate judge concluded that no reasonable jury could find that either of these actions had been taken in bad faith, as Medical Savings had sufficient justification for both denying coverage and canceling the policy. Plaintiff now appeals.

II.

The terms of Mr. LoCoco's policy explicitly authorized Medical Savings to deny benefits and to automatically terminate coverage under the type of circumstances presented in this case. Summary judgment for Medical Savings on all claims against it was thus appropriate.

A. Denial of Benefits

Medical Savings properly denied one year of benefits for Mr. LoCoco's lung cancer, as that illness was a "pre-existing condition" for which his policy precluded coverage. Even though Mr. LoCoco had not received a definitive diagnosis on the...