Earlier today, the United States Court of Appeals for the Fifth Circuit issued a decision in Smith v. United of Omaha Life Ins. Company, Case No. 18-60753 (5th Cir. June 11, 2019) in which it held that the United States District Court for the Southern District of Mississippi correctly held that United of Omaha arbitrarily and capriciously denied the plaintiff long-term disability (“LTD”) benefits under her employer’s LTD plan, which was governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”). A copy of the Court’s opinion can be found here.
The Smith plaintiff was hired on February 6, 2016, as a property manager for a local apartment complex. As a benefit of her employment, she participated in an ERISA-regulated long-term disability plan her employer sponsored and which United of Omaha insured. Her coverage under the LTD plan became effective March 1, 2016. The insurance policy funding benefits under the LTD plan contains an exclusion for certain preexisting conditions. It states as follows:
We will not provide benefits for Disability:
(a) caused by, contributed to by, or resulting from a Pre-existing Condition; and
(b) which begins in the first 12 months after You are continuously insured under this Policy
A Pre-existing Condition means any Injury or Sickness for which You received medical treatment, advice or consultation, care or services including diagnostic measures, or had drugs or medicines prescribed or taken in the 3 months prior to the day You become insured under this Policy.
Three months after the effective date of her coverage, the plaintiff was diagnosed with metastatic ovarian cancer. She underwent surgery and chemotherapy. She applied and was approved for short-term disability (“STD”) benefits for a period of twenty-six weeks. Her claim for LTD benefits, however, was denied under the preexisting condition exclusion referenced above. She appealed that determination under the LTD plan’s appeal procedures. Her internal appeal was denied.
The plaintiff filed a lawsuit against United of Omaha under Section 502(a)(1)(B) of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. challenging the denial of her LTD benefits. After both parties filed cross-motions for summary judgment, the district court entered summary judgment in favor of the plaintiff. United of Omaha appealed, and the U.S. Court of Appeals affirmed the decision in favor of the plaintiff.
The Fifth Circuit upheld the entry of judgment in favor of the plaintiff. It noted that the insurer acknowledged that she was not diagnosed with metastatic ovarian cancer until June 1, 2016, three months after the pre-existing condition exclusion period, or “look-back” period, had ended. Nonetheless, United of Omaha contended that her claim was properly denied because the plaintiff had received treatment during the look-back period for a symptom of the ovarian cancer. In response, the plaintiff argued that the symptom of the cancer did not cause her disability. The cancer caused her disability. The Fifth Circuit agreed. Because the cancer is the condition that caused the plaintiff’s disability, it had to be the condition for which she must have received treatment, care, or services to trigger the pre-existing condition exclusion.
The Court further noted that although the plaintiff’s cancer caused the symptom for which she received treatment during the look back period, those symptoms could have been caused by conditions other than her ovarian cancer. The symptoms were non-specific to ovarian cancer and the medical records did not indicate that the plaintiff’s medical providers believed at the time that the symptoms were the consequence of metastatic ovarian cancer. Thus, the Court held, the insurer could not “reasonably have concluded that she received treatment ‘for’ metastatic ovarian cancer during the look-back period.” The insurer’s contrary conclusions were held to be arbitrary and capricious.
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