Sandoval v. UNUM Life Insurance ( 2020 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS March 17, 2020
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
BRENDA SANDOVAL,
Plaintiff - Appellant/Cross
Appellee,
v. Nos. 19-1047 & 19-1164
UNUM LIFE INSURANCE
COMPANY OF AMERICA,
a/k/a Unum,
Defendant - Appellee/Cross
Appellant.
_________________________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
( D.C. No. 1:17-CV-00644-WJM-KMT )
______________________________
Joseph M. Gorman, Shakeshaft & Gorman, Colorado Springs, Colorado
(Kenneth J. Shakeshaft with him on the briefs), for Plaintiff-
Appellant/Cross Appellee.
Kenneth F. Rossman, IV, Lewis Roca Rothgerber Christie LLP, Denver,
Colorado (Stephen M. Bressler, Lewis Roca Rothgerber Christie LLP,
Phoenix, Arizona, with him on the briefs), for Defendant-Appellee/Cross
Appellant.
_________________________________
Before TYMKOVICH, Chief Judge, BACHARACH, and CARSON,
Circuit Judges.
_________________________________
BACHARACH, Circuit Judge.
_________________________________
This suit grew out of an insurance policy that protected against
disabilities. The insured (Ms. Brenda Sandoval) submitted a claim to her
insurer, Unum Life Insurance Company of America, which initially paid
benefits but then terminated them. The termination of benefits led Ms.
Sandoval to sue Unum for
 a common-law tort (bad faith breach of insurance contract),
 a statutory tort (unreasonable conduct under Colo. Rev. Stat.
§ 10-3-1115 to 1116), and
 breach of contract.
The district court granted Unum’s motion for partial summary
judgment on the tort claims. The contract claim went to trial, where the
jury rendered a verdict for Ms. Sandoval. The district court later denied
Unum’s motion for judgment as a matter of law. Ms. Sandoval appeals the
grant of Unum’s motion for partial summary judgment, and Unum cross-
appeals the denial of its motion for judgment as a matter of law.
We affirm the award of partial summary judgment on the tort claims
because Unum conducted a reasonable investigation. On the contract claim,
we also affirm the denial of Unum’s motion for judgment as a matter of
law. The policy contained two alternative tests for a disability, and the
evidence permitted a reasonable finding that Ms. Sandoval had satisfied at
least one of these definitions. The district court thus did not err in denying
Unum’s motion for judgment as a matter of law.
2
1. Unum issued a long-term disability policy to Ms. Sandoval.
Under the insurance policy, Ms. Sandoval was entitled to benefits if
she incurred a disability. The policy provided two alternative definitions of
a disability:
1. [Ms. Sandoval is] unable to perform the material and
substantial duties of [her] regular occupation and [is] not
working in [her] regular occupation or any other
occupation
or,
2. [She is] unable to perform one or more of the material and
substantial duties of [her] regular occupation, and [she
has] a 20% or more loss in [her] indexed monthly earnings
while working in [her] regular occupation or in any
occupation.
Appellant’s App’x at 358 (emphasis omitted). But even if she satisfied one
of these definitions, Ms. Sandoval would be considered disabled only if
she remained “under [the] regular care of a physician.” Id.
2. Unum awarded disability benefits but terminated them roughly
three months later.
While working as a training supervisor, Ms. Sandoval had surgery
because of pain in her neck and arm. The surgery temporarily relieved Ms.
Sandoval’s pain, and she returned to work as a training supervisor. But the
pain resumed, and she had a second surgery. The surgeon opined that Ms.
Sandoval could not return to work as a training supervisor because she
could sit only briefly before suffering substantial pain.
3
Ms. Sandoval submitted an insurance claim to Unum, asserting a
disability. Unum awarded disability benefits based on the surgeon’s
opinion, but then asked two physicians to review Ms. Sandoval’s medical
records. Both physicians opined that Ms. Sandoval could return to work,
and Unum terminated the insurance benefits.
Ms. Sandoval requested reconsideration of the claim, relying on a
new statement from her surgeon, a report from a functional capacity
examination, and a vocational assessment. To address the request for
reconsideration, Unum consulted an internist. Like the other two
consulting physicians, the internist opined that Ms. Sandoval could return
to work. So Unum adhered to its initial decision to deny the claim.
3. The district court properly granted partial summary judgment to
Unum on the tort causes of action.
We affirm the district court’s award of summary judgment to Unum
on the causes of action for a common-law tort and a statutory tort.
3.1 We engage in de novo review of the district court’s grant of
partial summary judgment, applying Colorado law as to an
insurer’s duties.
Ms. Sandoval challenges the district court’s grant of summary
judgment to Unum on her tort causes of action. To consider these
challenges, we engage in de novo review, applying the same standard for
summary judgment that applied in district court. See Universal
Underwriters Ins. Co. v. Winton, 818 F.3d 1103, 1105 (10th Cir. 2016).
4
This standard requires us to view the evidence and all reasonable
inferences favorably to Ms. Sandoval. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 255 (1986). Summary judgment is warranted only in the absence
of a “genuine dispute as to any material fact” and the defendants’
entitlement “to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
Ms. Sandoval’s tort causes of action arise under Colorado law, which
requires an insurer to treat an insured with good faith. Am. Family Mut.
Ins. Co. v. Allen, 102 P.3d 333, 342 (Colo. 2004) (en banc). If this duty is
breached, the insurer can incur tort liability. Goodson v. Am. Standard Ins.
Co. of Wis., 89 P.3d 409, 414 (Colo. 2004) (en banc).
To prevail on the cause of action for a common-law tort, Ms.
Sandoval must show that Unum (1) acted unreasonably and (2) knew or
recklessly disregarded the unreasonableness of its conduct. See Travelers
Ins. Co. v. Savio, 706 P.2d 1258, 1275 (Colo. 1985) (en banc). For the
statutory tort, Ms. Sandoval must show that Unum unreasonably delayed or
denied payment of benefits, but need not show knowing or reckless
conduct. Colo. Rev. Stat. § 10-3-1115(1)(a). The denial of benefits was
unreasonable if Unum refused to pay “a covered benefit without a
reasonable basis for that action.” Colo Rev. Stat. § 10-3-1115(2).
5
3.2 Because Unum conducted a reasonable investigation before
denying Ms. Sandoval’s claim, the district court properly
granted partial summary judgment to Unum on the tort
causes of action.
Ms. Sandoval argues that the district court erred in granting summary
judgment to Unum on the tort causes of action because a rational factfinder
could justifiably infer that Unum had acted unreasonably in investigating
the claim. 1 For this argument, Ms. Sandoval points to Unum’s
 disagreement with the opinion of her treating physician, an
orthopedic surgeon who had opined that Ms. Sandoval could
not work as a training supervisor because of chronic pain,
 reliance on the opinions of two consulting physicians who had
disagreed with the assessment of Ms. Sandoval’s treating
physician without conducting their own examinations, and
 reliance on an internist who allegedly lacked qualifications to
assess a disability and disregarded objective data.
Ms. Sandoval also relies on an affidavit by an expert witness, who opined
that Unum’s investigation was unreasonable.
1
Unum argues that the claim was fairly debatable. The existence of a
fairly debatable claim may bear on the reasonableness of the insurer’s
conduct. Etherton v. Owners Ins. Co., 829 F.3d 1209, 1226–27 (10th Cir.
2016) (applying Colorado law). Ms. Sandoval does not question the
existence of a fairly debatable claim. She instead contends that the district
court erroneously treated the existence of a fairly debatable claim as fatal
to her tort causes of action. We disagree with this interpretation of the
district court’s ruling, for the court acknowledged that the existence of a
fairly debatable claim was not “outcome determinative as a matter of law”
or “the beginning and the end of the analysis.” Appellant’s App’x at 485–
86.
6
In her reply brief, Ms. Sandoval contends that her tort causes of
action focus on Unum’s denial of her request for reconsideration. But in
the district court proceedings and in her opening appellate brief, Ms.
Sandoval also challenged Unum’s initial decision to terminate benefits. For
example, Ms. Sandoval alleged in the complaint that Unum had failed to
conduct a reasonable investigation and had used non-examining physicians
to make medical determinations. See Appellant’s App’x at 39. Ms.
Sandoval stuck to this allegation when responding to Unum’s motion for
partial summary judgment, again addressing the reasonableness of the
initial decision to deny the claim. See id. at 380 (arguing that Ms.
Sandoval had “shown [Unum] acted unreasonably by not doing a thorough
investigation, failing to resolve conflicting opinions and violating their
own policies contained in the claims manual”). And in her opening brief on
appeal, Ms. Sandoval again addressed the initial denial of the claim,
invoking expert testimony that “[Unum’s] unreasonable actions [had]
started with its first termination of [Ms. Sandoval’s] disability claim.”
Appellant’s Opening Br. at 16.
Given Ms. Sandoval’s allegations in the complaint and briefing prior
to her reply brief, we consider Unum’s investigation as to both the initial
7
claim and the request for reconsideration. We conclude that the totality of
the investigation was reasonable as a matter of law. 2
Unum’s disagreement with Ms. Sandoval’s surgeon does not suggest
that the investigation was unreasonable. Unum’s claims manual calls for
deference to treating physicians and authorizes Unum to contact treating
physicians if a reason exists to question their opinions. But Unum tried
twice to contact Ms. Sandoval’s surgeon and was rebuffed both times. 3
On top of its efforts to contact the surgeon, Unum obtained written
information from Ms. Sandoval, interviewed her, reviewed her medical
records, and asked an occupational physician to review these records. The
occupational physician conducted this review and opined that Ms. Sandoval
could return to her job as a training supervisor if the job could be
modified.
2
On the cause of action for a common-law tort, Unum argues that Ms.
Sandoval failed to present evidence of intentional or reckless conduct. We
need not address this argument.
3
In her reply brief, Ms. Sandoval argues that after she sought
reconsideration, Unum should have tried again to reach the surgeon. Ms.
Sandoval had not made this argument until her reply brief, which was too
late. See Anderson v. Spirit Aerosystems Holdings, Inc., 827 F.3d 1229,
1236 n.2 (10th Cir. 2016) (holding that addition of an argument in the
reply brief was “too late”). In any event, no factfinder could legitimately
find that Unum acted unreasonably by forgoing a third effort to contact the
surgeon after he had declined two prior requests.
8
The occupational physician also recommended that Unum consult
with another physician. Unum followed that recommendation and consulted
an orthopedic surgeon. He too opined that Ms. Sandoval could work as a
training supervisor, noting that
 her motor strength and cervical motion were normal,
 she had been taking only over-the-counter anti-inflammatories,
and
 she had been using a computer, working as a hairdresser,
driving, and performing household chores.
Unum evaluated all of the available information and denied the disability
claim.
When Ms. Sandoval asked for reconsideration, Unum consulted a
third physician, an internist. The internist reviewed Ms. Sandoval’s
medical records and the report of a functional capacity evaluation, opining
that the information did not support the disability claim because
 Ms. Sandoval had not been using pain medication or other
treatments appropriate for severe, chronic pain,
 the physical examinations had not consistently shown
weakness, atrophy, or sensory loss,
 the x-rays had shown improvement after the surgery, and
 the functional capacity evaluation had not shown full effort on
some tasks.
In discussing the functional capacity evaluation, the internist stated that
the report did not reflect Ms. Sandoval’s heart rates at the start and end of
9
each activity. This omission was considered significant because an
elevation in heart rate could show that Ms. Sandoval was giving her full
effort on each task.
Ms. Sandoval disagrees with the internist’s assessment, pointing to
 the examiner’s conclusion that Ms. Sandoval had exerted “full
effort” and
 the report’s reference to the starting and ending heart rates for
two of the tasks (isoinertial lift and carrying).
See Appellant’s App’x at 192. But Unum could also reasonably rely on the
internist’s assessment. The functional capacity report didn’t reflect the
starting and ending heart rates for most of the tasks, and the internist could
reasonably conclude that the heart rates would reflect the level of Ms.
Sandoval’s effort.
Ms. Sandoval also challenges the internist’s analysis of one of the
tests (the Purdue Pegboard Test) used to evaluate functional capacity. This
test measured Ms. Sandoval’s ability to use her hands in a coordinated and
efficient manner. Ms. Sandoval’s scores for this test fell below the first
percentile for each hand, for both hands together, and for a task requiring
assembly. In assessing these scores, the internist observed that Ms.
Sandoval’s medical records “d[id] not reflect pathology of the hands or
upper extremities that would explain these severely limited percentages.”
Id. at 251.
Challenging this observation, Ms. Sandoval argues that
10
 the functional capacity report reflects successful completion of
the Purdue Pegboard Test and
 her successful completion of the test shows the validity of the
poor results on the four listed tasks.
Ms. Sandoval did not make this argument in district court or urge plain
error review, so we consider the new argument waived. See McKissick v.
Yuen, 618 F.3d 1177, 1189 (10th Cir. 2010) (holding that an appellant’s
failure to explain “ how [arguments] survive the plain error standard waives
the arguments in this court” (emphasis omitted)).
Even if Ms. Sandoval had not waived this argument, we would have
rejected it. Industry standards supply the guidepost to assess the
reasonableness of the insurer’s conduct. Goodson v. Am. Standard Ins. Co.
of Wis., 89 P.3d 409, 415 (Colo. 2004) (en banc); see p. 12, below. And
Ms. Sandoval didn’t present evidence that the internist had failed to satisfy
industry standards. Given the lack of such evidence, Unum could
reasonably rely on the internist’s assessment of the results of the Purdue
Pegboard Test.
Ms. Sandoval also criticizes the internist’s disregard of the
vocational evaluation, which was based on the opinions of Ms. Sandoval’s
surgeon. But as discussed above, two consulting physicians had already
considered the surgeon’s opinions and reported to Unum that Ms. Sandoval
could return to work. Given these reports, Unum could reasonably conclude
11
that the vocational evaluation did not warrant reconsideration of the
disability claim.
Ms. Sandoval not only alleges the internist’s disregard of evidence
but also questions his qualifications to assess an alleged disability. As Ms.
Sandoval points out, the internist was neither a surgeon nor an expert in
pain management. But the internist’s lack of expertise in surgery or pain
management does not render his opinions meaningless. The internist
explained that he had seen many patients who had undergone surgeries like
Ms. Sandoval’s and studied with a physician who was well known for
treating chronic pain. Given this explanation, Unum could reasonably rely
on the internist’s opinions.
Finally, Ms. Sandoval relies on an affidavit by her expert witness.
The expert witness
 stated that Unum had unreasonably relied on the opinions of
physicians who had not conducted their own examinations and
 challenged Unum’s reliance on Ms. Sandoval’s decision to
forgo narcotic medications and her score of 5/5 on measures of
strength during clinical examinations.
These arguments are not persuasive. The reasonableness of an insurer’s
investigation is measured by industry standards. Goodson v. Am. Standard
Ins. Co. of Wis., 89 P.3d 409, 415 (Colo. 2004) (en banc); see p. 11, above.
But the expert witness did not identify any industry standards requiring
Unum’s consulting physicians to examine Ms. Sandoval before opining
12
about her ability to work. The expert witness’s opinions thus do not create
material factual issues on the causes of action for common-law and
statutory torts. See Zolman v. Pinnacol Assurance, 261 P.3d 490, 500
(Colo. App. 2011) (“[The expert’s] affidavit and report simply state his
conclusory opinions that [the insurer] acted in bad faith without
establishing any genuine issue of material fact.”).
The expert witness’s discussion of Ms. Sandoval’s avoidance of
narcotic medications and her strength score of 5/5 does not suggest that
Unum acted unreasonably. Unum consulted an internist, who noted the
existence of many alternative treatments for pain, such as “ongoing or
consistent treatment with physical therapy, occupational therapy,
acupuncture, biofeedback, cognitive behavioral therapy, or aqua therapy
(all commonly used minimally invasive pain relief techniques), . . .
injection treatments, . . . [or] a spinal cord stimulator.” Appellant’s App’x
at 245. The internist saw no indication that Ms. Sandoval had tried any of
these alternative treatments. Id. Given the apparent failure to try any
alternative treatments, Unum could reasonably conclude that Ms. Sandoval
was not disabled despite the expert witness’s opinion to the contrary.
* * *
Because Unum reasonably investigated Ms. Sandoval’s claim, the
district court properly granted partial summary judgment to Unum on the
tort causes of action.
13
4. Because the jury could reasonably find that Ms. Sandoval was
disabled, the district court properly denied Unum’s motion for
judgment as a matter of law on the cause of action for breach of
contract.
In cross-appealing, Unum challenges the district court’s denial of its
motion for judgment as a matter of law on Ms. Sandoval’s cause of action
for breach of contract.
Our review is de novo. See Bill Barrett Corp. v. YMC Royalty Co.,
918 F.3d 760, 766 (10th Cir. 2019) (per curiam). In engaging in de novo
review, we consider judgment as a matter of law to be appropriate “only if
the evidence points but one way and is susceptible to no reasonable
inferences which may support the nonmoving party’s position.” In re Cox
Enters., Inc., 871 F.3d 1093, 1096 (10th Cir. 2017) (quoting Auraria
Student Hous. at the Regency, LLC v. Campus Vill. Apartments, 843 F.3d
1225, 1247 (10th Cir. 2016)).
Unum argues that Ms. Sandoval was not disabled under the policy’s
first definition of a disability: “[She is] unable to perform the material and
substantial duties of [her] regular occupation and [she is] not working in
[her] regular occupation or any other occupation . . . .” Appellant’s App’x
at 358 (emphasis omitted); see Part 1, above. Unum maintains that even
after Ms. Sandoval stopped working as a training supervisor, she continued
to work as a cosmetologist, which qualified as “any other occupation”
under the policy.
14
We need not address Unum’s arguments about the first definition of a
disability. In denying Unum’s motion, the district court also concluded that
Ms. Sandoval was disabled under the second definition: “[She is] unable to
perform one or more of the material and substantial duties of [her] regular
occupation, and [she has] a 20% or more loss in [her] indexed monthly
earnings while working in [her] regular occupation or in any occupation.”
Appellant’s App’x at 358 (emphasis omitted); see Part 1, above.
In its opening brief on the cross-appeal, Unum does not argue that
the district court erred in concluding that Ms. Sandoval was disabled under
the second definition. Unum has thus waived its right to appeal the district
court’s ruling on that ground. See Rivero v. Bd. of Regents, ___ F.3d ___,
No. 18–2158, slip op. at 16 (10th Cir. Feb. 24, 2020) (“If the district court
states multiple alternative grounds for its ruling and the appellant does not
challenge all these grounds in the opening brief, then we may affirm the
ruling.”). 4
Even if Unum had not waived its right to appeal this ruling, Unum
has not shown an error. The jury could reasonably conclude that Ms.
4
Unum does raise this argument in the reply brief, but this was too
late. See Anderson v. Spirit Aerosystems Holdings, Inc., 827 F.3d 1229,
1236 n.2 (10th Cir. 2016) (holding that addition of an argument in the
reply brief was “too late”).
15
Sandoval had satisfied the second definition of a “disability” because her
earnings dipped by more than the 20% benchmark in the policy.
The jury could also reasonably find that Ms. Sandoval had remained
“under the regular care of a physician,” which was required for benefits.
Appellant’s App’x at 358. The policy states that “regular care” requires the
insured to
 personally visit a physician as frequently as is medically
required according to generally accepted medical
standards, to effectively manage and treat [her] disabling
condition(s) and
 [receive] the most appropriate treatment and care which
conforms with generally accepted medical standards, for
[her] disabling condition(s) by a physician whose specialty
or experience is the most appropriate for [her] disabling
condition(s), according to generally accepted medical
standards.
Id. at 359.
Unum argues that Ms. Sandoval was not “under the regular care of a
physician” because she stopped seeing her surgeon about a year after her
second surgery. But the jury could reject this argument based on the policy
language and the surgeon’s testimony. The policy states that “regular care”
involves seeing a physician “as frequently as is medically required” for
“the most appropriate treatment and care which conforms with generally
accepted medical standards.” Id. And the surgeon testified that he hadn’t
discharged Ms. Sandoval as a patient, so she could return whenever
needed. Appellee’s Supp. App’x at 206.
16
Given this policy language and testimony, the jury could reasonably
find that Ms. Sandoval had remained under the surgeon’s “regular care.”
See Heller v. Equitable Life Assur. Soc’y of U.S., 833 F.2d 1253, 1257 (7th
Cir. 1987) (concluding that the policy term “under the regular care and
attendance of a physician” means “that the insured is obligated to
periodically consult and be examined by his or her treating physician at
intervals to be determined by the physician”); Cont’l Cas. Co v. Pfeifer,
229 A.2d 422, 426 (Md. 1967) (holding that the evidence supported a
jury’s finding that an insured was under “the regular care and attendance
of a physician” when doctors concluded that the insured’s symptoms “were
unchanged and were unlikely to change”).
5. Conclusion
We affirm the district court’s rulings
 granting Unum’s motion for partial summary judgment on Ms.
Sandoval’s causes of action for common-law and statutory torts
and
 denying Unum’s motion for judgment as a matter of law on Ms.
Sandoval’s cause of action for breach of contract.
17