Lumbermens Mut. Cas. Co. v. Combs

• Decision Date: 20 September 2007
• Docket Number: No. 49A05-0608-CV-436.,49A05-0608-CV-436.
• Citation: 873 N.E.2d 692
• Parties: LUMBERMENS MUTUAL CASUALTY COMPANY, Appellant-Defendant, v. Donna COMBS, Appellee-Plaintiff.
• Court: Indiana Appellate Court

873 N.E.2d 692

LUMBERMENS MUTUAL CASUALTY COMPANY, Appellant-Defendant, v. Donna COMBS, Appellee-Plaintiff.

No. 49A05-0608-CV-436.

Court of Appeals of Indiana.

September 20, 2007.

Paul R. Garry, Peter Petrakis, Rachel S. Urquhart, Meckler Bulger & Tilson LLP, Chicago, IL, Michael L. Carter, Spangler, Jennings & Dougherty, PC, Indianapolis, IN, Attorneys for Appellant.

Bridget O'Ryan, Ralph J. Bratch, Bratch & O'Ryan Indianapolis, IN, Attorneys for Appellee.

OPINION

CRONE, Judge.

Case Summary

Lumbermens Mutual Casualty Company ("Lumbermens") appeals various rulings and the award of damages, attorney's fees, and prejudgment interest in favor of Donna Combs on her claims for breach of contract and bad faith termination of her long-term disability benefits. We affirm in part, vacate in part, and remand for an evidentiary hearing on attorney's fees.

Issues

We restate the issues as follows:

I. Whether the trial court correctly concluded that Combs's claims are not preempted by the federal Employee Retirement Income Security Act ("ERISA");

II. Whether the trial court properly denied Lumbermens' motions for judgment on the evidence;

III. Whether Lumbermens has preserved any error regarding the trial court's admission of the testimony of Combs's insurance expert, Mary Fuller;

IV. Whether Lumbermens has preserved any error regarding the trial court's exclusion of the testimony of Lumbermens' insurance expert, Dr. William Warfel;

V. Whether Lumbermens has shown that it was prejudiced by the admission of testimony of Combs's treating physicians, Dr. Craig Johnston and Dr. James Ehlich, regarding matters postdating the termination of Combs's benefits;

VI. Whether the bad faith damages award is supported by the record;

VII. Whether the trial court abused its discretion in awarding Combs attorney's fees; and

VIII. Whether the trial court abused its discretion in awarding Combs prejudgment interest on her bad faith claim.

Facts and Procedural History¹

Combs was a senior offsite radiology technologist employed by Hancock Memorial Hospital and Health Services ("Hancock Hospital") and earned approximately $3000 per month before taxes. Hancock Hospital is operated by its board of trustees. Appellant's App. at 116 (affidavit of Hancock Hospital counsel C. Thomas Cone). Combs participated in Hancock Hospital's long-term disability benefit plan ("the Plan"), which is insured and administered by Lumbermens. In 2000, Combs's primary care physician, Dr. Craig Johnston, referred Combs to hematologist/oncologist Dr. Magaral Murali for evaluation of her persistent anemia and increasing fatigue. Dr. Murali diagnosed Combs with myelodysplastic syndrome.² Initially, Dr. Murali treated Combs with iron, vitamin B12, and steroids. When this treatment proved unsuccessful, Combs received injections of erythropoietin.³

Because of her illness, Combs stopped working at Hancock Hospital on July 29, 2001. On February 15, 2002, Combs filed an application for long-term disability benefits with Lumbermens' subsidiary and claims administrator, Kemper National Services ("Kemper"), which later became Broadspire Services, Inc. ("Broadspire").⁴ In her application, Combs stated that she was unable to work because of "severe fatigue, weakness, bone & muscle pain, unable to lift or stand, difficulty concentrating, dizziness[.]" Def. Exh. 14 at 98. Combs listed her illnesses as "myelodysplastic syndrome, anemia, fibromyalgia, chronic fatigue syndrome[.]" Id. In a letter dated April 16, 2002, Kemper notified Combs that she had become eligible for $1,748.25 in monthly benefits effective January 26, 2002, based on Kemper's determination that she had a disability that prevented her from performing the essential functions of her regular occupation for the following twenty-four months. Id. at 326-27. This is known as an "own occ" disability standard.

In a letter dated July 31, 2003, Kemper notified Combs that her benefits would be terminated as of January 25, 2004, unless she was prevented by her disability from performing the essential functions of any gainful occupation "that [her] training, education, and experience would allow [her] to perform[,]" id. at 335, and that would pay at least sixty percent of her pre-disability income. Plf. Exh. V at 27. This is known as an "any occ" disability standard. Pursuant to the Plan, an employee cannot receive disability benefits after two years unless the employee meets the "any occ" standard. The letter stated that Kemper would "be conducting a thorough evaluation of [Combs's] claim to determine [her] eligibility for benefits beyond" January 25, 2004, and that a vocational consultant from Kemper might contact her "to discuss [her] work experience and educational background." Def. Exh. 14 at 336.

Also on July 31, 2003, one of Kemper's consulting physicians, hematologist Dr. Marc Fishman, conducted a peer review of Combs's medical records provided to him by Kemper's claims specialist. Dr. Fishman's review reads in pertinent part as follows:

According to a note from Dr. Mureli [sic] of April 17, 2003, the claimant has myelodysplastic syndrome with chronic refractory anemia. However, from the same note, Dr. Mureli [sic] states "the patient with the erythropoietin has done remarkably well." Physical examination on that date was normal and the claimant's hemoglobin on that date was 11.7. The assessment was that the claimant was doing well with the myelodysplasia. Reviewing the available medical records, the claimant is receiving erythropoietin, generally on a weekly basis. The hemoglobin results from the available records range from 9.9 grams % to 12.0 grams%.[⁵] An Estimated Physical Abilities form was completed by Dr. Craig Johnson [sic] on May 24, 2003. He states that the claimant has chronic fatigue syndrome and that she is unable to work. He indicates that she is never able to lift or carry anything and that she can sit, stand and walk only one hour per day. Also in an Attending Physician's Statement dated May 29, 2003, Dr. Johnson [sic] states that the claimant is unable to work due to chronic fatigue and myelodysplasia and anemia.

Based upon the available information, the claimant is not disabled with respect to her hematologic disorder. While the claimant does have myelodysplastic syndrome, based upon the available information, she is responding very well to the erythropoietin. The hemoglobin has been maintained in a satisfactory level. Accordingly, at the present time, the claimant is not disabled from her own occupation or from any occupation with respect to her hematologic disorder.

The opinions rendered above reflect reasonable medical certainty based upon the available information.

Id. at 178-79.

In a letter to Combs dated September 9, 2003, Kemper claims specialist Alicia Lopez summarized Dr. Fishman's review and stated that Kemper had "determined that based on the present information, the objective medical data provided by [her] treating physicians [did] not continue to support that [she] remain[s] totally disabled from performing the duties of [her] own occupation or any occupation." Id. at 338. Lopez informed Combs that it was her "responsibility to provide on-going proof of disability." Id.

In response, Combs submitted additional medical information, including a statement from Dr. Johnston dated September 24, 2003. Dr. Johnston diagnosed Combs with incapacitating fatigue, depression, myelodysplastic syndrome, refractory anemia, and a torn rotator cuff, and stated that the combination of those maladies rendered her unable "to perform even light work duties[.]" Id. at 164. Combs also submitted a letter from Dr. Murali, dated October 9, 2003, which states that she

has been diagnosed to have myelodysplastic syndrome with chronic refractory anemia in addition to chronic fatigue syndrome. She has been quite dependent on erythropoietin injections to improve her hemoglobin. The patient has been disabled because of her problems relating to the chronic fatigue syndrome as well as myelodysplastic syndrome. Consequently, she has also had some depression because of this reason. The patient will continue to be on erythropoietin injection on an indefinite basis at this time. The patient would not be able to resume her regular work with prolonged standing and moving in view of these two medical problems. If you need any further information, please feel free to contact me. The copies of most recent laboratory data are attached.

Id. at 73.

In the meantime, Lumbermens had contracted with Allsup Inc. to assist Combs in obtaining social security disability insurance ("SSDI") benefits. For social security purposes, "disability" is defined as "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months[.]" 42 U.S.C. § 423(d)(1)(A). The statute further provides that

[a]n individual shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists in the immediate area in which he lives, or whether a specific job vacancy exists for him, or whether he would be hired if he applied for work.

42 U.S.C. § 423(d)(2)(A). Pursuant to the Plan, Lumbermens' payout is offset by one dollar for every dollar that a claimant receives in SSDI benefits. Tr. at 616. On September 9, 2003, Allsup notified Broadspire that Combs had been awarded SSDI benefits and that Allsup would have to wait at least sixty to ninety days for the benefits information. Lumbermens never requested a copy of Combs's social security disability...