Insurers should not conflate risk factors with pre-existing conditions

This article was published in the Chicago Daily Law Bulletin on April 15, 2015.

By Mark D. DeBofsky

Mark D. DeBofsky is a name partner of DeBofsky, Sherman & Casciari, PC. He handles civil and appellate litigation involving employee benefits, disability insurance and other insurance claims and coverage . He can be reached at [email protected].

Although health plan exclusions for pre-existing conditions are no longer permissible under the Affordable Care Act, disability insurers may still lawfully invoke such exclusions in their policies. But the exclusions must be applied narrowly.

This was illustrated in Meyer v. Unum Life Insurance Company of America, 2015 U.S. Dist. LEXIS 42092 (D.Kan., March 31).

John Meyer became disabled after an ischemic stroke in March 2010. Although there was no dispute as to his disability, his employer’s group disability insurer, Unum Life Insurance Company of America, invoked the policy’s pre-existing condition exclusion, which bars coverage for any condition diagnosed or treated within the six months prior to the effective date of coverage that causes the insured’s disability within 24 months of when coverage first takes effect.

Before he was covered in 2008, Meyer was treated for atrial fibrillation and hypertension. Unum asserted that those conditions increased his likelihood of suffering a stroke; hence, the claim was denied.

The court overturned the decision. Among other factors, the court was troubled by the findings of Unum’s medical consultant, Dr. Costas Lambrew, because of his close financial ties to Unum and similar findings he made that were rejected in Lafferty v. Unum Life Insurance Company of America, No. 3:10-cv-02465, 2012 WL 667811 (M.D. Pa. Feb. 29, 2012) (opinion vacated and withdrawn following settlement).

The court also reviewed Unum’s history of biased claims administration, although the court acknowledged that Unum had taken steps to reform its practices.

However, the court remarked, "As noted, in Lafferty, the U.S. District Court for the Middle District of Pennsylvania rejected Lambrew’s effort to treat coronary artery disease (a risk factor) as a proxy for heart failure (a disabling event) for purposes of the pre-existing condition exclusion. The fact that Unum did not counsel Lambrew about his error — and instead asked the district court to vacate its decision — suggests that Unum’s commitment to independent impartial medical advice is more window dressing than substance. This practice suggests actual bias and is entitled to some weight in the court’s review."

Thus, the court ruled that Unum’s conflict should be given considerable weight.

Turning to the merits, the court held that Unum abused its discretion in determining that Meyer’s disability was "caused by, contributed to by, or resulting from a ‘pre-existing condition’ of atrial fibrillation and hypertension." The court pointed to three reasons why Unum acted arbitrarily:

  • Lambrew’s opinion was inconsistent with independent contemporaneous medical records and other independent evidence.
  • Unum adopted Lambrew’s opinion wholesale without an independent examination.
  • Unum did not reasonably interpret and apply the policy exclusion for pre-existing conditions — which must be construed narrowly. Specifically, Unum acted arbitrarily and capriciously in disregarding the plan’s express definition of "pre-existing condition" and jumping instead to an entirely different question — causation.

The court said Lambrew’s opinion was inconsistent with the medical evidence and criticized his conclusion that relied on a false negative result after the stroke (no visual evidence of an embolus when one was actually present) was "tantamount to a true positive result (an embolus was present, even if evidence is not available)."

What really disturbed the court, though, was Unum’s finding that the exclusion applied because it had concluded that Meyer’s prior conditions caused his stroke. The court found that Unum conflated the pre-existing condition requirement with the policy’s requirement that a medical condition must cause disability. The court determined that Unum could not lawfully treat "risk factors as proxies for pre-existing conditions." By extending the chain of causation, Unum improperly stretched the bounds of a policy limitation that the court said it was obligated to interpret narrowly.

The court added that Unum could not exclude coverage "through a post-disability underwriting process in the claims department. With the benefit of hindsight, insurers may find it cheap and convenient to use risk factors as proxies for pre-existing conditions, especially in cases which involve chronic diseases and high-dollar claims." However, the court categorically refused to accept such a reading of the policy that deems "treatment for a risk factor … treatment for a pre-existing condition."

"Where expert testimony is necessary to establish a causal link, the party bearing the burden of proof may not prevail if the expert evidence consists of testimony expressed only in terms of risk factors or various possibilities," the court added.

This decision covers a number of critical points in evaluating the propriety of an insurer’s invocation of a pre-existing condition limitation: First, the court made it clear that prophylactic treatment of risk factors does not trigger the pre-existing condition limitation if the insured later develops a disabling condition.

Second, a risk factor may not be used as a proxy for a pre-existing condition.

Finally, a direct causal connection is required between a condition and a resulting disability. A chain of causation (as in a proximate cause) is not enough; the exclusion is only properly invoked if the earlier diagnosis or treatment is the proximate cause of the ensuing disability.

Hence, in cases such as Fought v. Unum Life Insurance Company of America, 379 F.3d 997 (10th Cir. 2004), although the plaintiff’s coronary artery disease was pre-existing, her development of a disability due to a post-surgical infection following a bypass graft procedure could not be excluded. Likewise, in Vander Pas v. Unum Life Insurance Company of America, 7 F.Supp.2d 1011, 1018 (E.D. Wis. 1998), the court refused to find that a prescription for a blood thinner was a pre-existing condition when the insured later suffered a disabling stroke.

This case joins other rulings in restricting insurers’ ability to enlarge the scope of pre-existing condition exclusions.