McLaughlin v. Connecticut General Life Ins. Co.

• Decision Date: 03 May 1983
• Docket Number: No. C-81-4367-MHP.,C-81-4367-MHP.
• Citation: 565 F. Supp. 434
• Parties: Ruth L. McLAUGHLIN, Thomas W. McLaughlin, Plaintiffs, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY, Does I through X, inclusive, Defendants.
• Court: U.S. District Court — Northern District of California

565 F. Supp. 434

Ruth L. McLAUGHLIN, Thomas W. McLaughlin, Plaintiffs, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY, Does I through X, inclusive, Defendants.

No. C-81-4367-MHP.

United States District Court, N.D. California.

May 3, 1983.

COPYRIGHT MATERIAL OMITTED

Craig G. McIntosh, Katz & McIntosh, Inc., San Francisco, Cal., for plaintiffs.

Bradley A. Levin, Law Offices of Guy O. Kornblum, San Francisco, Cal., for defendants.

ORDER

PATEL, District Judge.

I.

This action arises out of defendant Connecticut General Life Insurance's ("Connecticut General") denial of Ruth and Thomas McLaughlin's claim for expenses incurred at the Immunology Researching Centre. Plaintiffs¹ allege three separate causes of action: breach of the insurance contract, breach of the implied covenant of good faith and fair dealing, and breach of California Insurance Code § 790.03(h).² The parties filed cross-motions for summary judgment. Having carefully considered the papers submitted and the arguments of counsel, the court hereby grants summary judgment for plaintiffs on the contract and implied covenant causes, and summary judgment for defendant on plaintiffs' punitive damages claim.

Summary judgment is only appropriate if there is no genuine dispute of fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court must view the evidence in the light most favorable to the non-moving party. Therefore, for purposes of plaintiffs' motion, the court must consider the following facts as established.

Thomas McLaughlin is an employee of Trans World Airways ("TWA"). Pursuant to a collective bargaining agreement between TWA and Mr. McLaughlin's union, Connecticut General provides TWA employees with an employee benefit plan, which includes a group health insurance policy. Under the policy, Mr. McLaughlin is insured as an employee, and Mrs. McLaughlin is insured as his "dependent." The policy provides coverage for medical expenses "only to the extent that the services or supplies provided are recommended by a physician and are essential for the necessary care and treatment of the ... sickness." The policy excludes coverage "for charges for unnecessary care or treatment." The policy makes no mention of the effect on coverage or exclusion of the Food and Drug Administration's ("FDA") approval of drugs or treatments. The policy does provide for coverage of medical expenses incurred in foreign jurisdictions.

In June, 1980, Mrs. McLaughlin's doctors diagnosed her as having terminal lung cancer. Although her doctors recommended that she undergo chemotherapy, she rejected their advice and instead in July, 1980 went to the Immunology Researching Centre in the Bahamas. There she underwent immuno-augmentative therapy which is an experimental cancer therapy not approved by the FDA for use in the United States. Mrs. McLaughlin remained in the Bahamas until October 1980 and then returned to California where she continued the immuno-augmentative treatments until her death in October 1982.

In late 1980, plaintiffs began submitting claims to defendant for expenses incurred at the Immunology Researching Centre. Responding to defendant's request for itemized billings, on November 1, 1980, Mrs. McLaughlin wrote defendant stating, inter alia, that she had visited her original oncologist, Dr. Schoen, and that he was "impressed" by her condition. After considering her claims, defendant's San Diego office referred her file to defendant's home office in Hartford. There, Helen Daffron, a medical claims examiner, considered and denied her claims. Plaintiffs were notified by letter dated February 9, 1981. On March 6, 1981, plaintiffs requested ERISA³ review of the denial and the claims were therefore again referred to the Hartford office. After receiving both a medical and legal report, Albert Perreault, the official charged with making final claims decisions, denied plaintiffs' claims.

On June 26, 1981, Mrs. McLaughlin's doctor at the Stanford University Medical Center, Dr. Charlotte Jacobs, wrote defendant on plaintiffs' behalf. She stated,

the patient chose to be treated with immunotherapy under Laurence Burton of the Immunology Researching Centre. I did not know any details of the treatment that she received there. The average survivial of a patient with metastatic oat cell carcinoma is approximately 9 to 11 months. Mrs. McLaughlin will certainly have a much longer survival and she is relatively symptom free. Although she received unconventional treatment for her disease she may have benefitted from it.

After receiving defendant's final denial, plaintiffs requested reconsideration and clarification of the defendant's grounds. Perreault denied their reconsideration request by letter on August 18.

The sole basis for defendant's denial was that immuno-augmentative therapy is not FDA-approved. This is indisputable in light of Helen Daffron's and Albert Perreault's deposition testimony. Daffron, the first of defendant's agents to deny the claim, testified as follows:

Q. Did you equate non-FDA approval to not necessary to the care and treatment of this patient?

A. Yes.

. . . . .

Q. And we agreed, I thought we agreed, that the policy provision that you were denying this under was not necessary for her care and treatment, right?

A. Correct.

Q. And you base that decision on the fact that it was, at least to your knowledge, non-FDA approved treatment, correct?

A. Correct.

Q. You know nothing else about whether this treatment was necessary to this woman's health, outside of the fact it was non-FDA approved, right, when you denied that claim, right?

A. Correct.

Q. Would it still be your position that even if two of her physicians in the United States said that Ruth McLaughlin benefitted from this treatment that you would still deny the claim because it was non-FDA approved?

A. Correct.

. . . . .

Q. Even if medical evidence showed, through doctors in the United States, that Ruth McLaughlin benefitted from the treatment she received, you would still not pay the claim because it's non-FDA approved, right?

A. Right.

Perreault made the final decision to deny plaintiffs' claims. His testimony is equally unequivocal that the sole basis for denial was non-FDA approval:

Q. My question to you is is it irrelevant to you, in making your decision in denying this claim, whether or not two physicians licensed to practice in California believe and have communicated to Connecticut General that the treatment that she received for which she is making a claim benefitted her?

. . . . .

A. The answer is no.

. . . . .

A. So the whole issue as to whether or not this treatment ... was of a medical benefit to her or not did not enter into your denial of her claim, is that correct?

A. That's correct.

Q. So then I take it that you denied her claim solely on the basis that the treatment was not FDA-approved, is that correct?

A. That's correct.

Q. And this is the only basis?

A. That is correct.

. . . . .

Q. And it had nothing to do with any other provisions of the group policy issued at TWA, right? ... when you made the denial, right?

A. Right.

. . . . .

Q. Are you telling me that all you have to do is have a non-approval by the FDA and that equates with not necessary care and treatment of an illness?

A. Essentially, yes.

Not only was non-FDA approval the sole basis for denial, defendant also communicated this to the plaintiffs. There was a series of correspondences between the parties in which defendant's agents merely stated that the claim was denied as not essential to the necessary care or treatment of an illness. However, when the plaintiffs requested clarification of the basis for the ERISA denial, Perreault in his August 18 final denial responded:

I have discussed your request for reconsideration of the decision to exclude the expense of treatment at the Immunology Researching Center with members of our Medical and Legal departments. I am advised that since our denial is limited to the immuno-augmentative cancer therapy which is not approved by the Food and Drug Administration or available in the United States as a prescription required service that the exclusion of the expenses of therapy is appropriate.

Furthermore, defendant's investigation into possible bases for Mrs. McLaughlin's claims was negligible. Despite the fact that Mrs. McLaughlin had represented to defendant that Dr. Schoen was impressed with her condition following the immuno-augmentative treatments, and later Dr. Jacobs wrote defendants that the therapy may have benefitted Mrs. McLaughlin, none of defendant's agents contacted either of these doctors to ask their opinion about whether the therapy was effective for Mrs. McLaughlin. Nor did they contact the Immunology Researching Center or any other doctor who believes that the therapy may be effective. They never requested her medical records. Helen Daffron testified,

Q. You talked to no one else, got no other input and you just did it on whatever you had there, right?

A. Right.

Q. And I take it you made no inquiry from anybody, Patty Dolat or anybody else, as to what this woman's doctors in the United States thought of this treatment, right?

A. Right.

Albert Perreault also failed to investigate the claim. He admitted that the defendant had paid claims for Laetrile in some cases despite the fact that Laetrile was not FDA-approved. The company paid, he stated, if "the law of the state says that this drug may be obtained only upon the prescription of a physician." However, when asked whether immuno-augmentative therapy was available only upon prescription in the Bahamas, he answered,

A. I don't know that.

Q. And you made no effort to find that out, right?

A. That's correct.

Perreault further testified,

Q. After you got the letter from Dr. Jacobs and read it, did you do anything whatsoever to follow up on that letter to ascertain whether or not in the opinion of any doctors who ever saw Ruth McLaughlin that this treatment

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