Phillips v. Lincoln Nat. Life Ins. Co.

• Decision Date: 26 September 1991
• Docket Number: No. 90 C 0345.,90 C 0345.
• Citation: 774 F. Supp. 495
• Parties: Gordon B. PHILLIPS as guardian of James G. Phillips, Plaintiff, v. LINCOLN NATIONAL LIFE INSURANCE COMPANY, an Indiana corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

774 F. Supp. 495

Gordon B. PHILLIPS as guardian of James G. Phillips, Plaintiff, v. LINCOLN NATIONAL LIFE INSURANCE COMPANY, an Indiana corporation, Defendant.

No. 90 C 0345.

United States District Court, N.D. Illinois, E.D.

September 26, 1991.

Stephen C. Voris and Andrew D. James, Burke, Wilson & McIlvaine, Chicago, Ill., for plaintiff.

J. Robert Geiman, David Joseph Novotny, Thomas P. Boylan, and William A. Chittenden, III, Peterson & Ross, Chicago, Ill., for defendant.

MEMORANDUM OPINION

BRIAN BARNETT DUFF, District Judge.

The plaintiff, Gordon B. Phillips, as guardian for his son James G. Phillips, seeks to recover nearly $500,000 in insurance benefits that he claims have been wrongly withheld by the defendant, Lincoln National Life Insurance Company ("Lincoln"). Mr. Phillips has sued Lincoln pursuant to § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), for reimbursement of what he has spent for the care of his sick son. That provision allows beneficiaries and participants in an employee welfare benefit plan to recover benefits due them under the terms of their plan. Id.

The dispute requires this court to determine whether the plaintiff's son's condition falls within the meaning of the term "mental illness" in the insurance policy. If James's condition is a "mental illness," then the insurance coverage is a great deal less than if his condition is other than a "mental illness." In his motion for summary judgment, the plaintiff asserts that this court can decide as a matter of law that the policy's provision limiting coverage for mental illnesses does not apply because James's condition is not a mental illness. By contrast, the defendant's cross-motion for summary judgment argues that this court can decide as a matter of law that the insurance policy's limitation of coverage for mental illnesses does apply. In addition to moving for summary judgment, both sides seek attorneys fees pursuant to 29 U.S.C. § 1132(g)(1).

Facts¹

Gordon Phillips was and still is President of Seedburo Equipment Company ("Seedburo"). On November 1, 1984, Seedburo executed a group insurance plan with Lincoln which remained in effect until November 1, 1990. The parties agree that the group insurance plan was an employee welfare benefit plan governed by ERISA and that James, as Gordon Phillips' dependent, was a beneficiary of the group plan.

The insurance contract between Lincoln and Seedburo stated in pertinent part:

MAJOR MEDICAL BENEFITS

                Maximum Benefit (Lifetime Aggregate) .......... $1,000,000
                Except that, the Maximum Benefit
                (Lifetime Aggregate) for
                charges for mental illness(es) is ................ $25,000
                

* * * * * *

MAJOR MEDICAL LIMITATIONS

The maximum payment for care of mental illness or care of nervous conditions of any type or cause by a doctor will not be more than:

1. $20.00 for each visit; and

2. one visit on any one day; and

3. 50 visits during any calendar year.

(A "visit" occurs each time the doctor provides care to the patient.)

* * * * * *

Illness — means:

1. A disorder or disease of the body or mind; or

2. An accidental bodily injury; or

3. Pregnancy.

Thus, the insurance contract provides a lifetime maximum benefit for major medical expenses of $1,000,000. It limits, however, the lifetime maximum benefit for charges for "mental illness(es)" to $25,000.

Until October, 1987, Lincoln paid the claims submitted on behalf of James for his medical expenses. In October, 1987, the claims paid by Lincoln reached $25,000. Thereafter, Lincoln refused to pay any further claims on James's behalf, insisting that James's condition is a mental illness and that the lifetime limitation of $25,000 for care of mental illness applies.² From October, 1987 through June, 1990, Mr. Phillips has paid $498,615.41 for James's care without reimbursement from Lincoln and he has continued since June, 1990 to pay his son's medical expenses.

James Phillips suffers from a debilitating condition marked by abnormal behavioral symptoms. His abnormal behavior includes hyperactivity, hyperexcitability and hyperkinesis. He is extremely self-abusive and has attempted suicide on several occasions. Sometimes he eats indiscriminately whatever he can get his hands on. In addition, James has difficulty processing visual stimuli and becomes anxious and overly excited when faced with a new or strange situation. He also needs constant reassurance and needs to hear statements repeated numerous times before he feels secure in his surroundings. James also requires an inordinate amount of attention and constant feedback from the people around him. Although he is not mentally retarded (his I.Q. is considered on the low end of normal), he does have a learning disability.

His condition is congenital and has been diagnosed by several doctors as an organic brain syndrome, meaning that he has a physical abnormality in his brain. His organic brain syndrome has also been termed "congenital encephalopathy." The Diagnostic and Statistical Manual of Mental Disorders, Third Edition-Revised ("DSM-III-R"), a comprehensive classification of mental disorders published by the American Psychiatric Association, classifies organic brain syndrome, which is referred to as "organic mental syndrome," as a mental disorder.

Based on psychological testing, doctors believe that James's abnormality is located in the right hemisphere of his brain although they cannot pinpoint its exact location. The results of an electro-encephalogram are consistent with the psychological tests as they place the abnormality in the right posterior part of James's brain. The physical abnormality in his brain is accepted by the parties as the cause of his aberrant behavior.

The focus of James's treatment has been directed toward his behavioral problems and not toward curing the underlying physical problem in the brain. James has been educated in a monitored environment to control and train his behavior. He has also been treated with the medications Lithium and Amoxapine to control his behavior, as well as with Haldol (an anti-psychotic), Ativan (an anti-anxiety and anti-psychotic) and Prozac (an anti-depressant). In addition, James received psychotherapy although it ultimately proved to be ineffective.

Discussion

Rule 56 of the Federal Rules of Civil Procedure requires this court to enter summary judgment upon either party's motion "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See generally Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). As mentioned above, however, the material facts in this case are not disputed. Once this court decides the legal question of how the term "mental illness" should be construed, the undisputed facts relating to James's condition can be related to that construction. This court can then rule as a matter of law whether James's condition is or is not within the meaning of "mental illness" as that term is used in the insurance contract.

A. Determining What Law Applies.

The threshold issue which this court faces is the question of what set of interpretive rules should be used in construing the terms of the group plan. Should this court interpret the term "mental illness" according to the relevant state's contract doctrines or according to an evolving federal common law of ERISA pertaining to the interpretation of employee welfare benefit plans?

Had this dispute arisen before Congress passed ERISA, the contract and the term "mental illness" would, of course, have been construed according to the relevant state's laws of contracts. See Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 955, 103 L.Ed.2d 80 (1989). This action, however, is not an action arising under the common law of contracts. Section 502 of ERISA, rather than state contract law, provides the legal basis for the plaintiff's claim. Therefore, the employee welfare benefit plan at issue here must be construed according to a federal common law of interpretation. See id. 109 S.Ct. at 954; Winstead v. Indiana Insurance Co., 1987 WL 15750 (N.D.Ill. 1987), aff'd, 855 F.2d 430 (7th Cir.1988); Reiherzer v. Shannon, 581 F.2d 1266 (7th Cir.1978).

The content of the federal common law of interpreting employee welfare benefit plans should be strongly informed by, if not a wholesale adoption of, the doctrines of contract interpretation found in the common law of the relevant state.³ As the Seventh Circuit has stated:

When ERISA is silent on an issue, a federal court must fashion federal common law to govern ERISA suits. In making such rules, we must of course, look to the statute itself for guidance ... and it is also proper to turn to state law when creating such rules as long as such state law is consistent with the policies underlying the federal statute at issue.

Fox Valley & Vicinity Construction Workers Pension Fund v. Brown, 897 F.2d 275 (7th Cir.1990) (citations omitted). See also Western Securities Co. v. Derwinski, 937 F.2d 1276 (7th Cir.1991) (adopting state common law contract doctrines to interpret a contract governed by federal common law).

ERISA itself is silent as to how qualified employee welfare benefit plans ought to be interpreted. In light of that silence, the parties' expectations would be best fulfilled by using as much as possible the familiar common law rules of contract interpretation of the state whose contract laws would have applied had a case been brought for breach of contract. The law should strive to fulfill parties' expectations regarding contracts because doing so will enable people to be more willing to make mutually advantageous contracts. When people do not have to guess about what set of interpretive doctrines will be used to interpret their contracts, they...