Date: 01-16-2007

Case Style: Metropolitan Life Insurance Company v. Russell D. Conger

Case Number: 06-5009

Judge: Karen Nelson Moore

Court: United States Court of Appeals for the Sixth Circuit on appeal from the Western District of Kentucky, Jefferson County

Plaintiff's Attorney:

William D. Pandolph, SULLOWAY & HOLLIS, P.L.L.C., Concord, New Hampshire, for Appellee.

Defendant's Attorney:

Lee E. Sitlinger, SITLINGER, McGLINCY, THEILER & KAREM, Louisville, Kentucky, for Appellant.

Description:

In 2002, Plaintiff Russell D. Conger filled out an on-line application and purchased a long-term care insurance policy under the Federal Long-Term Care Insurance Program ("FLTCIP"). When he sought to collect benefits, Metropolitan Life Insurance Company ("MetLife") refused to pay, voided the policy, and then sued for rescission and declaratory relief. Because we conclude that MetLife abused its discretion by voiding the policy and that Conger had no independent duty to disclose information that MetLife neglected to request, we REVERSE the district court's judgment and REMAND the case with instructions to dismiss MetLife's complaint.

I. BACKGROUND

A. Statutory Background

In 2000, Congress passed the Long-Term Care Security Act ("LTCSA" or "the Act"), 5 U.S.C. §§ 9001-09, to ensure that long-term care insurance would be available to federal employees. "Long term care is chronic care that an individual may need for the rest of his or her entire life." Gunson v. James, 364 F. Supp. 2d 455, 458 (D.N.J. 2005). By passing the LTCSA, Congress intended to create "affordable options for dealing with the catastrophic expenses of nursing home care, home care, assisted living, and other forms of long-term care services." S. Rep. No. 106- 344, 2000 WL 970179 at 18, quoted in Gunson, 364 F. Supp. 2d at 458.

The Act gave the Office of Personnel Management ("OPM") the responsibility to enter into group contracts (known as "master contracts") with qualified insurance carriers, and thereby establish and administer a program through which federal employees could obtain long-term care insurance. 5 U.S.C.§§ 9002(a), 9003(a). The result was the FLTCIP. Gunson, 364 F. Supp. 2d at 457-58.

Under the FLTCIP, the federal government does not pay for insurance, nor does it guarantee the availability of long-term care insurance to its employees. Id. at 458. Instead, the LTCSA merely "establishes minimal underwriting standards for master contracts, and delegates the establishment of further underwriting requirements to the qualified carriers and OPM." Id. (citing 5 U.S.C. § 9002(e)). Ultimately, the carrier determines which employees are eligible for insurance under the program and makes this determination based on the guidelines negotiated with OPM. Id.

B. Factual Background

1. Conger's Long-Term Care Insurance Application and Claim

On July 11, 2002, Conger, who was a 54-year-old employee of the National Weather Service at the time, applied for insurance under the FLTCIP by completing an online application. The application contained a series of questions necessary for a five-year coverage period, and a separate set of questions required of applicants seeking an unlimited coverage period. Question 5 in the latter group asked, "Within the last 10 years, have you had, been diagnosed with or been treated for any of the following conditions?" The conditions listed included:

* Diabetes (excluding gestational diabetes);

* Disorder of the Brain (e.g. tremor, seizure disorder, head injury, tumor, infection), Neuropathy, Syncope, Paralysis, any Chronic or Progressive Neurological Disorder;

* Memory Loss; and

Muscle Disorder (e.g., fibromyalgia, polymyalgia rheumatica, chronic fatigue syndrome).

Conger responded "NO" to each of the conditions listed under Question 5. Joint Appendix ("J.A.") at 67.

On July 20, 2002, Long Term Care Partners ("LTCP") sent Conger a letter approving his application, and indicating that the policy would be effective October 1, 2002. LTCP is a joint venture formed by John Hancock Life Insurance Company and MetLife for the sole purpose of providing and administering long-term care insurance under the FLTCIP. Gunson, 364 F. Supp. 2d at 458-59. Each person enrolled for coverage under the FLTCIP receives insurance from one of the two companies. Conger received his coverage from MetLife, but LTCP administered the policy.

With the letter, LTCP enclosed a schedule of benefits and a benefit booklet. The benefit booklet's first page of text states:

NOTICES: PLEASE READ CAREFULLY!

Important: Our decision to issue coverage was based upon your responses to the questions on your application. . . . We may deny benefits or rescind your insurance coverage if your answers are incorrect or untrue for any reason.

J.A. at 73, 187. A later provision of the benefit booklet states that the insurer "ha[s] discretion to interpret the terms, conditions and provisions of the Group Policy, this Benefit Booklet and your Schedule of Benefits." J.A. at 92, 218.

In April 2003, Conger retired from the National Weather Service after over thirty years of service. On August 29, 2003, he submitted a claim to LTCP for long-term care benefits stemming from difficulties with mobility and balance.

2. LTCP's Investigation of Conger's Past Medical History

LTCP initiated an investigation of Conger's prior medical history. It discovered that Conger had experienced difficulties with his balance for at least five years and had sought medical attention for this problem. More specifically, LTCP learned that on September 4, 1998, Conger sent a letter to Dr. Prospero Ishkanian stating,

I still have the balance problem and have to hold on to anything I can grab to move about. If I don't hold onto something I feel like I will lose my balance completely.

....

I have noticed that for the past 6 months to 1 year that my walking becomes more difficult after 6 hours on shift and gets progressively worse and by the time I work my entire shift my walking becomes very bad and seems to be related to poor balance.

J.A. at 134.

These difficulties led Conger to seek medical help from a number of different doctors over the following four years. For instance, Conger made several visits to Dr. John R. Morris (an ear, nose, and throat specialist) in late 1998 and early 1999, apparently to determine whether sinus problems caused his unsteadiness. In December 1998, a doctor's note after an MRI reported that Conger was suffering from "[e]xtensive sinusitis," but also noted that Conger's "[b]rain demonstrate[d] no significant abnormality, essentially normal for patient's age. Specifically, I see no cerebellar abnormality." J.A. at 138.

Shortly thereafter, Conger began seeing a group of neurologists, including Drs. Robert S. Tillett and Walter G. McFarland. On April 20, 1999, one of the doctors sent a letter to Morris reporting the results of a muscle biopsy. In this letter, the neurologist noted that the "right quadricep muscle biopsy material [was] consistent with inactive mild neuropathic muscle changes" and that "[t]here was note of Type II myofiber grouping implying a neurogenic process." J.A. at 141. MRIs performed in 1999 did not produce any clear diagnoses, but the radiologists indicated that Conger had degenerative spinal disc changes, J.A. at 142, and sinus opacification, J.A. at 143. The notes from Conger's November 23, 1999 MRI indicate a "[n]egative MRI of the brain." Id.

Conger continued visiting Tillett. In his notes after a follow-up visit in April 2000, Tillett indicated that Conger had "a gradually progressive ataxia" and that his "symptoms [we]re gradually getting worse." J.A. at 144. However, Tillett also labeled Conger's condition "very puzzling," noted that Conger's two brain MRIs were "normal," and refrained from any diagnosis. Id. He stated his impression that "Mr. Conger has a syndrome with spastic paraparesis with possibly some mild sensory changes . . . and maybe some mild cognitive impairment. . . . He does not have any obvious underlying systemic illness." Id. Similarly, after seeing Conger in November 2002, Tillett's impression was that "Mr. Conger has a central process involving sensory pathways, corticospinal tract pathways - basically diffuse bilateral dysfunction. He is not ataxic in the cerebellar sense. His imbalance is more of a nonspecific coordination dysfunction that I think reflects his position loss as well as mild corticospinal tract dysfunction." Id. at 152. Tillett ordered a third MRI, which again revealed no abnormalities.

3. LTCP's Rejection of Conger's Claim

On September 25, 2003, LTCP sent Conger a letter rescinding his policy for unlimited benefits, but leaving in force his policy for a five-year benefit period. The letter stated that Conger's medical records revealed "a medical history of Diabetes Mellitus type 2, . . . progressive ataxia, cognitive impairment and a syndrome with spastic paraparesis." J.A. at 179. LTCP concluded that Conger incorrectly had answered Question 5 on his application for insurance by stating that he did not have diabetes, a brain disorder, memory loss, or a muscle disorder.

On September 29, 2003, Conger requested a review of LTCP's denial of unlimited benefits, emphasizing that his three MRIs were normal and that his doctors indicated that ataxia was only a symptom, not a diagnosis. In response, LTCP undertook an internal review. On November 5, 2003, Mary Lou Asbell of LTCP faxed a request for review to Dr. Carolyn Jackson, a physician working for MetLife. Two days later, Jackson sent a letter stating that she had reviewed the records and in her opinion, "the medical records, dating from 9/4/98 through 3/18/03, clearly document a progressive neurological disorder." J.A. at 181. Jackson further noted that "[s]ymptoms consistent with of [sic] a progressive neurological disorder that have resulted in significant neurological deficits and/or impairment are a reason for declin[ing an application for insurance] whether or not an actual diagnosis is given." J.A. at 182. Jackson's letter did not discuss whether the medical records revealed a history of diabetes, memory loss, or muscle disorder, nor did it address the multiple MRIs that revealed no abnormalities.

The same day it received Jackson's letter, LTCP sent a letter to Conger confirming its decision to rescind his unlimited long-term care coverage, basing its decision solely on Conger's symptoms consistent with a progressive neurological disorder and omitting any reference to diabetes, ataxia, cognitive impairment, or spastic paraparesis. This letter further told Conger that the decision was final and that no further review was available.1

C. Procedural Background

On September 29, 2004, MetLife filed a complaint in the U.S. District Court for the Western District of Kentucky seeking (1) rescission and (2) a declaratory judgment that either the contract for unlimited benefits was void ab initio or that MetLife was entitled to rescind the contract. MetLife filed an Amended Complaint seeking the same relief on November 1, 2004. Substantively, MetLife's Amended Complaint pleads two claims. The first claim, for rescission, is based solely on Conger's response to Question 5. The second claim, for declaratory relief, is based on "the defendant's concealment and/or failure to disclose material facts regarding his medical condition." J.A. at 23-24 (First Am. Compl. at 7-8).

On April 29, 2005, MetLife moved for judgment on the administrative record, and the district court granted MetLife's motion on October 12, 2005. Metro. Life Ins. Co. v. Conger, 396 F. Supp. 2d 777 (W.D. Ky. 2005). In its opinion, the district court concluded that MetLife had abused its discretion by concluding that Conger answered Question 5 incorrectly because the record did not show that Conger had a progressive neurological disorder. Id. at 781-82. However, the district court concluded that Conger materially misrepresented his condition by failing to discuss "his symptoms and overall health condition," which "would affect the risk undertaken by a long-term care insurance provider." Id. at 782. Accordingly, the district court concluded that MetLife's decision to rescind the unlimited benefits portion of the policy was justified. Id. Conger now appeals.

* * *

Outcome: For the reasons explained above, we hold that (1) MetLife abused its discretion by steadfastly adhering to its decision to rescind Conger’s long-term care coverage while ignoring, without explanation, significant evidence contrary to its conclusion that Conger had a progressive neurological disorder when he applied for coverage; and (2) Conger had no independent duty to disclose information not requested by MetLife. Accordingly, we REVERSE the district court’s judgment on the pleadings. We note that our first holding forecloses MetLife’s claim for rescission, and our second holding forecloses its claim for declaratory judgment, so we REMAND with instructions to dismiss MetLife’s complaint.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None