Quesinberry v. Life Ins. Co. of North America

• Decision Date: 12 February 1993
• Docket Number: 92-1166,Nos. 92-1100,s. 92-1100
• Citation: Quesinberry v. Life Ins. Co. of North America, 987 F.2d 1017 (4th Cir. 1993)
• Parties: , 16 Employee Benefits Cas. 2625 Robert E. QUESINBERRY, individually and as Administrator of the Estate of Karen S. Quesinberry, deceased, Plaintiff-Appellee, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant, and Citibank Individual Banking Group Accident Plan, Defendant. Robert E. QUESINBERRY, individually and as Administrator of the Estate of Karen S. Quesinberry, deceased, Plaintiff-Appellant, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellee, and Citibank Individual Banking Group Accident Plan, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1017

987 F.2d 1017

61 USLW 2508, 16 Employee Benefits Cas. 2625

Robert E. QUESINBERRY, individually and as Administrator of

the Estate of Karen S. Quesinberry, deceased, Plaintiff-Appellee, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant, and Citibank Individual Banking Group Accident Plan, Defendant.

Robert E. QUESINBERRY, individually and as Administrator of

the Estate of Karen S. Quesinberry, deceased, Plaintiff-Appellant, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellee, and Citibank Individual Banking Group Accident Plan, Defendant.

Nos. 92-1100, 92-1166.

United States Court of Appeals Fourth Circuit.

Argued Sept. 29, 1992.

Decided Feb. 12, 1993.

William R. Rakes, Gentry, Locke, Rakes & Moore, Roanoke, VA, argued (Melissa W. Scoggins, C. Coleman, G. Edmunds, on brief), for defendant-appellant.

Thomas Daniel Frith, III, Mundy, Rogers & Frith, Roanoke, VA, argued for plaintiff-appellee.

Before ERVIN, Chief Judge, and RUSSELL, WIDENER, HALL, PHILLIPS, MURNAGHAN, SPROUSE, ^* WILKINSON, WILKINS, NIEMEYER, HAMILTON, LUTTIG, and WILLIAMS, Circuit Judges, sitting en banc.

OPINION

WILLIAMS, Circuit Judge:

Mr. Robert E. Quesinberry brought this action to collect proceeds as a beneficiary of an accidental death insurance policy purchased by his wife, Mrs. Karen S. Quesinberry, from Life Insurance Company of North America (LINA) through her employer. The district court awarded Mr. Quesinberry $82,500, the principal amount of the policy, as well as pre- and post-judgment interest. On appeal, LINA challenges the district court's consideration of evidence that was not part of the record before the plan administrator as well as the judgment for Mr. Quesinberry. Mr. Quesinberry cross-appeals the district court's denial of attorneys' fees and challenges the manner in which the district court awarded post-judgment interest.

This appeal presents three issues regarding the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461 (1988). The first issue concerns the scope of the district court's de novo review in denial of benefits cases, specifically whether the district court may consider evidence that was not presented to the plan administrator. The second issue concerns the district court's application of the test adopted by this court in Adkins v. Reliance Standard Life Insurance Co., 917 F.2d 794 (4th Cir.1990), for determining whether injuries or losses are accidental where there may be a preexisting infirmity or susceptibility. The third issue is the appropriate legal standard for an award of attorneys' fees in an ERISA action. In addition to the ERISA issues, we must determine whether prejudgment interest should be included as part of the judgment when calculating post-judgment interest.

For the reasons set forth below, we conclude that the district court employed the correct scope of review, that it did not err in finding for Mr. Quesinberry, and that attorneys' fees were properly denied. We also conclude, however, that the district court should have awarded post-judgment interest on the entire amount of the judgment, including the assessment of pre-judgment interest. Accordingly, we affirm in part, reverse in part, and remand.

I. Background

Mrs. Quesinberry was admitted to Roanoke Memorial Hospital, Roanoke, Virginia, on June 16, 1983, with a preliminary diagnosis of optic neuritis and multiple sclerosis. At the time of her hospitalization, Mrs. Quesinberry reported the following symptoms: dizziness, back pain, decreased rectal and bladder sensation, diminished visual acuity, and numbness in her hand. Mrs. Quesinberry's doctors scheduled her for a computerized tomography scan (CT scan) in order to verify their preliminary diagnosis. In preparation for the CT scan, Mrs. Quesinberry was given 300 cc's of Renografin 60, a contrast material administered to aid in interpreting the results of the CT scan. Within fifteen minutes of receiving the Renografin injection, Mrs. Quesinberry experienced uncontrollable muscle spasms. She later suffered several cardiac arrests, malignant hypothermia, and whole body tremors, and she eventually became comatose. Mrs. Quesinberry remained comatose until her death on June 19, 1983. The autopsy performed on Mrs. Quesinberry revealed that she had neurosarcoidosis with extensive involvement of the brain and central nervous system. ¹

As the beneficiary of his wife's accidental death insurance policy, Mr. Quesinberry filed a proof of loss and claim for benefits. LINA denied his claim for benefits and his administrative appeal. Mr. Quesinberry filed this action asserting that his wife suffered an accidental death as a result of a toxic reaction to the injection of Renografin and that he was wrongfully denied the proceeds of the insurance policy. ² Prior to trial, the district court determined that the de novo standard of review adopted by the Supreme Court in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), applied to the case and that under the de novo standard Mr. Quesinberry should be permitted to present all admissible evidence, including evidence that was not previously presented to the plan administrator, 737 F.Supp. 38.

At the bench trial, Mr. Quesinberry's experts opined that the Renografin reduced the level of calcium in Mrs. Quesinberry's blood to such a degree that it caused her muscle spasms and cardiac arrest, which in turn caused damage to the hypothalamus, resulting in the malignant hypothermia. According to Mr. Quesinberry's theory, the Renografin injection started a process that ultimately caused Mrs. Quesinberry's death, unrelated to the sarcoidosis.

LINA argued that Mrs. Quesinberry's sarcoidosis, in combination with the injection of Renografin, played a significant role in causing her death. The medical experts for LINA testified that the sarcoidosis caused the Renografin to breach the blood-brain barrier, which led to Mrs. Quesinberry's toxic reaction to the drug. As support for its position, LINA's medical experts testified that a toxic reaction to Renografin would not typically produce the symptoms experienced by Mrs. Quesinberry.

The parties agreed that the appropriate rule for determining whether Mr. Quesinberry should recover under his wife's accidental death insurance policy was the Reliance Standard test for determining whether a pre-existing illness or predisposition defeats accidental injury or death coverage. Reliance Standard, 917 F.2d at 797. Applying this test, the district court found that, under either version of the facts, Mrs. Quesinberry had a predisposition or susceptibility that contributed to her death. The district court then held that the injection of the dye and the resulting consequences was an accident within the meaning of the policy and that Mr. Quesinberry was entitled to recover the $82,500 in insurance proceeds.

The district court subsequently addressed Mr. Quesinberry's request for attorneys' fees, pre-judgment interest, and post-judgment interest. The district court noted that an award of attorneys' fees under ERISA was discretionary. Applying the five factor test outlined in Reinking v. Philadelphia American Life Insurance Co., 910 F.2d 1210, 1217-18 (4th Cir.1990), the court denied Mr. Quesinberry's request for attorneys' fees.

The district court also held that Mr. Quesinberry was entitled to pre-judgment interest on the $82,500 principal amount of the insurance policy to compensate him for the loss of use of his funds. With the pre-judgment interest, Mr. Quesinberry's total recovery was $147,885.21. The court awarded post-judgment interest, but only on the principal amount of $82,500.

II. Scope of Review

In Firestone, the Supreme Court decided that a district court should review de novo a plan administrator's denials of benefits under § 1132(a)(1)(B) of ERISA, unless the benefit plan "gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." 489 U.S. at 115, 109 S.Ct. at 956. Prior to the Firestone decision, the review in ERISA cases in this Circuit, as well as other Circuits, was limited to determining whether the benefit denial was arbitrary and capricious. Id. at 107, 109 S.Ct. at 952 (citing Bruch v. Firestone Tire and Rubber Co., 828 F.2d 134, 138 (3rd Cir.1987)); Berry v. Ciba-Geigy Corp., 761 F.2d 1003, 1007 (4th Cir.1985). While it is clear that Firestone changed the standard of review for non-discretionary plans from arbitrary and capricious to de novo, it is not clear how this change in review standards affects the scope of evidence which the district court can consider in conducting a de novo review.

Other courts addressing the scope of de novo review under ERISA have correctly pointed out that de novo review can refer "both to review of the decision below based only on the record below and to review based on the record below plus any additional evidence received by the reviewing court." Perry v. Simplicity Eng'g, 900 F.2d 963, 966 (6th Cir.1990) (citing 2 S. Childress & M. Davis, Standards of Review § 15.2 (1986)). ERISA does not specify either a standard of review or the scope of that review. LINA argues that in adopting a de novo standard of review the Supreme Court intended that district courts conduct a de novo review of the plan administrator's decision, limited to the evidence which was before the plan administrator. Mr. Quesinberry argues that the Supreme Court intended a full and unrestricted de novo hearing, and therefore the district court properly allowed evidence which was not before the plan administrator.

In Firestone the Supreme Court resolved the standard of review question by looking to the Congressional purposes of ERISA and the applicable standards of review prior to ERISA. We will take a similar approach in this case. In determining the appropriate scope of review we will first review the principles that...