:: ERISA Claim Denial Sustained In Accidental Death Case Despite Lack Of Causal Proof

That it may be impossible to prove that Mr. Nally was indeed hypoglycemic at the moment of his accident does not mean that LINA’s decision does not survive moderately heightened arbitrary and capricious review. It was not unreasonable for LINA to conclude on the record before it that Mr. Nally’s accident was a result of his hypoglycemia and thus not covered by this policy. The district court was correct to grant of summary judgment in favor of LINA.

Nally v. Life Ins. Co. of N. Am., 2008 U.S. App. LEXIS 23250 (3d Cir. 2008) (non precedential)

Nally is another in the line of cases wherein an apparent accident is disputed as an excluded sickness under the terms of an accidental death policy.  As is often the case, the deferential standard of review played an important role in this decision for the insurance carrier.

Mr. Nally died in a single car accident. 

Ms. Nally’s late husband, Dennis Nally, was an insulin-dependent diabetic. One morning on his way to work, he was involved in a high-speed, single-vehicle automobile accident. Witnesses described Mr. Nally’s driving before the crash as erratic. The police found no evidence of mechanical failure, poor driving conditions, or drug use by Mr. Nally.

What caused the accident?  The evidence was sparse.

Mr. Nally suffered severe traumatic injuries in the accident. It took response personnel approximately forty-five minutes to extricate him from his vehicle. His glucose was measured around the time he was extracted and found to be 37 mg/dl. Emergency medical technicians transported Mr. Nally to a hospital, where he died several days later.

The glucose level became the focal point. 

I gather that at some point Ms. Nally told the police that Mr. Nally had hypoglycemia.  Other than that, the cause of the accident was an enigma.

The carrier, in considering Ms. Nally’s claim for benefits, engaged an expert.  The expert, however, “stated that because of the time lapse between the accident and Mr. Nally’s first glucose test she could not determine whether he was hypoglycemic at the time of his accident”.  

Thus, the court observed  “it may be impossible to prove that Mr. Nally was indeed hypoglycemic at the moment of his accident . . . ”

Standard Of Review Decisive

At this point, there were two ways the court could go.  One approach would be to place the burden on the carrier – the other, to place the burden on the participant. 

The participant argued that under a “reasonable expectations” view, the carrier should bear the burden of proving that the sickness exclusion applied.

Ms. Nally argues at length for the blanket proposition that courts, rather than insurance companies, are entrusted with the responsibility of interpreting insurance contracts. . . . Ms. Nally’s argument rests in large part upon her assertion that Pennsylvania’s reasonable expectations doctrine is applicable. [Blue Br. at 34-40]

This argument ran afoul of ERISA.  The court opined:

However, federal common law–not state law–governs the interpretation of a benefit plan in an ERISA suit. Feifer v. Prudential Ins. Co. of Am., 306 F.3d 1202, 1210 (2d Cir. 2002); Hooven v. Exxon Mobil Corp., 465 F.3d 566, 572 (3d Cir. 2006) (”Generally, breach of contract principles, applied as a matter of federal law, govern claims for benefits due under an ERISA plan.” (quotation marks omitted)).

 The standard of review turned the issue in the carrier’s favor:

After correctly determining the applicable standard of review, the district court correctly applied it to review LINA’s rejection of Ms. Nally’s claim. As the district court found, there was evidence consistent with the proposition that Mr. Nally was hypoglycemic at the time of his accident and that his hypoglycemia caused the accident. That it may be impossible to prove that Mr. Nally was indeed hypoglycemic at the moment of his accident does not mean that LINA’s decision does not survive moderately heightened arbitrary and capricious review. It was not unreasonable for LINA to conclude on the record before it that Mr. Nally’s accident was a result of his hypoglycemia and thus not covered by this policy. The district court was correct to grant of summary judgment in favor of LINA.

 Note:  On the court’s view, evidence need only be ”consistent” with the carrier decision to warrant sustaining the benefit denial.  The evidence on this point:

while Terlecki stated that because of the time lapse between the accident and Mr. Nally’s first glucose test she could not determine whether he was hypoglycemic at the time of his accident, she also noted that a blood glucose level of 37 mg/dl was inconsistent with “safely operating a motor vehicle” and would produce “cognitive impairment.”

Summary Plan Conflict –  The court recounts the prevailing law in the Third Circuit when the SPD has language absent from the plan document.  This issue did not really bear on the outcome, but it is interesting to review:

“[W]here a summary plan description conflicts with  the plan language, it is the summary plan description that will control.” Burstein v. Ret. Account Plan for Employees of Allegheny Health Educ. & Research Found., 334 F.3d 365, 378 (3d Cir. 2003). “If an SPD conflicts with a plan document, then a court should read the terms of the ‘contract’ to include the terms of a plan document, as superseded and modified by conflicting language in the SPD.” Id. at 381.

The district court determined that because both the policy and the SPD contained an unambiguous grant of discretion to some entity, the discrepancy between the two as to which entity had this discretion was not significant in this instance. [Slip op. at 12] The district court reasoned that the two documents could be read harmoniously as granting the Tyco Benefits Review Committee discretion (as noted by the SPD) which was permissibly delegated to LINA (as noted by the policy). [Id.]

We agree with the district court. In Tocker v. Phillip Morris Cos., the Second Circuit determined that a policy vested discretion in an administrator even though the SPD given to the plaintiff was completely silent on the issue. 470 F.3d 481, 488-89 (2006). Other circuits have reached the same conclusion.  [*6] See Fenton v. John Hancock Mut. Life Ins. Co., 400 F.3d 83, 90 (1st Cir. 2005); Martin v. Blue Cross & Blue Shield of Va., 115 F.3d 1201, 1205 (4th Cir. 1997); Cagle v. Bruner, 112 F.3d 1510, 1517 (11th Cir. 1997); Wald v. S.W. Bell Corp. Customcare Med. Plan, 83 F.3d 1002, 1006 (8th Cir. 1996); Atwood v. Newmont Gold Co., 45 F.3d 1317, 1321-22 (9th Cir. 1995), overruled on other grounds by Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 966-67 (9th Cir. 2006) (en banc). Given these holdings from other circuits, it would be anomalous for us allow the SPD’s statement that the Tyco Benefits Review Committee had discretion to interpret the policy to invalidate the policy’s grant of discretion to LINA.

Standard Of Review – The Court approved a “sliding scale” approach to evaluating the ”structural conflict” – the carrier both funded and paid claims.  Nonetheless, the Court approved the district court’s conclusion that that no procedural factors warranted increasing its scrutiny of LINA’s decision to deny Ms. Nally’s claim, and was therefore correct to apply only a “moderately-heightened” standard of review.  It is difficult to see what such hybrid standards really mean, if anything, and whether they are even permissible after Glenn’s rejection of special evidentiary rules