Court Opinion

ID: 3048812
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:24:50.215682+00
Date Added: 2024-06-11T12:46:39.610354
License: Public Domain

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

      1
        The HONORABLE JOAN N. ERICKSEN, United States District Judge for
the District of Minnesota.
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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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.

      2
        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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       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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