Opinion ID: 4521051
Heading Depth: 2
Heading Rank: 2

Heading: Transfer of Insurance Coverage Provision

Text: Defendant’s plan document also includes a “Transfer of Insurance Coverage” provision. Although the plan document does not directly address how this provision interacts with the preexisting conditions limitation, in accordance with its name, this provision apparently ensures that those covered under the prior policy—subject to some conditions—are also covered under Defendant’s policy as of the effective date of the policy. Defendant agrees that “[t]he Transfer of Insurance provision in the Group Policy allows for the individual coverage effective date to coincide with the effective date of the Group Policy.” (See Def. Br. at 32.) Plaintiff contends that she was covered under this provision.7 Its relevant portion establishes: If an employee was covered under the prior group long term disability insurance plan maintained by you prior to this Policy’s Effective Date, but was not Actively at Work due to Injury or Sickness on the Effective Date of this Policy and would otherwise qualify as an Eligible Person, coverage will be allowed under the following conditions: 7 Defendant argues that Plaintiff should not be permitted to raise this argument in this case, as she did not exhaust this issue in an internal appeal. However, this Court has held that a claimant is not required to exhaust her issues “because of the non-adversarial nature of ERISA proceedings.” Liss v. Fidelity Servs. Co., 516 F. App’x 468, 474 (6th Cir 2013) (citing Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620, 632 (9th Cir. 2008) (“The non-adversarial nature of the ERISA proceeding weighs against imposing an issue-exhaustion requirement.”); Sims v. Apfel, 530 U.S. 103, 110 (2000) (“Where . . . an administrative proceeding is not adversarial, we think the reasons for a court to require issue exhaustion are much weaker.”)). While we are not bound by this decision, we agree with its conclusions, which are also supported by our exhaustion holding. No. 18-2316 Wallace v. Oakwood Healthcare, et al. Page 14 (1) The employee must have been insured with the prior carrier on the date of the transfer; and (2) Premiums must be paid; and (3) Total Disability must begin on or after this Policy’s Effective Date. (Admin. R., R. 42-1 at PageID #742.) The transfer of insurance provision thus only applies to individuals who meet several conditions. First, the relevant portion of the provision provides that individuals “not Actively at Work due to Injury or Sickness” when the policy became effective on January 1, 2013 are eligible for coverage.8 (Id.; see also id. at #729 (indicating effective date of January 1, 2013).) Neither party contends that Plaintiff was actively at work on this date, and we agree with the district court’s finding that she was not. (Op. & Order Granting Pl.’s Mot. J. & Den. Def.’s Mot. J., R. 50 at PageID #1233.) As for whether Plaintiff was out of work due to “Injury” or “Sickness,” the document’s definitions of those terms both require that the affliction cause “Total Disability which begins while insurance coverage is in effect for the Insured.” (Admin. R., R. 42-1 at PageID ##739– 40.) This is significant. Although Defendant repeatedly asserts that “a disability insurance policy does not cover an individual already on disability – or not actively at work – just like a life insurance policy does not cover an individual who is already dead,” (Def. Br. at 37 n.2; see also Def. Reply Br. at 11 n.2 (citing Sonnichsen v. Principal Life Ins. Co., No. 1:12-cv-1232, 2013 U.S. Dist. LEXIS 31559 (E.D. Wis. March 7, 2013))), this provision’s terms suggest it only applies to those who were out of work because of an affliction that eventually develops into a “Total Disability.”9 Defendant’s contention that an employee who left work due to a disability 8 Defendant analogizes to McKay v. Reliance Standard Life Ins. Co, No. 1:06-CV-267, 2009 WL 5205375 (E.D. Tenn. Dec. 23, 2009), aff’d 428 F. App’x 537 (Jun. 27, 2011), to suggest that the transfer of insurance provision was not applicable to Plaintiff because, like the defendant there, she was not “Actively At Work.” 428 F. App’x at 543–45. Defendant’s argument is unavailing. For one, McKay applied a more generous arbitrary and capricious standard of review to the plan administrator’s determination. Id. at 540–41. Moreover, Plaintiff does not contend that she is eligible under the clause of the transfer of insurance provision that requires her to have been “Actively At Work” on January 1, 2013, but that she is eligible under the clause that does not require her to have been “Actively At Work.” 9 As applicable to Plaintiff, “Total Disability” means “that as a result of Injury or Sickness”: No. 18-2316 Wallace v. Oakwood Healthcare, et al. Page 15 before the group policy’s effective date cannot be covered by this provision is thus contradicted by the plain terms of its provision—such individuals may be covered if their disability began before the policy’s effective date, so long as they were not totally disabled before that date. Applying the pre-existing condition limitation to exclude these same individuals would be in direct conflict with the apparent point of this provision. Second, to be covered under the transfer of insurance provision, one must “otherwise qualify as an Eligible Person.” (Admin. R., R. 42-1 at PageID #742.) According to the plan document’s terms, Plaintiff is an “Eligible Person” if she “meets the Eligibility Requirements of this Policy,” which in turn provide that she must be “a member of an Eligible Class” and “ha[ve] completed the Waiting Period.” (Id. at ##739, 745.) Plaintiff is a member of an “Eligible Class” if she is an “active, Full-time employee” in one of four designated groups of positions: Classes 1, 2, 3, and 4. (Id. at #737.) It is uncontested that her position fell within Class 3. It is less clear whether Plaintiff was an “active, Full-time employee,” and we are again unable to determine if she was. The plan document does not define “active,” but the definition notably does not require an employee to be “Actively at Work,” a term used extensively throughout the document that means “actually performing on a Full-time basis the material duties” of one’s position, “not includ[ing] time off as a result of an Injury or Sickness.” (Id. at #739.) Defendant’s failure to use “Actively at Work” suggests that “active” has a different meaning here. That meaning is ambiguous. See Schachner, 77 F.3d at 893 (stating that a term or provision is ambiguous “if it is subject to two reasonable interpretations”). “Active” could mean that a party is able and available to work, but not present on that day, as the district court apparently understood it to mean in the context of Hartford’s plan. (See Op. & Order Granting Pl.’s Mot. J. & Den. Def.’s Mot. J., R. 50 at PageID #1235 n.6 (distinguishing between “Actively at Work” and “Active (1) during the Elimination Period and for the first 24 months for which a Monthly Benefit is payable, an Insured cannot perform the material duties of his/her Regular Occupation; . . . (2) after a Monthly Benefit has been paid for 24 months, an Insured cannot perform the material duties of Any Occupation. We consider the Insured Totally Disabled if due to an Injury or Sickness he or she is capable of only performing the material duties on a part-time basis or part of the material duties on a Full-time basis. (Admin. R., R. 42-1 at PageID #740.) No. 18-2316 Wallace v. Oakwood Healthcare, et al. Page 16 Employee” as defined in Hartford’s plan).) “Active” could also mean non-retired. See, e.g., Boggs v. Boggs, 520 U.S. 833, 839 (1997) (explaining that “ERISA is designed to ensure the proper administration of pension and welfare plans, both during the years of the employee’s active service and in his or her retirement years”). As both definitions are reasonable, this Court must interpret the definition in Plaintiff’s favor. Perez, 150 F.3d at 557 n.7. As the district court noted, the record shows that Plaintiff performed work after January 1, 2013. (Op. & Order Granting Pl.’s Mot. J. & Den. Def.’s Mot. J., R. 50 at PageID ##1228, 1236.) Therefore, we can conclude that she was an “active” employee in the sense that she was not retired at that point. “Full-time” is defined to mean “working for [Oakwood] for a minimum of 30 hours during a person’s regular work week.” (Admin. R., R. 42-1 at PageID #739.) Defendant contends that an employee is “Full-time” only if she is “‘working’ for the policy holder for a minimum of 30 hours.” (Def. Br. at 36 (citing Admin. R., R. 42-1 at PageID #739).) But this argument ignores the fact that the definition requires thirty hours of work “during a person’s regular work week.” (Admin. R., R. 42-1 at PageID #739.) Defendant analogizes to Turner v. Safeco Life Ins. Co., 17 F.3d 141 (6th Cir. 1994), where this Court suggested that a contract making insurance available to “[a]ll active regular full time employees of the policyholder working a minimum of [thirty] hours a week” was restricted to those “working” now, since the verb was in the present tense. (Def. Br. at 36–37 (citing Turner, 17 F.3d at 143–44).) But the contract at issue in Turner did not modify “working” to include those working the requisite hours in a “regular work week,” as is the case here. Moreover, in Turner, this Court did not apply the rule that ambiguous contract provisions are construed against the drafting party, which precedent now suggests we should apply. See 17 F.3d at 144; Perez, 150 F.3d at 557 n.7. This provision could be reasonably interpreted to mean that a person must currently work thirty hours a week, but it could also be reasonably interpreted to mean that a person’s job description requires that person to work thirty hours a week. See Schachner, 77 F.3d at 893. In the case of ambiguity, we defer to the latter interpretation. See Perez, 150 F.3d at 557 n.7. The district court also did not address whether Plaintiff’s required work schedule made her a full-time employee, and we leave that factual determination to it on remand. No. 18-2316 Wallace v. Oakwood Healthcare, et al. Page 17 Plaintiff “has completed the Waiting Period” if she “is continuously employed on a Fulltime basis” with Oakwood for 180 days. (Admin. R., R. 42-1 at PageID ##737, 745.) There is no question that Plaintiff had been continuously employed with Oakwood for more than 180 days at the time the insurance switched, as she had been employed there since 2005. (See id. at ##768, 824 (noting Plaintiff’s employment since 2005); Op. & Order Granting Pl.’s Mot. J. & Den. Def.’s Mot. J., R. 50 at PageID #1228.) Thus, she had apparently satisfied the waiting period. Therefore, if the district court finds that Plaintiff was indeed a full-time employee, she would have been an Eligible Person on January 1, 2013 and the transfer of insurance provision would not be inapplicable on this basis. But Plaintiff must still meet three more explicit conditions to be covered by the transfer provision. The first requires Plaintiff to “have been insured with the prior carrier [(Hartford)] on the date of the transfer.” (Admin. R., R. 42-1 at PageID #742.) Plaintiff, Defendant, and the district court look to the language of the Hartford plan document to determine whether Plaintiff was insured. (Pl. Br. at 38–40; Def. Br. at 32–34; Op. & Order Granting Pl.’s Mot. J. & Den. Def.’s Mot. J., R. 50 at PageID ##1233–35.) However, the whole of Hartford’s plan document is not in the administrative record, and we are not permitted to look outside the administrative record on review. Hoover, 390 F.3d at 809. Moreover, whether Plaintiff was insured by Hartford on the date of transfer is more appropriately treated as a question of fact, rather than an invitation to construe Hartford’s plan document, especially in the absence of the administrative record that Hartford itself would have relied upon to determine coverage. It is therefore necessary to conduct new factfinding on this point on remand. As for the second criterion for coverage, Defendant did not argue before the district court that Plaintiff’s premiums were unpaid. (See at Def.’s Resp. Pl.’s Mot. J., R. 46 at PageID #1167 (“The facts indicate that Plaintiff fails to satisfy two of the three conditions,” including coverage with the prior insurer and “Total Disability” beginning after the “Policy’s Effective Date”).) Defendant itself should be able to confirm whether it was paid Plaintiff’s premiums, and it implicitly conceded before the district court that Plaintiff’s premiums were indeed paid. The district court accordingly did not address this issue. Defendant may not now assert that Plaintiff failed to satisfy this criterion, nor may it so argue on remand. Because this issue was not No. 18-2316 Wallace v. Oakwood Healthcare, et al. Page 18 contested before the district court in the first instance, it is not preserved for review. See, e.g., Daft v. Advest, Inc., 658 F.3d 583, 594 (6th Cir. 2011); Hutson, 742 F. App’x at 119. Turning to the third criterion, we are also unable to determine whether the “Total Disability” Plaintiff suffered began “on or after this Policy’s Effective Date” of January 1, 2013. (Admin. R., R. 42-1 at PageID #742; id. at #729 (indicating January 1, 2013 effective date).) As applied to Plaintiff, “Total Disability” means that “during the [180-day] Elimination Period and for the first 24 months for which a Monthly Benefit is payable, an Insured cannot perform the material duties of his/her Regular Occupation” and “after a Monthly Benefit has been paid for 24 months, an Insured cannot perform the material duties of Any Occupation.” (Id. at ##737, 740.) The district court found that because Plaintiff was able to work between April 7 and May 12, 2013, she clearly could perform her duties as of those dates, and thus was not “Totally Disabled” as of January 1, 2013. (See Op. & Order Granting Pl.’s Mot. J. & Den. Def.’s Mot. J., R. 50 at PageID #1236.)10 The district court’s analysis on this point overlooks two crucial provisions of the plan document. These provisions allow that one may be “Totally Disabled” because of a condition as of a certain date, have a period of recovery thereafter, and then return to a “Totally Disabled” state due to that same condition. Read together, they lay out specific conditions for when two instances of leave related to the same condition will constitute separate “Total Disabilities.” First, the “Recurrent Disability” provision establishes that “[i]f, after a period of Total Disability for which benefits are payable, an Insured returns to Active Work for at least six (6) consecutive months, any recurrent Total Disability for the same or related cause will be part of a new period of Total Disability,” provided the insured completes a new 180-day elimination period. (Admin. R., R. 42-1 at PageID #748.) But “[i]f an Insured returns to Active Work for less than six (6) months, a recurrent Total Disability for the same or related cause will be a part of the same Total Disability. A new Elimination Period is not required.” (Id.) When considered alongside 10 Defendant suggests that McKay is also controlling on this point. We disagree. As discussed herein, McKay applied a more generous arbitrary and capricious standard of review to the plan administrator’s determination. 428 F. App’x at 540–41. More importantly, the defendant in McKay was found to have been totally disabled prior to the group policy’s effective date in large part because he did not work after that date. Id. at 545. By contrast, Plaintiff returned to work following January 1, 2013. No. 18-2316 Wallace v. Oakwood Healthcare, et al. Page 19 the first sentence, it is clear that this latter portion of the provision also applies only when an insured person has completed an initial elimination period and thus had “a period of Total Disability for which benefits are payable.” (See id.) The second provision overlooked by the district court applies to employees who do not complete a full elimination period during their first leave, making them ineligible for benefits during that period. In that case, the plan document provides for an “Interruption Period” for those who, “during the Elimination Period, . . . return[] to Active Work for less than 30 days,” in which case “the same or related Total Disability will be treated as continuous.” (Id. at #739.) By implication, the converse of this provision is also true—that is, if an employee returns to work for thirty days or more before completing the elimination period, her second period of disability will be considered a new “Total Disability.” To resolve the question of whether Plaintiff met this third criterion, then, it is necessary to determine whether Plaintiff’s two leaves created two separate periods of “Total Disability” under the plan document. Plaintiff returned to work from April 7, 2013 to May 12, 2013. (Id. at ##762, 798.) This is less than the six-month return required to create a new period of “Total Disability” under the “Recurrent Disability” provision applicable to those who were out on their initial leave through the elimination period. Still, it is more than the less-than-thirty-day return that means a second period of leave would be treated as part of the same “Total Disability” under the “Interruption Period” provision applicable to those who were not out on leave through the elimination period. The district court did not make any findings of fact as to whether Plaintiff completed the elimination period during her first leave. Assuming, without deciding, that Plaintiff’s “Total Disability” began on the date that she began her initial leave, the parties have argued two possible dates for the start of her elimination period: October 8, 2012 and October 12, 2012. If Plaintiff’s leave began October 8, she was out of work for 181 days before returning on April 7, 2013 and thus completed the elimination period. If her leave began October 12, she was out of work for 177 days and did not complete the elimination period. In the parties’ initial pleadings before the district court, Plaintiff contended that she left work on October 8, (Am. Compl., R. 16 at PageID #155), and Defendant argued that she left work October 12, (Def.’s Answer Am. No. 18-2316 Wallace v. Oakwood Healthcare, et al. Page 20 Compl., R. 38 at PageID #698). On appeal, they switch positions. (Pl. Br. at 39; Def. Br. 11, 29.) Given the conflicting evidence and arguments on this point, we think it appropriate to afford the parties the opportunity to argue this issue on remand. As to whether the Plaintiff was disabled after departure for her second leave, we partially agree with the district court’s finding that she was. The record indicates that Plaintiff was “Totally Disabled” beginning on May 13, 2013 through at least May 27, 2014. The record is replete with evidence of Defendant’s disability during this time. Plaintiff’s attending physician, Dr. Michaele Oostendorp, D.O., provided a statement indicating that Plaintiff was totally disabled between May 13, 2013 and July 24, 2013. (Admin. R., R. 42-1 at PageID #827.) In July 2013, Dr. Opada Alzohaili attested that Plaintiff had “continued symptoms and possible immune system compromise related to medications” and advised that her medical leave should be continued through October 16, 2013. (Id. at ##838–39, 847.) As of a November 13, 2013 appointment, Kristi Tesarz, a physician’s assistant working with Dr. Oostendorp, (id. at #850), assessed Plaintiff as having tachycardia, asthma, hyperlipidemia, vitamin B-12 and D deficiencies, hypothyroidism, osteopenia, glucocorticoid deficiency, obstructive sleep apnea, anxiety, and shingles, (id. at #860.) On January 28, 2014, Dr. Oostendorp reported similar issues and that, due to her medications, Plaintiff was immunosuppressed. (Id. at #850.) Oostendorp concluded that Plaintiff’s current position “would cause a danger to herself,” and that Plaintiff “is unable to work due to her immunosuppressed state.” (Id.) On May 27, 2014, Kristi Tesarz completed a questionnaire indicating that Plaintiff could not stand, sit, walk, or drive over the course of an eight-hour workday; could not perform simple grasping, pushing or pulling, or fine manipulation; and could not bend, squat, climb, reach above her shoulder, kneel, crawl, use her feet, drive, or carry any significant weight. (Id. at #888.) Tesarz indicated that Plaintiff would likely not achieve maximum medical improvement for over sixteen months, the longest time frame she could indicate, through September 27, 2015. (Id.) This evidence demonstrates that Plaintiff was totally disabled in that she “could not perform the material duties of [her] Regular Occupation” from May 13, 2013 through at least May 27, 2014. (See id. at #740.) However, the facts before us are again insufficient to allow us to determine that Plaintiff was totally disabled beyond May 27, 2014. Tesarz’s attestation that No. 18-2316 Wallace v. Oakwood Healthcare, et al. Page 21 Plaintiff would be totally disabled through September 27, 2015 is apparently based on projection, rather than actual evidence. Finding total disability beyond May 27, 2014 on this basis would be error, and further factfinding is therefore also necessary on this issue on remand.