Spencer v. Arkansas Blue Cross & Blue Sheild

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 This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and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properly rescinded Durla’s health insurance coverage.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

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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

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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).

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 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

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