Opinion ID: 3202226
Heading Depth: 2
Heading Rank: 1

Heading: ERISA Claims Against Standard (Counts I and II)

Text: As a preliminary matter, we note that Count II has been waived on appeal. In Count II, Northwest and Leatherwood brought ERISA claims against Standard as purported fiduciaries with respect to the Group Policy. The District Court granted summary judgment in favor of Standard, concluding that ERISA did not give Northwest and Leatherwood statutory standing to sue Standard on Duda’s behalf. Nowhere in the appellate briefing do the Appellants touch the issue of standing, nor does their Reply Brief respond to Standard’s contention that they have thus “forfeited the issue on appeal.” (Standard’s Ans. Br. 26.) We therefore deem Appellants to have abandoned that issue. See Nagle v. Alspach, 8 F.3d 141, 143 (3d Cir. 1993) (“When an issue is either not set forth in the statement of issues presented or not pursued in the argument section of the brief, the appellant has abandoned and waived that issue on appeal.”). Because the decision on standing was dispositive of Count II, we will affirm the District Court’s grant of summary judgment on that count. 5 The District Court had jurisdiction over the ERISA claims pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e), and had supplemental jurisdiction over the related statelaw claims pursuant to 28 U.S.C. § 1367. We have appellate jurisdiction to review the District Court’s final decision under 28 U.S.C. § 1291. We exercise plenary review of the grant of summary judgment, and apply the same standard the lower court was obligated to apply. Smathers v. Multi-Tool, Inc., 298 F.3d 191, 194 (3d Cir. 2002). “Summary judgment is proper if there is no genuine issue of material fact and if, viewing the facts in the light most favorable to the nonmoving party, the moving party is entitled to judgment as a matter of law.” Carter v. McGrady, 292 F.3d 152, 157 n.2 (3d Cir. 2002). For a dispute over a material fact to be “genuine,” the evidence must be such that “a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 8 As to Count I, the Appellants and Standard agree that Standard’s decision not to award benefits is subject to review under an “arbitrary or capricious” standard.6 See Doroshow v. Hartford Life & Accident Ins. Co., 574 F.3d 230, 234 (3d Cir. 2009). Under that standard, a reviewing court “may overturn a decision of the Plan administrator only if it is without reason, unsupported by substantial evidence or erroneous as a matter of law.” Abnathya v. Hoffmann-La Rouche, Inc., 2 F.3d 40, 45 (3d Cir. 1993) (internal quotation marks omitted), abrogated on other grounds by Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 112 (2008); Miller v. American Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011). We must therefore determine whether there was a reasonable basis for the administrator’s decision, based on the facts known at the time the decision was made. Smathers v. Multi-Tool, Inc., 298 F.3d 191, 199-200 (3d Cir. 2002). In determining whether a decision by the plan administrator was arbitrary or capricious, “one of several factors” we consider is whether the administrator had a conflict of interest. Estate of Schwing v. The Lilly Health Plan, 562 F.3d 522, 525 (3d Cir. 2009). Although the District Court rejected Count I on multiple grounds, we conclude that the absence of satisfactory medical documentation that Duda was continuously disabled during the so-called “Benefit Waiting Period” was a sufficiently reasonable basis for Standard to deny both total and partial disability benefits. Duda submitted his claim on March 5, 2009 and represented that his last day working without disability was 6 Although that standard is sometimes described in terms of an “abuse of discretion,” we have clarified that “[i]n the ERISA contest, the arbitrary and capricious and abuse of discretion standards of review are essentially identical.” Miller v. American Airlines, Inc., 632 F.3d 837, 845 n.2 (3d Cir. 2011). 9 on August 10, 2007. Regardless of the proof Duda may have supplied that he was disabled as of March 2009 or beyond, the express terms of the Group Policy required his claim to be supported by proof of disability during the preceding Benefit Waiting Period. In its letter denying Duda’s claim, Standard noted, among other things, that “[t]he available records document that you have received limited formal medical attention for these diagnoses over the past three years,” and pointed out Standard’s “receipt of a narrative from Dr. Leatherwood dated March 24, 2009 that admitted the lack of detailed formal records.” (JA 1581.) The letter concluded that “review of the available records” did not provide “substantiation” that Duda had a “continuous Disability … throughout a 180 day Waiting Period for any period over the past 3 years.” (JA 1582.) In its letter reaffirming the denial of Duda’s claim after independent administrative review, Standard again emphasized the lack of documentation of Duda’s condition either before or after his claimed date of disability: With regard to your longstanding history of scapholunate dissociation, you report that your productivity with regard to open surgery has gradually and progressively decreased. Under circumstances regarding Disability as a result of a longstanding and/or progressive condition, it is reasonable for us to expect to find evidence of a notable worsening or progression of your condition as of or just prior to the date you claimed to be disabled (August 10, 2007), to reasonably support that you became Disabled as defined by the Group Policy. In this regard, [] Standard has not received any documentation of treatment for your right wrist contemporaneous to August 10, 2007. In fact, we have not received documentation of any medical treatment for your right wrist for over a year prior to that date (August 6, 2006) through the present, with the only exception being x-rays of your right wrist and hand that was performed on March 6, 2009. 10 (JA 1409.) The letter also observed that, when Standard requested copies of all of Duda’s medical records with Leatherwood, it did not receive any records documenting Duda’s treatment other than a letter dated March 24, 2009 in which Leatherwood described Duda’s “symptoms at this time” – i.e., over two weeks after Duda filed his claim for benefits and almost two years after the purported start of his disability. (JA 1410 (emphasis added).) The letter concluded that, “because records were not kept, we do not have satisfactory written proof substantiating that your condition precluded your ability to perform the Material Duties of your Own Occupation as of August 10, 2007, or even through the present.” (Id.) The paucity of medical records documenting Duda’s condition between August 2007 and March 2009 makes it impossible to say that Standard’s decision to deny Duda’s claim for lack of “satisfactory written proof” was without reason, unsupported by substantial evidence, or erroneous as a matter of law. As the District Court observed, even assuming “satisfactory written proof” to be an ambiguous term, Standard’s interpretation of that language is entitled to deference under the arbitrary-and-capricious standard of review unless it is “contrary to the plain language of the plan.” Skretvedt v. E.I. DuPont de Nemours & Co., 268 F.3d 167, 177 (3d Cir. 2001), abrogated on other grounds by Glenn, 554 U.S. 105. Because the Group Policy specifically required Duda to prove that physical disease or injury rendered him “continuously” disabled during a 180day Benefit Waiting Period prior to March 5, 2009,7 it was not contrary to the plain 7 As mentioned above, March 5, 2009 was the date Duda submitted his disability claim to Standard. 11 language of the plan for Standard to reject Duda’s claim based on the complete absence of contemporaneous medical records dating from that period.8 Because that basis for denying Duda’s claim – either for total or partial disability – finds adequate support in the record, we conclude that Standard’s decision to deny the March 2009 claim cannot be overturned as arbitrary or capricious. Thus, it was not error for the District Court to grant summary judgment for Standard on Count I.9 B. Breach of Contract Claims Against Lincoln (Counts III, IV and V)10 Under both Personal Policies, “total disability” is defined to mean that “the insured, due to injury or sickness, cannot perform the main duties of his or her regular occupation.” (JA 2308; 2326.) By comparison, the Personal Policies define “residual disability” to mean that “the insured, due to injury or sickness, cannot perform all the main duties of his or her regular occupation full time, but: (a) can and is performing some of those duties; or (b) can perform all of those duties, but not full time … . At the same time, the insured must be earning at least 20% less than his or her monthly earned income 8 As Standard points out, Duda has since supplied the record with documents and data that were not before Standard when it made its decision. Because inquiry into the reasonableness of Standard’s decision is “based upon the facts as known to the administrator at the time the decision was made,” we do not consider information that was unavailable to Standard at that point in time. Smathers, 298 F.3d at 200 (internal quotation marks omitted). 9 Duda’s other arguments for establishing that Standard’s decision was arbitrary and capricious are similarly unconvincing, as explained in the District Court’s thorough opinion. 10 Lincoln concedes that Pennsylvania substantive law applies to the contract claims under the Personal Policies. Although Duda does not expressly address this point, his briefing does not contest the applicability of Pennsylvania law; rather, it operates from the assumption that such law does govern. We therefore apply Pennsylvania law to Counts III through V. 12 base.” (JA 2302; 2322.) Reading the total and residual disability definitions together, it is clear that an insured who can still perform some of the main duties of his occupation is not eligible for “total disability” benefits. With respect to Count III, Duda argues that his inability to perform open surgery rendered him totally disabled because “open surgery was the keystone and sole ‘main duty’ of [his practice] because it served as the magnet that drew the full array of surgical procedures performed at Northwest … .” (Op. Br. 39-40.) In this conception of his practice, arthroscopic surgery was not one of Duda’s “main duties” because it was “merely one of many services that was provided as part of a comprehensive menu of orthopedic surgical services that were all generated and fueled by Dr. Duda’s open surgery practice.” (Id. at 43.) Nevertheless, even crediting the argument that open surgeries were the driver of Duda’s practice, we do not think that a reasonable jury looking at this record could conclude that performing open surgery was the only one of his main duties. As the District Court noted, the parties do not dispute that “Dr. Duda performed thousands of arthroscopic surgeries from 1998 until 2009,” and “performed more arthroscopic surgeries than open surgeries” in each of those years. Duda, 2015 WL 1961170, at . For example, between 2002 and 2006 – the five years preceding Duda’s claimed start of disability in 2007 – Duda’s billing codes show that non-open procedures (including but not limited to arthroscopic surgeries) accounted for over 91% of all procedures performed by Duda during that period, while total knee replacements and other open surgery procedures accounted for approximately 1.8% and 6.5%, respectively, of all procedures. Thus, even looking exclusively at Duda’s orthopedic surgery practice 13 and ignoring his IME practice and other medical duties,11 we still conclude that Duda simply cannot prevail on a theory that open surgery was the exclusive “main duty” of his regular occupation. Because Duda’s inability to perform open surgeries did not preclude him from performing some of the main duties of his occupation at the time of his total disability claims, Lincoln did not breach the policies by denying those claims. Hence, the District Court was correct to grant summary judgment in favor of Lincoln on Count III.12 Consistent with that holding, we also conclude that Duda cannot prevail on his Count IV claim that Lincoln denied his total disability claims in bad faith. Duda disputes the District Court’s conclusion that Count IV, brought under 42 Pa. Cons. Stat. § 8371, is barred by a two-year statute of limitations. However, even assuming Count IV is not time-barred, it must fail on the merits. Obviously, if no reasonable jury would find that Duda’s inability to perform open surgeries, by itself, qualified him for “total disability” benefits, it necessarily follows that no reasonable jury would find that Lincoln lacked a reasonable basis for denying “total disability” benefits. Thus, the District Court properly granted summary judgment for Lincoln on that claim.13 11 It is telling that Duda, in filing his disability claims with Lincoln, listed “all” the administrative and physical duties of his “current position” as including not just “Total Joint Replacement,” but also “Open Reduction and Internal Fixation of Fractures, Arthroscopy, Office Visits, [and] IME.” (JA 2793.) 12 Duda also tries to get around his ultimate inability to prevail on Count III by alleging that Lincoln breached a contractual duty not in the actual denial of his claims, but in the process by which Lincoln reached that outcome. However, Duda fails to identify any specific contractual provision that was breached in that regard. 13 Duda attempts to prop up his insurance-based bad faith claim under 42 Pa. Cons. Stat. § 8371 by claiming that Lincoln engaged in bad faith during the discovery stage of the instant litigation. However, Pennsylvania courts have held that § 8371 14 Finally, we conclude that the District Court correctly granted summary judgment for Lincoln on Count V, which alleged both breach of contract and bad faith in the denial of his claims for residual benefits under the Personal Policies.14 Both Personal Policies define residual disability in relation to the insured’s inability to perform “all the main duties of his or her regular occupation” – leaving the term “regular occupation” undefined. (JA 792, 814.) As relevant here, to qualify for residual disability, an insured “must be earning at least 20% less than his or her monthly earned income base.” (Id.) In turn, “monthly earned income” is defined as “the amount of income, net of reasonable and necessary business expenses, earned in a calendar month by the insured from his or her regular occupation … .” (Id. (emphasis added).) “clearly does not contemplate actions for bad faith based upon allegation of discovery violations.” O’Donnell ex rel. Mitro v. Allstate Ins. Co., 734 A.2d 901, 908 (Pa. Super. Ct. 1999). Although the Hollock v. Erie Insurance Exchange case, upon which Duda relies, allowed for the possibility that an insurer’s actions during litigation, at least in some circumstances, may be admissible evidence in support of the underlying bad faith claim, 842 A.2d 409, 414-15 (Pa. Super. Ct. 2004), it also emphasized that a bad faith claim is still established upon a showing that the insurer “refused to pay the proceeds of [the] policy” because of “a frivolous or unfounded reason,” id. at 416. 14 Duda’s belated pursuit of residual benefits through litigation bears some mention. The District Court concluded that Duda’s nonresponsive behavior during Lincoln’s consideration of his residual benefits eligibility constituted a failure to cooperate with Lincoln’s investigation of those claims, and hence defeated his Count V claim for residual benefits. Duda, 2015 WL 1961170, at -26. But, since we are reviewing the grant of summary judgment, and the determination of “[w]hether there has been a material breach of an insured’s duty to cooperate is a question for the finder of fact,” Forest City Grant Liberty Assocs. v. Genro II, Inc., 652 A.2d 948, 951 (Pa. Super. Ct. 1995) (citing Cameron v. Berger, 7 A.2d 293, 296 (Pa. 1938)), we focus only on the District Court’s alternative ground for denying Count V, namely that Duda’s income level had not fallen to the point at which the definition of residual disability was met. See Duda, 2015 WL 1961170, at  n.25. 15 Duda admits that, if income from his lucrative IME practice is counted toward his “monthly earned income,” he cannot qualify for residual disability by showing that he meets the 20% threshold of decreased earnings. Rather, he contends that his IME income should have been disregarded because IME work, though a substantial part of his earnings, is not part of his “regular occupation” as an orthopedic surgeon. The underlying basis of Duda’s argument is that his unilateral description of his occupation in his insurance applications should operate, in effect, as a controlling definition. In his applications for both Personal Policies, Duda listed his full time occupation “for the past 3 years” as “Orthopedic Surgeon” and described his past duties in that occupation as “Those [Duties] Customary to the Performance of Surgery.” (JA 800, 819.) In the course of litigation Duda has also submitted a signed statement representing that, when he purchased the policies, his understanding from his own “broker” and other “advisors” was that such policies “would protect [his] Orthopedic Surgery earnings regardless of ability to work at ANY job other than ORTHOPEDIC SURGERY,” (JA 785-86 (original emphasis)), and that he therefore did not expect his work performing IMEs to disqualify him for disability benefits under the policies (id. at 786-87). Notwithstanding Duda’s own understanding of the policies, “Pennsylvania case law … dictates that the proper focus for determining issues of insurance coverage is the reasonable expectations of the insured … . [and i]n most cases, the language of the insurance policy will provide the best indication of the content of the parties’ reasonable expectations.” Reliance Ins. Co. v. Moessner, 121 F.3d 895, 903 (3d Cir. 1997) (internal quotation marks omitted). Even clearly worded provisions “will not bind the insured 16 where the insurer or its agent has created in the insured a reasonable expectation of coverage,” id., but in this case Duda has alleged that his expectations were influenced by his own advisors rather than by the insurer. Thus, the unambiguous language of the insurance contract controls. See Pa. Nat’l Mut. Cas. Ins. Co. v. St. John, 106 A.3d 1, 14 (Pa. 2014) (“When the language of an insurance policy is plain and unambiguous, a court is bound by that language.”). Although our opinion in Lasser v. Reliance Standard Life Insurance Company was not applying Pennsylvania law, it concerned a policy with language almost identical to that considered here, defining disability in relation to the insured’s ability to “perform the material duties of his/her regular occupation.” 344 F.3d 381, 386 (3d Cir. 2003). We held that the term “regular occupation,” likewise undefined in that case, was not ambiguous, instead concluding that “[b]oth the purpose of disability insurance and the modifier ‘his/her’ before ‘regular occupation’ make clear that ‘regular occupation’ is the usual work that the insured is actually performing immediately before the onset of disability.” Id. Because the language in the Personal Policies is essentially identical to the provision in Lasser, the District Court was correct in concluding that, for purposes of assessing Duda’s residual disability claims, the term “regular occupation” should be defined in relation to “the tasks actually performed before the onset of disability, not those tasks that are generally required of individuals in the insured’s profession.” Duda, 2015 WL 1961170, at . It was therefore proper for the District Court to consider 17 Duda’s extensive IME practice as part of the tasks he was “actually performing” before the onset of his disability.15 Because Duda concedes, with admirable candor, that it is impossible for him to prevail on his residual benefits claims if his IME income factors into the analysis, our determination that IME work was part of Duda’s “regular occupation” is dispositive of both the breach of contract and bad faith claims raised in Count V. Therefore, the District Court properly granted summary judgment for Lincoln on that count.