Spencer v. Arkansas Blue Cross & Blue Sheild , 205 F. App'x 652 ( 2006 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
October 11, 2006
FO R TH E TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
RONALD J. SPENCER, Husband;
DURLA C. SPENCER, W ife,
Plaintiffs-Appellants,
No. 05-5214
v. (D.C. No. 04-CV-360-C)
(N.D. Okla.)
A RK A N SA S B LU E C RO SS A ND
BLUE SH IELD, a M utual Insurance
Company,
Defendant-Appellee.
OR D ER AND JUDGM ENT *
Before O’BRIEN, PO RFILIO, and ANDERSON, Circuit Judges.
In this appeal, Ronald and Durla Spencer challenge the district court’s
judgment dismissing their breach of contract claim and determining, based on the
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. The court generally disfavors the citation of orders and
judgments; nevertheless, an order and judgment may be cited under the terms and
conditions of 10th Cir. R. 36.3.
administrative record, that Arkansas Blue Cross and Blue Shield (Blue Cross)
properly rescinded Durla’s health insurance coverage. W e affirm.
B ACKGROUND
Blue C ross issued a small group health plan to Ronald’s employer, Aire
Tech Corporation. Ronald requested coverage for himself and Durla on a Blue
Cross form. The form’s medical questionnaire section sought information as to
whether “any person to be insured [has] ever had or been advised to have
treatment, diagnosis or care for,” among other things, high blood pressure,
arthritis, back pain, and sinus disorders. A plt. App. at 23. A warning above this
inquiry read: “FA ILU RE TO REVEAL ALL M EDICAL INFORM ATION
W HETHER INTENTIONAL OR UNINTENTIONAL M AY RESULT IN
TERM INATION OR RESCISSION OF COVERAGE.” Id. The form also elicited
prescription information for “any person to be insured.” Id. at 24. In the form’s
signature section, the applicant was warned that “[t]his application may be
rejected if it is incomplete” and that “any material misrepresentation, omission or
fraudulent statement, may result in cancellation of any coverage issued in reliance
thereon.” Id. Nevertheless, when Ronald completed the form, he did not reveal
anything about Durla’s medical history, although she suffered from high blood
pressure, arthritis, recurrent back pain, and chronic sinusitis, and had been
prescribed medication for these conditions. Blue Cross eventually discovered
Durla’s medical history and rescinded her coverage, stating that her omitted
-2-
history was “important to [Blue Cross’s] underwriting department in making a
determination of risk assessment and rates for [Aire Tech’s employee] group.”
Id. at 38.
Ronald unsuccessfully appealed the rescission to Blue Cross’s appeals
coordinator. He and Durla then filed suit in federal court, apparently asserting a
breach of contract claim somehow premised on the Health Insurance Portability
and Accountability Act (HIPPA ). Blue Cross moved to dismiss and for judgment
on the administrative record. The Spencers opposed the motion and sought
discovery outside the administrative record to obtain Blue Cross’s “underwriting
practices, procedures, and policies in general and its underwriting methodologies
and calculations in this case in particular.” Aplee. Supp. App. at 449.
The district court denied the Spencers’ motion and entered judgment for
B lue C ross, ruling that the Employee Retirement Income Security Act (ERISA)
preempts state breach-of-contract claims, that Blue Cross, as the plan
administrator, had discretionary authority to make claims determinations, that the
Spencers received sufficient notice of the rescission of coverage, and that
substantial evidence supported rescission.
On appeal, the Spencers argue that (1) there was no evidence that the
omission of Durla’s medical history materially affected Blue Cross’s premium
calculations and underwriting determinations; (2) Blue Cross provided inadequate
notice of the reasons for rescinding coverage; (3) a breach of contract claim could
-3-
be maintained to enforce HIPPA; (4) the omission of Durla’s medical history did
not justify the loss of coverage; and (5) discovery was improperly denied.
D ISCUSSION
W here, as here, an ERISA plan grants a plan administrator “discretion in
interpreting the terms of, and determining the grant of benefits under, the plan,
we are required to uphold the decision” unless it is arbitrary and capricious.
Adam son v. U num Life Ins. C o. of Am., 455 F.3d 1209, 1212 (10th Cir. 2006). 1
Under such circumstances, review is limited to the materials compiled in the
administrative record. DeGrado v. Jefferson Pilot Fin. Ins. Co., 451 F.3d 1161,
1169 (10th Cir. 2006). And “if after judicial review, it appears the administrator
. . . was correct in its decision, the court will uphold that decision even in light
of” inadequate notice denying coverage. Hickman v. GEM Ins. Co., 299 F.3d
1208, 1215 (10th Cir. 2002). Finally, a district court’s decision regarding ERISA
preemption is subject to de novo review. Allison v. Unum Life Ins. Co. of Am.,
381 F.3d 1015, 1025 (10th Cir. 2004).
1
The fact that Blue Cross served as both plan administrator and insurer does
not necessarily warrant less deference to the administrative decision. See
Adamson, 455 F.3d at 1213 (stating that matters such as the insurer’s solvency
and the nature or size of the medical claims should be considered before
presuming bias from an insurer’s dual roles).
-4-
After reviewing the record and the parties’ arguments, we AFFIRM the
district court’s judgment for substantially the same reasons stated therein.
Entered for the Court
John C. Porfilio
Circuit Judge
-5-