Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-08-03830/USCOURTS-ca8-08-03830-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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1

 The HONORABLE JOAN N. ERICKSEN, United States District Judge for

the District of Minnesota.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 08-3830

___________

Carol Jones, *

*

Plaintiff - Appellant, *

* Appeal from the United States

v. * District Court for the

* District of Minnesota.

Unum Provident Corporation, *

*

Defendant - Appellee. *

___________

Submitted: October 22, 2009

Filed: March 1, 2010

___________

Before LOKEN, Chief Judge, HANSEN and MELLOY, Circuit Judges.

___________

LOKEN, Chief Judge.

Carol Jones filed a claim for long term benefits under the group disability

insurance policy issued to her employer by an affiliate of Unum Provident

Corporation (“Unum”). After Unum denied the claim and Jones’s appeal, she

commenced this action for wrongful denial of benefits under the Employee Retirement

Income Security Act of 1974 (“ERISA”). See 29 U.S.C. § 1132(a)(1)(B). The district

court1

 granted summary judgment dismissing her claim. Jones appeals, arguing Unum

and the court erred in concluding that a lapse in coverage triggered the pre-existing

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condition limitation in the prior group insurer’s policy. Reviewing the grant of

summary judgment de novo, we affirm. See Jessup v. Alcoa, Inc., 481 F.3d 1004,

1006 (8th Cir. 2007) (standard of review). 

I. Background

In January 2004, Jones was hospitalized for major depression and stopped

working as a legal secretary with Fabyanske, Westra & Hart, P.A. She filed a claim

for disability benefits under the firm’s Group Long Term Disability Insurance Policy

issued by Fortis Benefits Insurance Company (“Fortis”). Fortis found Jones disabled

and began paying long-term disability benefits after a three-month qualifying period.

Her treating psychiatrist, Dr. Paul Richardson, cleared Jones to return to work after

June 7, 2004. Jones notified Fortis but advised that she disagreed with Dr.

Richardson’s decision and was seeking a different psychiatrist. Fortis suspended

benefit payments on June 8, advising Jones it would review her eligibility and

requesting additional medical information. Dr. Richardson released Jones to work

part-time on June 28 and full-time on July 26. 

Jones returned to work part-time on June 28. She scheduled initial

appointments with two other psychiatrists, who refused to support her claim of

continuing long-term disability without further investigation. She did not pursue

follow-up appointments. She stopped working on July 15, and a new psychiatrist, Dr.

John Heefner, supported her claim of continuing disability. Jones sent Fortis records

from her visits to Dr. Heefner and the other psychiatrists. On August 26, Fortis

notified Jones that it was denying her long-term disability claim for benefits after June

7, based on her failure to satisfy the test of disability in the Fortis policy. Jones did

not appeal this adverse decision. She returned to work part-time on September 20,

2004, and began working full-time on October 4. Effective January 1, 2005, the

Fabyanske firm changed group disability insurance providers from Fortis to Unum.

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II. The Claim at Issue

Jones stopped working in late February 2005, complaining of an infected dog

scratch. The Fabyanske firm terminated her employment in mid-March. Later that

month, Jones filed a long-term disability claim with Unum, based upon a recurrence

of her major depression and other ailments. Unum denied the claim based upon the

pre-existing condition clause in the Unum policy: 

In order to receive a payment you must satisfy the pre-existing condition

provision under: 1. the Unum plan; or 2. the prior carrier’s plan, if

benefits would have been paid had that policy remained in force. 

Unum first determined that Jones did not satisfy the Unum policy’s pre-existing

condition clause because she received psychiatric treatment within the three months

prior to the effective date of the Unum policy, January 1, 2005, and her disability

began during the first twelve months after the effective date of the policy. Jones does

not challenge that decision. Rather, the dispute turns on Unum’s application of the

pre-existing condition limitation in the Fortis policy.

 Like the Unum policy, the Fortis policy defined a pre-existing condition as one

that was diagnosed or treated during the three months before the claimant became

insured; it denied coverage “for any disability caused by a pre-existing condition”

during the first twelve consecutive months of being insured under the policy. Unum

initially determined that Jones’s coverage under the Fortis policy lapsed on August

26, 2004, the date of Fortis’s final decision that she was “no longer considered

disabled.” Because coverage did not resume until she returned to full-time work in

October 2004, and because Jones received psychiatric treatment within three months

prior to that date, Unum concluded that benefits would not have been paid under the

pre-existing condition clause of the Fortis policy, had it remained in force. Jones

appealed that decision under the appeal provisions of the policy.

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Before resolving Jones’s appeal, Unum contacted Fortis about the apparent

lapse in coverage. The Fortis claims agent who handled Jones’s prior disability claim

opined that coverage lapsed on June 8. Unum sent Fortis a confirming letter. Unum

also explained to Jones in a telephone conversation that her benefits were denied

based on the Fortis policy, suggested that Jones contact Fortis, and noted that “our

decision may change” if Fortis changed its position. Jones apparently contacted

Fortis, because the Fortis agent called Unum again and confirmed that Jones fell out

of an eligible class when her disability ended and she failed to return to full-time

work. In denying the appeal on May 24, 2006, Unum’s appeals department

determined, consistent with the informal Fortis opinion, that Jones’s coverage under

the Fortis policy lapsed on June 8, 2004, the retroactive effective date of Fortis’s

August 26 decision that Jones was no longer disabled, and did not resume until she

returned to work full-time in October. 

In granting summary judgment, the district court concluded that Unum did not

abuse its discretion in determining that Jones’s coverage under the Fortis policy lapsed

between June 8 and October 4, 2004:

[T]he Fortis policy provides that a covered person’s insurance ends when

the person is no longer in an eligible class or when the person stops

active work. Under the Fortis policy, eligible classes are defined in part

to include active full-time employees, full-time means working at least

thirty hours per week, and active work means working full-time for the

policyholder at the employee’s usual place of business. Fortis

determined that Jones was no longer disabled as of June 8, 2004, and she

first returned to full-time work at Fabyanske approximately four months

later. Under these circumstances, the Fortis plan plainly provides that

her insurance ended.

For the most part, we agree with this analysis. The Fortis policy provided that

insurance coverage ends when a person “stops active work” or is no longer in an

“eligible class,” defined as being “an active full-time employee.” Coverage for Jones

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was not an issue while she was receiving long-term disability benefits. No doubt for

this reason, the policy did not address the issue. The record suggests that the

Fabyanske firm continued to classify Jones as a full-time employee who was on

disability leave, and Fortis waived monthly insurance premiums for continued

coverage. But what happened to that status when Jones recovered the ability to

resume work? 

We disagree with Unum and the district court on one aspect of the issue. We

conclude that coverage continued when Jones returned to work part-time on June 28,

2004, consistent with Dr. Richardson’s limited release-for-work and with long-term

benefits suspended but not yet denied, just as coverage would continue for a full-time

employee who is reduced to part-time work during a medical leave. Accord Weber

v. GE Group Life Assur. Co., 541 F.3d 1002 (10th Cir. 2008); Tester v. Reliance

Standard Life Ins. Co., 228 F.3d 372 (4th Cir. 2000). But here, Jones quit work

entirely on July 15, contrary to Dr. Richardson releasing her for full-time work on July

26, and Fortis found her not disabled on August 26, retroactive for benefits purposes

to June 7, 2004. In these circumstances, both Unum and the district court reasonably

looked to the coverage provisions in the Fortis policy and concluded that her coverage

lapsed. As of no later than August 26, Jones had stopped active work and was no

longer in the eligible class of active full-time employees, defined as those who work

at least thirty hours per week. The 2004 billing records reflect that Fortis waived

premium payments for Jones until she was “added” as an employee after returning to

full-time work in October, consistent with coverage having lapsed.

On appeal, Jones argues that her coverage under the Fortis policy began in April

2001, and there was no lapse in coverage in 2004 because her employer considered

her a full-time employee on medical leave. The fact that Fortis terminated disability

benefits, Jones asserts, “has no relevance” to continued insurance coverage. We

disagree. Unlike individual disability insurance plans, employer-provided group plans

condition coverage on the insured employer’s relationship with an employee. Some

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Jones relies on Reese v. Brookdale Motors, Inc., 567 N.W.2d 83, 87-88 (Minn.

App. 1997), which held that an employee scheduled to work full-time was covered

even though he never worked full-time. But the issue in Reese was when coverage

began, not when it ended, and the plan at issue “did not specifically require that an

employee be ‘actively working’ in order to be eligible.” Id. at 87. See also Lickteig

v. Bus. Men’s Assur. Co. of Am., 61 F.3d 579, 585 (8th Cir. 1995); Granite v.

Guardian Life Ins. Co. of Am., 544 F. Supp. 2d 833, 848 (D. Minn. 2008). Jones

further argues that Unum’s interpretation of the Fortis policy violated numerous

Minnesota statutes. We decline to consider these issues because they were not raised

in the district court nor included in her statement of issues on appeal. See Al-Zubaidy

v. TEK Indus., Inc., 406 F.3d 1030, 1037 (8th Cir. 2005). 

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policies provide that insurance does not end until an employee is formally terminated,

like the policy at issue in Verlo v. Equitable Life Assurance Society, 562 F.2d 1034

(8th Cir. 1977). But others provide narrower coverage. The Fortis policy provided

that insurance ends when a person is no longer an active, full-time employee or stops

active work, defined as working full-time. “Full-time” was defined as “working at

least 30 hours per week.” An employee who, like Jones, quit work for several months

can hardly be called an active, full-time employee. Accord Fink v. Union Cent. Life

Ins. Co., 94 F.3d 489, 491 (8th Cir. 1996); Irvine v. Reliance Standard Life Ins. Co.,

2009 WL 2231681, at *1-*2 (D. Minn. July 24, 2009).2

 

Jones argues that a literal interpretation of the thirty-hour requirement would

lead to absurd results, because any employee taking a day off for vacation, a holiday,

or illness would lose coverage and be subject to the pre-existing condition provision

upon returning to work. But neither Fortis nor Unum applied either policy in this

extreme manner. For example, the Fortis billing records reflect that Fortis waived

premiums -- rather than lapsing coverage -- while Jones received long-term disability

benefits, and neither insurer took the position that Jones’s coverage lapsed when she

was absent from her full-time work for one week in November 2004 due to illness. 

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Jones further argues that Unum erred by ignoring the Continuance of Insurance

clause in the Fortis policy, which provided that the policyholder may continue

coverage for a person unable to perform active work on account of a covered

disability. Leaving aside the question whether this provision applied after Jones

recovered from a long-term disability, the clause expressly provided that

“[c]ontinuance must be based on a uniform policy, and not individual selection.” Here,

a human resources employee advised Unum that the Fabyanske firm had no “formal”

leave of absence policy other than the Family and Medical Leave Act (FMLA). The

record further reflects that the Fabyanske firm wrote Jones on August 13 asking if she

would return to work. On September 3, Jones “stopped in to the office to say that she

would be attempting to return to work on Wednesday, September 8.” She later left

a message stating she would not return to work on September 8. On this record, Jones

failed to prove either that her employer requested continued coverage, or that she was

eligible for continued coverage because the continuance, if implicitly requested, was

based upon a uniform policy.

III. Standard of Review

Because the policy granted Unum discretion “to determine your eligibility for

benefits and to interpret the terms and provisions of the policy,” the district court

applied the familiar abuse-of-discretion standard in reviewing Unum’s denial of

Jones’s claim. See Walke v. Group Long Term Disability Ins., 256 F.3d 835, 839 (8th

Cir. 2001). Jones argues the district court erred in applying this standard of review.

Jones argues that Unum’s decision is entitled to less deferential review because

Unum operated under the financial conflict of interest present whenever an insurer

both evaluates claims for benefits and pays granted claims. Under the Supreme

Court’s recent decision in Metropolitan Life Ins. Co. v. Glenn, 128 S. Ct. 2343, 2351

(2008), this conflict does not change the standard of review but may be relevant in

determining whether the insurer abused its discretion, for example, “where an

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insurance company administrator has a history of biased claims administration.”

Applying Glenn, we have noted that courts heavily criticized Unum for unfair claims

practices in the decade ending in 2003. See Chronister v. Unum Life Ins. Co. of Am.,

563 F.3d 773, 776 (8th Cir. 2009); Wakkinen v. Unum Life Ins. Co. of Am., 531 F.3d

575, 582 (8th Cir. 2008). But Jones filed her claim in 2005. Unum thoroughly

investigated the claim, both initially and when Jones appealed, and its initial and final

decisions were carefully reasoned. The district court did not err for this reason in

applying the abuse-of-discretion standard. 

Jones argues that, even if Unum had discretion to interpret its own policy, the

district court erred in not reviewing de novo Unum’s interpretation of the Fortis

policy. This is an interesting issue of first impression. But Jones did not preserve the

issue by raising it to the district court. Accordingly, we decline to consider it. See

Menz v. Procter & Gamble Health Care Plan, 520 F.3d 865, 868 & n.6 (8th Cir. 2008).

We note that the issue would be of little if any significance if the other insurer’s policy

was unambiguous. Only when the other policy is ambiguous will discretion to

interpret it be significant. In such cases, a reviewing court may properly grant some

deference when the ERISA administrator has sought advice from the other insurer as

to the proper interpretation of its policy, as Unum did in this case. 

Our decision in this case is not affected by the ERISA standard of review.

Based on the extensive record compiled during Unum’s thorough investigation, we

conclude that coverage under the Fortis policy lapsed more than six weeks prior to

Jones’s return to full-time work in October 2004. Accordingly, her March 2005

disability claim was not covered because of the pre-existing condition clauses of the

Unum and the Fortis policies.

The judgment of the district court is affirmed. 

______________________________

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