Undiagnosed illness not a preexisting condition.

Insurers may not deny coverage of treatment for symptoms of an undiagnosed illness by using preexisting-condition exclusions, the Third Circuit has ruled. The three-judge panel reversed a district court's grant of summary judgment to an insurer that denied long-term disability benefits to a woman diagnosed with multiple sclerosis (MS) after the effective date of her policy. (McLeod v. Hartford Life & Accident Ins. Co., No. 03-1744, 2004 WL 1385876 (3d Cir. June 22, 2004).)

"The decision is significant because it opens the door to more claimants who were previously denied benefits on the basis of what we argued is a vague and overly broad exclusion for preexisting conditions," said Barry Gross of Newtown, Pennsylvania, who represented the plaintiff. "The exclusion dealt with not just the preexisting condition, but also symptoms or manifestations, or treatment for manifestations, of the disabling condition."

Shirley McLeod enrolled in a health insurance plan provided by a new employer and administered by Hartford Life and Accident Insurance Co. The policy included a provision that denied benefits for preexisting conditions treated during the 90 days before the effective date of coverage.

During this so-called lookback period, McLeod consulted with her regular physician because she experienced numbness in her left arm. The doctor had previously treated her for cardiac insufficiency and for multiple bulging cervical discs.

McLeod continued to seek treatment from her physician and two neurologists for the numbness in her arm; tour months after her policy took effect, she was diagnosed with MS. Several physicians, including her own and one hired by Hartford, attributed her original symptoms to MS.

Hartford approved her claim for short-term disability benefits but later denied her application for long-term benefits. It concluded that her MS was a preexisting condition because she had received medical care for symptoms of the disability during the lookback period.

After she made two unsuccessful internal appeals, McLeod filed a complaint in district court. It granted Hartford's motion for summary judgment, McLeod appealed, and the Third Circuit reversed.

"[D]espite language in the benefit plan aimed to cast a broad net as to what constitutes receiving medical care for a 'preexisting condition,' McLeod did not receive treatment 'for' such a preexisting condition prior to her effective date of coverage because neither she nor her physicians either knew or suspected that the symptoms she was experiencing were in any way connected with MS," Judge Edward Becker wrote for the court.

The decision was based on Lawson ex rel. Lawson v. Fortis Insurance Co., an individual disability-policy case, which expressly ruled that a vague and ambiguous provision will be interpreted against the insurance company. (301 F.3d 159 (3d Cir. 2002).) Gross said the court's reliance on Lawson is significant because it extended that decision's reasoning and holding to a case governed by the Employee Retirement Income Security Act (ERISA).

The McLeod court also cited Pinto v. Reliance Standard Life Ins. Co. The Pinto decision held that courts should apply a heightened form of the "arbitrary and capricious" standard when reviewing a denial of benefits under an ERISA plan by an insurer that both determines eligibility for benefits and pays the benefits out of its own funds. (214 F.3d 377 (3d Cir. 2000).) The Third Circuit determined that such a heightened review applied to Hartford.

"The insurer was given the exclusive authority to decide who was eligible to receive benefits, and Hartford was also responsible for paying those benefits," said Gross. "That creates a conflict under ERISA, because ERISA was meant to protect the rights of employees and participants in employer benefit plans."

The heightened standard of review triggered by the conflict of interest makes it more difficult for the insurance company to justify its decision to deny benefits, Gross said.

Becker wrote, "Hartford would have us hold that receiving medical care 'for symptoms' of a preexisting condition encompasses receiving care for symptoms that no one even suspected were connected with the later-diagnosed ailment but which were later deemed not inconsistent with it, but a heightened standard of review will not countenance such a strained interpretation.

"In a case of heightened review, where the plan administrator is not afforded complete, freewheeling discretion," Necker continued, "we must be especially mindful to ensure that the administrator's interpretation of policy language does not unfairly disadvantage the policyholder."

Hartford has filed for reargument, Gross said.