An insurance carrier did not abuse its discretion by attributing the death of an ERISA plan participant in a car crash to a pre-existing condition and denying his widow’s claim for accidental death benefits, the 1st U.S. Circuit Court of Appeals has ruled.
Decedent Joseph Arruda suffered from heart disease, cardiac arrhythmia, and a number of other related conditions. Recently treated for a cardiac episode, he was driving to a work event when his car crossed the median, leading to a fatal crash.
Relying on independent medical reviews, an autopsy report, and a crash investigation report theorizing that Arruda’s underlying conditions contributed to the accident, defendant Zurich American Insurance Co. ruled that the death was not accidental “independent of all other causes” and thus not covered by the accident policy.
Finding Zurich’s denial to be based on “conclusory and speculative” evidence, a U.S. District Court judge ruled that the insurer abused its discretion in denying the claim.
But the 1st Circuit reversed.
“The descriptions in the record before Zurich of the causes that contributed to Mr. Arruda’s death were all consistent that his crash was caused, at least in part, or was contributed to by his pre-existing medical conditions,” Judge Sandra L. Lynch wrote for the court. “Zurich’s conclusion is not undermined because [the plaintiff’s medical expert’s] opinion differed.”
The 43-page decision is Arruda v. Zurich American Insurance Company.
Boston attorney Mala M. Rafik, who represented the plaintiff, declined to comment on the record, as did one of Zurich’s attorneys, Allen N. David of Boston.
But Stephen Rosenberg, a Boston attorney who represents plan administrators, described the decision as a “standard application” of the arbitrary-and-capricious standard.
“The ruling paid homage to the idea that while there’s a lot of leeway for insurers and administrators, [the standard] is supposed to have some ‘bite’ in it as opposed to rubber-stamping whatever the insurer finds,” he said. “This is a good example of courts actually looking under the hood of an administrator’s decision and closely studying the medical evidence to decide whether it supports it, as opposed to doing a more superficial review.”
Johanna L. Matloff of Boston, who also represents ERISA plans, said the decision underscores that the arbitrary-and-capricious standard is very difficult for claimants to overcome, as it gives administrators the right to make a judgment call.
“The decision does not necessarily have to be the correct one at the end of the day,” she said. “It just has to be reasonably supported by substantial evidence, and the plan administrator can rely on one of two competing expert opinions, as long as the opinion is well-reasoned.”
“By asserting that a ‘tension’ exists between the substantial factor test and the abuse of discretion standard of review, the court has taken the bite out of the requirement that plan administrators’ decisions are supported by substantial evidence.”
— Marshal L. Garbus, ERISA lawyer
However, Mark B. Morse of Providence, who represents claimants, called the ruling a “strong indicator that the 1st Circuit defers to an administrator’s decision to the extreme.”
Morse also pointed out that not all plans have language specifically excluding underlying conditions from the payment of benefits, which means that plaintiffs’ attorneys seeking to challenge an administrator’s decision in the 1st Circuit will need to scrutinize plan language carefully and try to “get as far away as possible” from an abuse-of-discretion standard of review.
Marshal L. Garbus, an ERISA lawyer in North Kingstown, Rhode Island, said it was noteworthy that the 1st Circuit departed from other circuits that evaluate a benefits denial under a less deferential “substantial factor” test. That test requires that the pre-existing condition substantially contribute to a loss in order to be considered a cause.
“By asserting that a ‘tension’ exists between the substantial factor test and the abuse of discretion standard of review, the court has taken the bite out of the requirement that plan administrators’ decisions are supported by substantial evidence,” Garbus said.
Boston attorney Jonathan M. Feigenbaum, who represents ERISA claimants, said the decision would not alter the way plaintiffs’ lawyers like himself approach such cases.
“It has been and continues to be an uphill battle for plan beneficiaries, despite the fact that ERISA was passed to protect employee benefits and not to make it easy for insurance companies to deny claims to worthy plan beneficiaries,” Feigenbaum said.
On May 22, 2014, Arruda was driving to a work event when his car crossed the median into oncoming traffic and struck another car before hitting a curb, flipping over multiple times, and landing upright on the opposite side of the road.
CPR attempts were unsuccessful and Arruda was pronounced dead at the scene. The medical examiner’s report listed his cause of death as hypertensive heart disease, as did his death certificate.
Arruda’s medical records apparently described him as obese and sedentary while cataloguing more than two dozen other medical conditions in the decade leading up to his death. Additionally, four months before his death, a defibrillator was implanted in him after he passed out at home from a cardiac incident.
Through his employer, Arruda had an accident policy with Zurich that defined a covered injury as one “caused by accidental means which is independent of all other causes.”
The policy contained an exclusion for a loss “caused by, contributed to, or result[ing] from … illness or disease, regardless of how contracted.”
Plaintiff Denise Arruda, the decedent’s widow and beneficiary, filed for accidental death benefits. In response, Zurich collected medical records, witness statements, medical examiner reports, and independent medical review reports.
Zurich subsequently denied coverage, concluding that pre-existing conditions contributed to Arruda’s death. Zurich further found marijuana to be a contributing factor based on a blood toxicology report that found THC in his system.
The plaintiff appealed, providing as evidence a log book from the manufacturer of her husband’s defibrillator, which showed no evidence of a cardiac episode on the morning of the accident.
She also provided evidence from a witness who saw Arruda breathing immediately after the crash and from a pathologist who determined Arruda bled profusely from his injuries.
The plaintiff further provided an independent medical review from pathologist Elizabeth Laposata, who concluded that Arruda did not experience a “natural death at the wheel” with a resulting collision and criticized the medical examiner’s conclusions.
Meanwhile, Zurich’s appeals committee obtained a medical opinion from its own forensic pathologist, Mark Taff, who theorized that Arruda’s multiple pre-existing illnesses caused him to lose control of his car and crash and, in May 2017, affirmed the denial.
The plaintiff filed suit in U.S. District Court in Boston where Judge Douglas P. Woodlock found the denial to be an abuse of discretion, citing the lack of any evidence beyond Arruda’s history of heart disease to show that an underlying condition actually contributed to his death.
The insurer appealed.
The 1st Circuit found that Zurich did not, in fact, make an arbitrary and capricious decision. In so ruling, it rejected the plaintiff’s argument that Laposata’s differing opinion undermined Zurich’s conclusion.
“The thrust of Dr. Laposata’s second report was her assertion that it was impossible to tell with ‘a reasonable degree of medical certainty’ that Mr. Arruda’s pre-existing pathologies contributed to his having the accident which resulted in his death,” Lynch said. “But Zurich could reasonably rely on Dr. Taff’s opinion ‘to a reasonable degree of forensic medical certainty’ that that is exactly what happened.”
That is because Taff reached a “firm conclusion” based on his strong familiarity with the facts of the case and his medical expertise, the judge continued.
Accordingly, the court concluded, “Zurich’s determination that Mr. Arruda’s death was caused or contributed to by pre-existing medical conditions was supported by substantial evidence.”
Judge Kermit V. Lipez dissented.
“In sum, the record lacks substantial medical evidence that bridges the gap between Mr. Arruda’s pre-existing conditions, which he had been living with for years, and the cause of the fatal car accident,” Lipez wrote. “Without more, Zurich’s decision amounts to a denial of benefits based on the mere existence of Mr. Arruda’s pre-existing conditions. But it is not enough to reason that an indisputably sick man must have had the fatal car accident because of his sickness.”