Holzman v. The Hartford

United States District Court

District of Massachusetts

)

William Holzman, )

)

Plaintiff, )

)

v. )

) Civil Action No.

The Hartford Life and Accident ) 17-11436-NMG

Insurance Co., )

)

Defendant. )

)

MEMORANDUM & ORDER

GORTON, J.

This case arises out of a dispute over the decision by the

Hartford Life and Accident Insurance Company (“the Hartford” or

“defendant”) to deny William Holzman (“Holzman” or “plaintiff”)

long-term disability (“LTD”) benefits under the Employee

Retirement Income Security Act (“ERISA”).

I. Background

Holzman was employed at Anderson Corporation (“Anderson”)

and the Hartford issued a group disability insurance policy

(“the Group Policy”) to Anderson that is governed by ERISA.

Under the Group Policy, a participant is entitled to LTD

benefits when the Hartford determines that the employee is

disabled and eligible to receive benefits.

The term “disabled” is defined as when the employee cannot

perform one or more of his essential duties and the employee’s

monthly earnings are less than 80% of his indexed pre-disability

earnings. LTD benefits are also limited by the Pre-Existing

Condition provision which provides that

[N]o benefit will be payable under The [Group] Policy for

any Disability that is due to, contributed to by, or

results from a Pre-Existing Condition.

A pre-existing condition is defined as

any accidental bodily injury, sickness, mental illness,

pregnancy, or episode of substance abuse

for which the individual receives “Medical Care” during the 90-

day period that ends the day before the effective date of

coverage (“the Look-Back Period”). Medical Care is received by

a patient when a physician or health care provider is consulted

or gives medical advice, or recommends, prescribes or provides

treatment. Treatment includes, but is not limited to, medical

examinations, tests, attendance or observation by a physician,

and use of drugs, medicines, services, supplies or equipment by

the patient. The Pre-Existing Condition provision does not

apply if the disability occurs after the last day of the Look-

Back Period or after the last day of 365 consecutive days during

which the employee has been continuously insured under the Group

Policy.

Holzman became insured under the Group Policy on June 10,

2016, with a Look-Back Period of March 12, 2016, to June 9,

2016. Prior to the Look-Back Period, on March 7, 2016, Dr. Eric

Weber (“Dr. Weber”) determined that Holzman had a facial nerve

disorder or perhaps Bell’s palsy. He prescribed medicine for

Holzman’s condition but noted the cause of his symptoms were

unknown at the time.

On May 19, 2016, Dr. Weber examined Holzman again and

observed that the facial paralysis had increased. He

recommended additional laboratory tests and assured the

plaintiff that his symptoms would improve. At that point, Dr.

Weber informed the plaintiff that his Lyme disease test was

negative and concluded, again, that Holzman had Bell’s palsy.

On June 29, 2016, a few weeks after the end of the Look-Back

Period, Dr. Weber observed that Holzman had a small growth on

his jaw and referred him to another doctor. A few weeks later,

Dr. Richard Wein (“Dr. Wein”) counseled Holzman on his likely

prognosis of salivary duct cancer.

Holzman stopped working on July 29, 2016, when he had

surgery to remove the mass in his jaw. At his post-surgery

appointment, Dr. Wein confirmed plaintiff’s cancer diagnosis and

Holzman sought further cancer treatment thereafter. He filed

his claim for LTD benefits under the Group policy in January,

2017.

In April, 2017, the Hartford informed Holzman that his LTD

claim was subject to the Pre-Existing Condition provision and

that he was exempt from coverage because he received Medical

Care during the Look-Back Period. Holzman appealed that

decision in May, 2017. The Hartford Appeals Specialist referred

the appeal to an independent, board-certified oncologist, Dr.

Brian Samuels (“Dr. Samuels”), who performed a review of Mr.

Holzman’s medical records and treatment history.

Dr. Samuels concluded that Holzman had symptoms related to

his salivary duct cancer before June 10, 2016, but that 1) the

symptoms did not result in the cancer and 2) because no

diagnosis of cancer was made prior to June 29, 2016, there was

no Medical Care or treatment prior to June 10, 2016, related to

or resulting in the cancer. He also determined that Dr. Weber’s

treatment notes during the Look-Back Period showed that the

symptoms were related to the later diagnosis of cancer, although

it was not known to be cancer at the time. In June, 2017, the

Hartford notified Holzman that it affirmed its prior decision to

deny his LTD benefits. Following the exhaustion of

administrative remedies under ERISA, the plaintiff filed suit in

federal court.

II. Legal Analysis

A. Legal Standard

The role of summary judgment is to assess the proof in

order to see whether there is a genuine need for trial. Mesnick

v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991). The

burden is on the moving party to show, through the pleadings,

discovery and affidavits, that there is “no genuine dispute as

to any material fact and that the movant is entitled to judgment

as a matter of law”. FED. R. CIV. P. 56(a). A fact is material if

it “might affect the outcome of the suit under the governing

law”. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

A genuine issue of material fact exists where the evidence with

respect to the material fact in dispute “is such that a

reasonable jury could return a verdict for the nonmoving party”.

Id.

If the moving party has satisfied its burden, the burden

shifts to the nonmoving party to set forth specific facts

showing that there is a genuine, triable issue. Celotex Corp. v.

Catrett, 477 U.S. 317, 324 (1986). The Court must view the

entire record in the light most favorable to the nonmoving party

and indulge all reasonable inferences in that party’s favor.

O’Connor v. Steeves, 994 F.2d 905, 907 (1st Cir. 1993). Summary

judgment is appropriate if, after viewing the record in the

nonmoving party’s favor, the Court determines that no genuine

issue of material fact exists and that the moving party is

entitled to judgment as a matter of law. Celotex Corp., 477 U.S.

at 322–23.

B. Motion for Summary Judgment

1. Contra Proferentem

The defendant argues that courts must apply the

deferential, arbitrary and capricious standard of review when

reviewing decisions made by plan administrators under ERISA and

that the common law doctrine of contra proferentem (wherein

courts construe ambiguous terms against the insurer) does not

apply when the Group Policy grants the administrator discretion.

In support of that proposition, the defendant submits (and

plaintiff does not contest) that the Group Policy gives the

Hartford full discretion and authority to determine eligibility

for benefits and to construe and interpret all terms and

provisions of the Policy. That same discretionary authority is

confirmed in the Certificate of Insurance.

The plaintiff rejoins that contra proferentem applies,

noting that ERISA imposes a requirement on insurers to

communicate accurately with plan participants such that they are

aware of their rights and obligations. Specifically, he avers

that the Hartford failed to define pre-existing condition

adequately or to specify what constitutes “nonspecific

symptomology”. He further contends that he became aware of his

cancer diagnosis only after the Look-Back Period and that the

ambiguity in the Group Policy should be resolved in his favor as

the insured.

This Court concludes that contra proferentem does not apply

because, while Holzman disputes the Hartford’s interpretation of

material terms in the Policy, he agrees that the Group Policy

grants full discretionary authority to the Hartford to determine

eligibility for benefits and to construe and interpret all terms

and provision in the Policy. See Stamp v. Metro. Life Ins. Co.,

531 F.3d 84, 93-94 (1st Cir. 2008) (finding that when plan

administrators have discretionary authority to construe the

plan, they determine the intended meaning of the terms and

courts cannot apply contra proferentem). The Court turns next

to the applicable standard of review.

2. Deferential, Arbitrary and Capricious Standard of

Review

If the policy provides the administrator discretionary

authority to determine eligibility for benefits and to construe

the terms of the plan, the administrator is entitled to the

deferential, arbitrary and capricious standard of review. Leahy

v. Raytheon Co., 315 F.3d 11, 15 (1st Cir. 2002) (quoting

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (2002)).

Defendants aver that Holzman’s disability was due to,

contributed to by or resulted from a sickness for which he

received Medical Care during the Look-Back Period, and thus the

Hartford’s decision to deny LTD benefits was rational and in

compliance with the deferential standard of review.

The plaintiff protests that the Hartford’s denial of his

benefits was a clear abuse of discretion in that it violated

settled law. In relation to that claim, the parties discuss two

First Circuit Court of Appeals decisions which the Court now

peruses.

a. Hughes v. Boston Mutual Life Insurance Company

In Hughes, the administrator did not have discretionary

authority to interpret the terms of the ERISA-based insurance

policy and thus the Court applied contra proferentem, not

deference, when reviewing the decision to deny benefits. Hughes

v. Boston Mut. Life Ins. Co., 26 F.3d 264, 267-68 (1st Cir.

1994). The parties offered differing but reasonable

interpretations of the ambiguous pre-existing condition

provision of the policy. Id. at 269. The insurer alleged that

treatment for a condition includes treatment of any symptom in

which hindsight appears to be a manifestation of the later,

disabling condition. Id. at 269. The claimant, in contrast,

argued that the provision requires some awareness on the part of

the physician or the insured that the insured is receiving

treatment for the disabling condition itself. Id. The Court

found that both interpretations were reasonable but that,

because it was compelled to apply contra proferentem, it would

adopt the claimant’s interpretation. Id.

The Hartford distinguishes Hughes on the grounds that,

unlike the administrator in Hughes, the Hartford has discretion

to interpret the terms of the Group Policy and thus contra

proferentem does not apply. As such, the Court need not go

beyond the deference analysis.

Moreover, defendant marks that the First Circuit endorsed

the insurer’s interpretation of the ambiguous pre-existing

condition provision as reasonable. The Hartford proffers the

same interpretation of its analogous pre-existing condition

provision that Holzman received Medical Care for a sickness

(facial paralysis) which was a manifestation of his latent

cancer (the disabling condition). Furthermore, the Hartford

argues that, unlike the fact pattern in Hughes where the insured

had generalized, nonspecific symptoms, Holzman exhibited

specific facial paralysis that was directly caused by the

disabling condition. Cf. Id. at 266 (finding that the disabling

condition of multiple sclerosis progresses slowly and cannot be

diagnosed with certainty even during the life of the patient).

Thus, the Hartford submits that its decision was rational under

the deferential, arbitrary and capricious standard of review.

Holzman, naturally, prescribes to the second interpretation

that the First Circuit proffered in Hughes (requiring some

awareness on the part of the physician or the insured that the

insured is receiving treatment for the disabling condition

itself) as evidence of the Hartford’s unreasonable denial of LTD

benefits. He argues that consistent with the second, reasonable

interpretation in Hughes, his doctor had no reason to believe

that he had anything but Bell’s palsy and that the cancer was

rare, aggressive and unforeseeable. Thus, the Hartford’s

decision ought not prevail under a deferential review standard.

The Court agrees that Hughes is distinguishable because

contra proferentem does not apply in this case and the

Hartford’s interpretation of the provision that treatment of a

symptom that in hindsight is a precursor for the disabling

condition satisfies deferential review. Although the Court

could conclude its analysis here, for the sake of completeness

it will address the other relevant First Circuit decision.

b. Glista v. Unum Life Insurance Company of America

In Glista, the claimant was treated for radiculopathy

during the Look-Back Period but was not diagnosed with primary

lateral sclerosis (“PLS”), the disabling condition, until after

the Look-Back Period. Glista v. Unum Life Ins. Co. of Am., 378

F.3d 113, 127–28 (1st Cir. 2004). Although the treating doctor

noted that the patient showed signs of a symptom inconsistent

with radiculopathy during the Look-Back Period, he did not

notify the patient of that symptom (which happened to be a

precursor of the PLS disability), nor did he investigate the

cause of the symptom. Id. Although the administrator in Glista

had discretionary authority over the plan, the Court held that

the denial of LTD benefits was unreasonable because there was

nothing in the record that showed a clear, direct relationship

between the patient’s symptoms and PLS during the Look-Back

Period. Id. at 128. The policy provided that there must be a

clear and direct relationship between the sickness or injury

treated and the cause of the insured’s disability. Id.

The Hartford argues that unlike the claimant in Glista, who

was treated for symptoms that were clearly unrelated to the

ultimate, long-term diagnosis of PLS, Holzman received Medical

Care during the subject period for his facial paralysis which

was a specific manifestation of his salivary duct cancer.

Holzman responds that, consistent with Glista, a doctor

cannot provide treatment for a condition of which neither the

patient nor the doctor was aware. Specifically, Holzman submits

that a later diagnosis of cancer, in retrospect, is immaterial

to whether medical care providers who treated him for Bell’s

Palsy during the Look-Back Period suspected that cancer was the

cause of his facial paralysis.

From a policy perspective, this Court agrees with the

jurisprudence that pre-existing condition provisions that

include “any sickness” during the Look-Back Period (as opposed

to an illness that is directly related to the disabling

condition) create a perverse incentive for insurers to deny

coverage where any treatment is sought. See Lawson ex rel.

Lawson v. Fortis Ins. Co., 301 F.3d 159, 166 (3d Cir. 2002)

(considering treatment for symptoms of a not-yet-diagnosed

condition as equivalent to treatment of the underlying condition

ultimately diagnosed might open the door for insurance companies

to deny coverage for any condition the symptoms of which were

treated during the exclusionary period); see also Estate of

Ermenc by Ermenc v. Am. Family Mut. Ins. Co., 585 N.W.2d 679,

682 (Ct. App. 1998) (permitting backward-looking

reinterpretations of symptoms to support denials of claims would

greatly expand the definition of pre-existing condition as to

make that term meaningless).

As defendant asserts, however, here the Group Policy

provides that the Pre-Existing Condition provision applies when

the claimant receives treatment for “any sickness” during the

Look-Back Period which contributes to or results in a

disability. As such, the pre-existing condition need not be the

same condition as the disabling condition and thus the question

of whether the physician accurately diagnosed or suspected the

disabling condition during the Look-Back Period is irrelevant.

Accordingly, because this Court concludes that the Hartford

proffered a reasonable interpretation of the Group Policy and

the terms of the Policy clearly state that treatment of any

sickness during the Look-Back Period precludes LTD coverage,

defendant’s motion for summary judgment will be allowed.

3. Conflict of Interest

Finally, the Hartford acknowledges that it is both the

decision maker and the payor of claims, which creates a

potential conflict of interest. The defendant submits that such

a conflict does not alter the deferential standard of review but

is a factor to be considered in determining whether its decision

was an abuse of discretion. In support of its claim that the

conflict is immaterial here, the Hartford submits that it took

steps to promote accuracy in its decision, gave a thorough

appellate review of the initial determination and consulted an

independent board-certified oncologist in its appellate review.

It further contends that it took steps to wall off its claim

adjusters from financial considerations and that its payment of

Holzman’s short-term disability benefits for the maximum period

is further evidence of unbiased interest.

When evaluating abuse of discretion, courts consider

several factors, including a structural conflict of interest.

Denmark v. Liberty Life Assur. Co. of Boston, 566 F.3d 1, 8 (1st

Cir. 2009) (quoting Metro. Life Ins. Co. v. Glenn, 554 U.S. 105,

117 (2008)). Courts have also held that a structural conflict

will be more important where circumstances suggest that the

conflict likely affected the benefits decision. Id. It is less

important, however, when the administrator takes steps to reduce

potential bias and to promote accuracy. Id. Moreover, the

plaintiff bears the burden of showing a conflict of interest.

Cusson v. Liberty Life Assur. Co. of Boston, 592 F.3d 215, 225

(1st Cir. 2010), abrogated by Montanile v. Bd. of Trustees of

Nat. Elevator Indus. Health Benefit Plan, 136 S. Ct. 651 (2016).

This Court concludes that the conflict of interest is

minimal here because 1) the Hartford has proffered evidence of

its unbiased interest and 2) Holzman has not raised this issue,

despite having the burden of doing so. As such, the standard of

review remains deferential and defendant is entitled to summary

judgment.

ORDER

For the foregoing reasons, defendant’s motion for summary

judgment (Docket No. 18) is ALLOWED.

So ordered.

_/s/ Nathaniel M. Gorton____

Nathaniel M. Gorton

United States District Judge

Dated January 14, 2019