Court Opinion

ID: 3024377
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:31:12.732259+00
Date Added: 2024-06-11T11:47:40.929180
License: Public Domain

United States Court of Appeals
                              FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 99-2381
                                    ___________
Gary A. Davolt,                       *
                                      *
            Appellee,                 * Appeal from the United States
                                      * District Court for the
  v.                                  * Western District of Missouri.
                                      *
The Executive Committee of O'Reilly   *
Automotive, as Trustee and Plan       *
Administrator of the O'Reilly         *
Automotive Employee Health Plan,      *
                                      *
            Appellant.                *
                                 ___________

                            Submitted: February 18, 2000
                                Filed: March 15, 2000
                                   ___________

Before RICHARD S. ARNOLD, LOKEN, and HANSEN, Circuit Judges.
                           ___________

HANSEN, Circuit Judge.

      O' Reilly Automotive, Inc., (O'Reilly) appeals the district court's order granting
summary judgment to Gary A. Davolt after finding O'Reilly liable for approximately
$35,000 in medical expenses under O'Reilly's self-insured employee benefits plan
pursuant to ERISA.1 We reverse.

      1
       The Employee Retirement Income Security Act of 1974 (codified as amended
at 29 U.S.C. §§ 1001-1461 (1994 & Supp. III 1997) and in scattered sections of Title
26 U.S.C.).
                                          I.
                                Facts and Background

       On March 5, 1992, O'Reilly hired Davolt to work at the counter of its auto parts
store in Columbia, Missouri. On his own accord, Davolt left O'Reilly in 1994 to
assume a similar position with a NAPA auto parts store, but he returned to work at
O'Reilly on April 17, 1995.

      O'Reilly offers its employees a health and dental benefits plan (plan). Employees
become eligible for plan benefits after 90 days of continuous employment. The plan,
however, excludes coverage for preexisting conditions "that exceed a maximum plan
payment of $1000 per calendar year that were diagnosed or treated in the six-month
period before [the employee was] covered under [the] Plan." (Appellant's App. at 83-
84.)

       Davolt suffers from diabetes. Davolt's physician, Dr. Alan L. Braun, diagnosed
Davolt's diabetic condition in 1990. About one year later, Dr. Braun preliminarily
diagnosed Davolt as suffering from peripheral vascular disease. Peripheral vascular
disease, a condition often associated with diabetes, is the clotting or hardening of the
arteries in a person's arms or legs. Davolt's physician initially treated Davolt's vascular
disease with a prescription drug known as Trental. Davolt's treatment with Trental
started in 1991, and he was still taking the drug pursuant to his doctor's orders at the
time of his re-employment with O'Reilly in April 1995. In late January of 1996, Dr.
Jonathan Roberts, a vascular surgeon, recommended that Davolt undergo surgery for
his vascular disease. Dr. Roberts performed the recommended surgery on February 5,
1996.

      Davolt submitted a claim for reimbursement for the cost of his surgery pursuant
to O'Reilly's benefits plan. Davolt sought approximately $35,000. O'Reilly denied
Davolt's claim on the grounds that his condition was a preexisting condition expressly

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excluded by the plan. Davolt filed an action against O'Reilly seeking reimbursement
pursuant to ERISA. Both parties submitted motions for summary judgment. See Fed.
R. Civ. P. 56(c). The district court found that the diagnosis of Davolt's vascular disease
occurred prior to the plan's six-month waiting period and, although Davolt received
drug treatment during the waiting period, such treatment was part of an ongoing
treatment process that began earlier than the waiting period. Based on that analysis,
the district court granted Davolt's summary judgment motion. O'Reilly appeals. On
appeal, O'Reilly contends that the district court misinterpreted the language of its
benefits plan.

                                           II.
                                       Discussion

       The district court reviewed O'Reilly's interpretation of its plan under a de novo
standard. O'Reilly argues that the district court should have reviewed its interpretation
of its plan under a more deferential standard. We review de novo the question of
whether the district court applied the correct standard of review for evaluating an
administrator's interpretation of an ERISA plan. See Woo v. Deluxe Corp., 144 F.3d
1157, 1160 (8th Cir. 1998).

       Federal courts typically review an administrator's interpretation of an ERISA
plan under an arbitrary and capricious standard of review if the plan affirmatively grants
the plan administrator discretion to decide eligibility questions. See Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989). If, however, the record reveals
evidence of a conflict of interest or that the plan administrator is acting "with an
improper motive," we review the plan administrator's discretionary decision de novo.
Armstrong v. Aetna Life Ins. Co, 128 F.3d 1263, 1265-66 (8th Cir. 1997). In Aetna,
the plan administrator attempted to minimize claim payments by providing "incentives
and bonuses to its claim reviewers based on criteria that include a category called
'claims savings'." 128 F.3d at 1265 (citation omitted). Hence, we concluded that due

                                            3
to Aetna's obvious conflict of interest, a much less deferential standard of review was
warranted. See id. We did not, however, create a blanket rule mandating de novo
review in all cases where the insurer of a health benefits plan is also the plan
administrator. Rather, we held that the inquiry is fact specific and limited to instances
where the relationship places the ERISA benefits plan administrator in a "perpetual"
conflict of interest. See id.

       In this case, the district court assumed a conflict of interest existed simply
because the plan administrator is also the self-insured provider of the benefits. Such
an assumption contravenes the express holding of Aetna. Although the fact that the
plan administrator is also the insurer may give rise to a conflict of interest, the district
court erred when it assumed an automatic conflict of interest existed.

       O'Reilly argues that the district court should have applied an arbitrary and
capricious standard of review because no conflict of interest exists in this case. Davolt,
conversely, claims that a conflict of interest does exist, and that de novo review is the
appropriate standard. We need not resolve this question, however, because any
standard of review (even one determined on an intermediate "sliding scale," see Woo,
144 F.3d at 1061-62) will yield the same result.

       We agree with O'Reilly's argument that the district court misinterpreted the plain
language of the employee benefits plan. Specifically, the district court held that the
preexisting condition exclusion applies only to conditions originally diagnosed or
originally treated within the six-month waiting period. The district court concluded that
because Davolt's diagnosis and initial treatment occurred prior to the six-month waiting
period, such diagnosis and treatment were not excluded by the plan. The district court's
interpretation is untenable. It simply strains logic to conclude that the preexisting
condition clause excludes only those conditions originally diagnosed or originally
treated during the six-month waiting period but does not exclude those conditions

                                             4
diagnosed or treated prior to the six-month waiting period, and which continued to exist
and to be treated during the waiting period.

       Davolt received treatment, in the form of drug therapy, for his condition during
the six-month waiting period. The district court acknowledged this fact but it
concluded that the treatment was irrelevant because it was identical to treatment
received prior to the waiting period. The district court found that although physicians
treated Davolt during the six-month waiting period, that treatment was merely a
continuation of the same treatment rather than additional treatment. Under the district
court's interpretation, the plan excludes only new or additional treatment that occurs
during the six-month period. Such an approach runs contrary to the plain language of
the plan. The plan provides that a preexisting condition includes one that is diagnosed
or treated within the six-month waiting period. The plan does not create an exception
for on-going treatment or require that the treatment be an additional form of treatment.
Accordingly, we must conclude that Davolt's vascular disease is a preexisting condition
as defined by the plan and that O'Reilly properly denied Davolt coverage. Any other
interpretation would be at variance with the plan's plain language, and we are not
permitted to rewrite the plan simply to suit sympathetic situations.

                                        III.
                                     Conclusion

      For the reasons stated herein, we reverse the judgment of the district court.

      A true copy.

             Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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