Palmer v. Metropolitan Life Insurance Co

FILED
United States Court of Appeals
Tenth Circuit

March 16, 2011
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
FOR THE TENTH CIRCUIT

MICHAEL PALMER,

Plaintiff-Appellant,

v. No. 10-3171
(D.C. No. 6:09-CV-01314-MLB-DWB)
METROPOLITAN LIFE (D. Kan.)
INSURANCE COMPANY,

Defendant-Appellee.

ORDER AND JUDGMENT *

Before O’BRIEN, ANDERSON, and TACHA, Circuit Judges.

Plaintiff Michael Palmer brought this action against Metropolitan Life

Insurance Company (MetLife) after MetLife terminated his disability benefits

under the Alltel Corporation Long-Term Disability Plan (Plan). The action

proceeded under the Employee Retirement Income Security Act of 1974 (ERISA),

*
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 This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and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. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
which permits a plan participant or beneficiary to bring a civil action “to recover

benefits due to him under the terms of his plan, to enforce his rights under the

terms of the plan, or to clarify his rights to future benefits under the terms of the

plan.” 29 U.S.C. § 1132(a)(1)(B). The district court granted summary judgment

for MetLife and denied Palmer’s motion for summary judgment. It upheld

MetLife’s decision as plan administrator to terminate benefits, concluding that its

determination that Palmer’s alleged disability was due to a preexisting condition

was not arbitrary and capricious. It further rejected Palmer’s claim that MetLife

owed him additional benefits due to an alleged underpayment during the benefit

period. He appeals from this judgment, and we affirm.

BACKGROUND

1. Plan Provisions

Alltel hired Palmer on June 1, 2005, as a Business Solutions

Representative. His disability insurance under the Plan became effective July 1,

2005. Under the Plan, MetLife agreed to pay participants a monthly benefit upon

presentation of satisfactory proof of a covered disability. The Plan contained two

definitions of “disability,” applicable to the first 24 months of covered disability

and afterwards:

There are two different types of disability, each with its own benefit
levels. You are considered disabled and eligible for Plan benefits
under the following circumstances:

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 • Either you are unable to perform all material duties of your
occupation or you are able to perform parts of your job but
suffer at least a 20% loss in income. This definition applies to
the first 24 months of disability after your elimination period
has been met.

• Either you are unable to perform any occupation for which you
are reasonably qualified or you are able to perform parts of any
job but suffer at least a 20% loss in income. This definition
applies after the first 24 months of disability.

Aplt. App., Vol. III at A731.

The Plan also excluded benefits for a disability resulting from a pre-existing

condition:

The Plan will not pay benefits under the following circumstances:

...

• your losses were caused by or resulted from preexisting
conditions such as illnesses or injuries that began in the first 12
months of your effective date and for which you received
medical treatment, consultation, care or services (including
diagnostic measures), or prescription medicines or drugs in the
three months prior to your effective date[.]

Id. at A732.

2. Initial Approval of Palmer’s Claim

Palmer’s last work day with Alltel was February 2, 2006. The next day, he

underwent a total disc replacement. On July 11, 2006, he submitted a claim for

long-term disability benefits to MetLife, alleging disability due to lower-back

problems.

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 In processing this claim, MetLife sought his medical records for the period

April 1, 2005, to June 30, 2005, to determine whether the claim fell within the

Plan’s exclusion for pre-existing conditions. Palmer’s claim identified Dr. Marty

Turner as his attending physician during the relevant time period. MetLife

attempted to obtain his medical records from Dr. Turner’s office. While

Dr. Turner signed and returned a completed Attending Physician Statement form,

his office did not provide the requested medical records. Instead, it sent a fax to

MetLife stating “[t]he Medical records part of your request will be addressed by

Smart Corporation on 8/22/06. That is our policy & we have a contract[.] No

exception[.] Patient is aware as well.” Id. at A626.

While awaiting Dr. Turner’s records, MetLife obtained further information

suggesting that Palmer’s claim involved a pre-existing condition. A discharge

summary dated February 5, 2006, described Palmer as “a 38-year-old male with a

long history of low back pain, which increased with motor vehicle collision in

1999.” Id. at A645. On September 1, 2006, having still not received the medical

records from Dr. Turner’s office, MetLife called the office and was informed

verbally that Dr. Turner had seen Palmer four times during the relevant time

period.

On September 13, 2006, MetLife received an invoice from Smart Document

Solutions, LLC for the medical records from Dr. Turner’s office. MetLife

contacted Palmer two days later and advised him he was responsible for paying the

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invoice. Palmer responded by stating his position that it was MetLife’s

responsibility to pay for the records if MetLife wanted them.

Although neither MetLife nor Palmer paid the invoice and MetLife did not

receive Dr. Turner’s records, a September 27, 2006, MetLife internal diary entry

noted “Medical has been reviewed and claim is not pre-ex.” Id., Vol. II at A260.

MetLife approved Palmer’s claim for disability benefits by letter dated October 12,

2006. Id., Vol. III at A601-03. The letter informed him that benefits became

payable as of August 2, 2006, after his satisfaction of the required 180-day waiting

period. 1

3. The Two-Year Disability Review

MetLife’s benefits letter further informed Palmer that

[t]o continue to qualify for disability benefits until August 1, 2008,
you must continue to satisfy the definition of disability and all other
requirements of your plan. Benefits may continue beyond August 1,
2008 if you continue to satisfy the definition of disability solely due
to other non-limited medical condition(s) and other plan requirements.

Id. at A602.

On January 4, 2008, MetLife wrote Palmer, reminding him of the definition

of disability and that “[i]n order for you to continue to receive benefits beyond

1
Some of the language in the letter is predicated on MetLife’s determination
that benefits based on Palmer’s alleged disability were limited to a two-year
period because the disability involved a “neuromusculoskeletal and soft tissue
disorder.” Aplt. App., Vol. III, at A602. MetLife apparently later reconsidered
this position due to evidence of radiculopathy. See id., Vol. II at A289. The
two-year soft tissue injury limitation is not at issue in this appeal.

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[the expiration of the two-year initial benefit period on] August 1, 2008, you must

be totally disabled from any occupation.” Id., Vol. II at A492. The letter noted

that Palmer’s continued receipt of benefits would depend on his ability to

“continue to satisfy the definition of disability and all other requirements of your

plan.” Id. 2

Palmer hired an attorney, who notified MetLife around February 8, 2008,

that Palmer had been underpaid disability benefits. The attorney noted that

benefits had only been calculated based on his base salary, while the Plan required

payment based on both base salary and commissions. MetLife did not immediately

resolve this problem, but instead proceeded with its review of Palmer’s claim.

In the course of its review, MetLife noted on February 13, 2008, that “per review

of claim pre-ex investigation is needed.” Id. at A315. It further observed that

Dr. Turner’s records had never been received.

The same day, MetLife telephoned Palmer about the medical records. He

indicated he had them and would send them to MetLife. He faxed Dr. Turner’s

office notes for the period April 1, 2005, through June 30, 2005, and a pharmacy

profile to MetLife. Dr. Turner’s records revealed that he had indeed seen Palmer

for back problems on four occasions during the relevant time period. Based on

its review of the records, MetLife terminated Palmer’s disability benefits

2
MetLife scheduled a functional capacity exam in connection with its
two-year review but terminated Palmer’s benefits before it could be completed.

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effective March 1, 2008, as an ineligible preexisting condition. It upheld the

termination decision through the administrative appeal process.

ANALYSIS

1. Standard of Review

The parties disagree on the standard of review applicable to this appeal.

They acknowledge the general principle that we review the district court’s entry of

summary judgment de novo, applying the same legal standard it used. See

Adamson v. Unum Life Ins. Co., 455 F.3d 1209, 1212 (10th Cir. 2006). Neither

challenges the further rule that

[w]here, as here, the parties in an ERISA case both moved for
summary judgment and stipulated that no trial is necessary, summary
judgment is merely a vehicle for deciding the case; the factual
determination of eligibility for benefits is decided solely on the
administrative record, and the non-moving party is not entitled to the
usual inferences in its favor.

LaAsmar v. Phelps Dodge Corp. Life, Accidental Death & Dismemberment &

Dependent Life Ins. Plan, 605 F.3d 789, 796 (10th Cir. 2010) (quotation omitted).

The parties’ dispute about the standard of review concerns a more

fundamental matter: the appropriate standard to be applied to MetLife’s decision

to terminate benefits. Both acknowledge the general principle that MetLife’s

action should be reviewed de novo unless the Plan gives MetLife “discretionary

authority to determine eligibility for benefits or to construe the terms of the plan,”

id. (quotation omitted), and that if the Plan provides for such discretionary

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authority “we employ a deferential standard of review, asking only whether the

denial of benefits was arbitrary and capricious,” id. (quotation omitted). There is

no dispute that the Plan provides such discretionary authority.

Palmer argues, however, that we owe no deference to MetLife’s decision in

this instance because MetLife committed “procedural irregularities . . . that require

us to apply the same de novo review that would be required if discretion was not

vested in MetLife.” Id. (quotation omitted). Palmer cites two such alleged

irregularities: (1) MetLife’s “obtain[ing] medical information in a manner

contrary to plan terms,” Aplt. Opening Br. at 14, and (2) its issuance of a

determination “beyond the ERISA-mandated time limits,” id.

We have applied the “procedural irregularity” exception where the plan

administrator either never issued a decision, or issued a decision “substantially

outside the time period within which the Plan vested it with discretion to interpret

and apply the Plan.” LaAsmar, 605 F.3d at 799. Palmer cites no authority that

would trigger de novo review merely because MetLife allegedly obtained medical

information in a manner contrary to plan terms. In any event, he did not argue in

district court for a de novo standard of review based on MetLife’s allegedly

improper request for medical information. We therefore decline to consider that

portion of his argument, made for the first time on appeal. See Curtis v. Chester,

626 F.3d 540, 548 (10th Cir. 2010) (“Absent extraordinary circumstances, we will

not consider arguments raised for the first time on appeal.”) (quotation omitted).

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 As for his argument concerning the ERISA-mandated time limits, even if the

alleged irregularity falls within the parameters of LaAsmar, Palmer’s argument

rests on an assumption that MetLife issued an untimely initial decision on benefits

rather than a benefit termination. Because (as will be seen) we do not agree with

this assumption, we reject the resulting argument involving the standard of review

as well. We will therefore apply the arbitrary and capricious standard, without

modification for procedural irregularities, to MetLife’s decision.

2. Scope of Merits Issues

It may be helpful to begin our analysis by stating what is not at issue.

Palmer does not contest that his medical visits with Dr. Turner during the time

period between April 1, 2005, and June 30, 2005, qualified his back problems as a

“pre-existing condition” under the terms of the Plan. For its part, MetLife does

not contest that if Palmer were entitled to benefits, their amount should have been

calculated based on his commissions as well as his base salary. The narrow issues

actually at stake are (1) whether MetLife could, after previously approving and

paying benefits, terminate them (a) based on a finding of a pre-existing condition

(b) discovered through records obtained from Palmer that were in existence at the

time it initially awarded benefits but not obtained by MetLife at that point; and

(2) whether MetLife was required to compensate Palmer for an underpayment that

occurred during the time it was mistakenly paying benefits.

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 3. MetLife’s Termination of Benefits

Palmer contends that MetLife’s termination of his benefits was improper for

two reasons. He contends that MetLife’s actions represented an unauthorized and

untimely second initial determination of his claim. He also argues that MetLife

improperly obtained and relied upon his prior medical records in reaching its

decision.

A. Authorization for Termination

Palmer argues that MetLife’s decision violated ERISA because MetLife

improperly “attempted to reverse its initial decision that [his] claim was not

precluded by the preexisting condition.” Aplt. Opening Br. at 19. 3 He contends

that by this action, MetLife wrongfully made “a new and different decision on the

same facts it had for its initial decision.” Id. at 21.

The district court correctly determined under ERISA that MetLife’s initial

decision in Palmer’s favor on the pre-existing condition issue did not preclude

MetLife from revisiting this issue and reaching an opposite result. This is true

3
Palmer does not argue that MetLife was prohibited from revisiting the
pre-existing condition issue unless specifically authorized by language in the Plan
to conduct a review of that issue. Instead, he argues (apparently under general
ERISA principles) that MetLife should “not get a second bite at the apple when
its first decision was simply contrary to the facts.” Aplt. Opening Br. at 21
(quotation omitted). His arguments concerning language in the Plan center on
whether it authorized MetLife to request and use existing medical records in its
review. We confine our discussion to the contentions he has specifically raised
and developed on appeal.

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whether or not MetLife relied on additional evidence concerning the pre-existing

condition issue when it reached its decision to terminate benefits.

We find our prior case of Kimber v. Thiokol Corp., 196 F.3d 1092 (10th Cir.

1999), strongly persuasive on this issue. In Kimber, the administrator of a

disability plan granted the plaintiff insured disability benefits based upon evidence

of his diabetic symptoms. Id. at 1096. Upon further review, however, the

administrator changed its mind: it now determined the insured had not adequately

demonstrated medical evidence of his total disability. The administrator therefore

requested further proof of disability before continuing to pay benefits. When such

evidence was not forthcoming, it terminated benefits. Id. The insured appealed,

providing additional medical evidence. Finding this evidence insufficient to

overturn its earlier decision on the issue of physical disability, the administrator

upheld the denial of benefits for a physical disability but did grant a limited,

two-year benefit based on the insured’s mental condition. On appeal, we affirmed

the administrator’s actions, noting that “[a] one-time determination of eligibility

for benefits under the Plan does not foreclose subsequent principled review.”

Id. at 1098.

Kimber supports the ability of a plan administrator to revisit disability

issues and to reach a different result even in the absence of evidence of medical

improvement, so long as the administrator’s review is “principled,” that is,

authorized under ERISA and conducted in accordance with its principles. Id.

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A contrary result “would basically prohibit a plan fiduciary from ever terminating

benefits if it later discovered evidence that the ERISA plaintiff was not disabled at

the time of the initial grant of benefits” and “would have a chilling effect on the

promptness of granting initial benefits in the first place.” Ellis v. Liberty Life

Assurance Co. of Boston, 394 F.3d 262, 274 (5th Cir. 2004).

While Kimber concerned medical evidence of disability, the Fourth Circuit

has applied similar principles to an exclusion for pre-existing conditions. See

Gagliano v. Reliance Standard Life Ins. Co., 547 F.3d 230, 239 (4th Cir. 2008)

(“[T]he ‘mistake’ by [insurer] in failing to initially assert the Pre-Existing

Conditions Limitation cannot estop [insurer] from asserting that exclusion under

some notion of waiver because [insurer] is required to administer the Plan as

written, including the Pre-Existing Conditions Limitation.”). We agree with this

reasoning and therefore conclude that MetLife’s initial failure to assert the

pre-existing condition provision did not prevent a later assertion of the condition

in connection with MetLife’s review of Palmer’s continued entitlement to benefits.

Palmer further argues, however, that MetLife’s termination decision was in

fact a “(second) initial determination” that was untimely under the deadlines for

initial determinations of claims established by 29 C.F.R. § 2560.503-1(f)(3). See

Aplt. Opening Br. at 22. Palmer’s argument rests on an artificial dichotomy: he

assumes MetLife was only authorized to avoid paying continued benefits if it

either issued an initial determination or terminated benefits to which he was

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initially entitled. See Aplt. App., Vol. III at A733 (defining when benefit

payments may end); A776 (same). As we have seen, however, benefits could also

terminate as the result of a principled review, such as the review MetLife

conducted in connection with its two-year redetermination of Palmer’s disability.

We therefore reject this argument.

B. Use of Medical Information

As we have noted, a disability review must be “principled,” that is,

authorized under ERISA and conducted in accordance with its terms. Palmer

claims that MetLife’s actions were essentially unprincipled because the Plan only

permitted MetLife to request and use “current” medical records in reaching a

decision to terminate benefits. He argues “current” means “recent,” see Aplt.

Opening Br. at 19, and therefore MetLife was not authorized to request or rely on

records that existed at the time it initially approved his claim.

We note, first, that the Plan provisions Palmer cites only concern MetLife’s

right to obtain current medical information from him, not use of that information

once it has been obtained. By voluntarily providing MetLife with the records of

his consultations with Dr. Turner, Palmer waived any claim that MetLife was

unauthorized to obtain the records from him. Cf. Allison v. UNUM Life Ins. Co.,

381 F.3d 1015, 1024 (10th Cir. 2004) (refusing to consider whether insurer acted

beyond scope of plan by (a) requesting additional releases for medical information

dating nearly two years before coverage period, (b) resulting from insurer’s initial

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miscalculation of pre-existing condition period, then (c) denying benefits based on

pre-existing condition when releases were not received; where claimant’s attorney

“did not protest” scope of releases and did not “write back and indicate his refusal

to comply with the extensive request”). 4

Moreover, having received relevant and unquestionably authentic records in

connection with its review, MetLife did not act unreasonably in relying on them.

The Plan did not restrict MetLife’s use of medical records in connection with a

principled review. Under the Plan, MetLife had the right to consider “Proof” of

disability in support of a claim, which was defined to include information relating

to “the claimant’s right to receive payment.” Aplt. App., Vol. III at A764. We

therefore reject Palmer’s claim that MetLife conducted its review in an

unprincipled fashion by obtaining and relying on records of his previous

consultations with Dr. Turner.

4. Underpayment of Benefits

Finally, Palmer argues that if his disability benefits were indeed terminated

effective March 1, 2008, he was entitled to the full amount of benefits that had

accrued to that point and that had become due and payable upon MetLife’s initial

approval of his claim. MetLife does not seek recovery of benefits already paid to

4
Our determination on this issue forecloses Palmer’s additional argument
that MetLife’s letter to him about its right to seek records to demonstrate his
continued eligibility could not have expanded its authorization under the Plan to
request “old” or “existing” medical records as well as “future” records. See Aplt.
Opening Br. at 23-24.

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Palmer. But since there is no dispute that MetLife failed to pay him benefits

calculated based on both his base salary and commissions, as required by the Plan,

he contends MetLife must make good the underpayment to the date of termination.

The district court addressed this issue briefly, reasoning as follows:

[P]laintiff seeks payment of additional benefits on the basis that
MetLife miscalculated the amount of his payments while he was
receiving benefits. MetLife responds that plaintiff is not eligible for a
recalculation because the benefits plaintiff received were
overpayments and plaintiff should not have received those payments
because his condition was preexisting. The court finds that this
decision was reasonable based on the record.

Aplt. App., Vol. I at A159.

Palmer fails to point us to any precedent in support of his argument that

MetLife’s erroneous determination obligates it to pay him benefits that are

unquestionably barred by the Plan language. He cannot claim benefits under the

Plan’s plain language, which excludes such payment for what he concedes is a

pre-existing condition. At best, he has an argument that MetLife is estopped by its

own prior erroneous determination and its payment of benefits from denying his

entitlement to the full amount of those benefits.

Our cases hold that coverage under a plan subject to ERISA cannot be

expanded by estoppel. The insured’s reliance on an administrator’s oral and

written statements cannot create coverage, because it is the language of the plan

that controls the entitlement to benefits. See, e.g., Alexander v. Anheuser-Busch

Cos., 990 F.2d 536, 539 (10th Cir. 1993); Miller v. Coastal Corp., 978 F.2d 622,

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624-25 (10th Cir. 1992) (miscalculation of estimated benefits in annual statements

not binding under equitable estoppel theory). This case differs somewhat from

these precedents, in that here the claim for additional benefits is based on

MetLife’s own formal decision awarding benefits. But even if estoppel may be

predicated on such a decision, Palmer fails as a matter of law to show his

entitlement to it.

In order to make out a claim of estoppel under ERISA, there must be:

1) conduct or language amounting to a representation of material fact;
2) awareness of the true facts by the party to be estopped; 3) an
intention on the part of the party to be estopped that the
representation be acted on, or conduct toward the party asserting the
estoppel such that the latter has a right to believe that the former’s
conduct is so intended; 4) unawareness of the true facts by the party
asserting the estoppel; and 5) detrimental and justifiable reliance by
the party asserting estoppel on the representation.

Armistead v. Vernitron Corp., 944 F.2d 1287, 1298 (6th Cir. 1991).

Under the facts of record, Palmer cannot meet either the fourth or fifth

criteria for estoppel. He does not deny (and cannot reasonably deny) that his back

problems constituted a pre-existing condition under the terms of the Plan. During

the time MetLife was paying him benefits for his condition, he was on notice of

both the Plan’s definition of a pre-existing condition and of the visits he had made

to Dr. Turner for his back condition during the disqualification period. While he

received a windfall from MetLife’s inexplicably favorable decision on his

pre-existing condition, he fails to show an equitable entitlement to additional

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benefits based on any sort of reasonable reliance. We therefore affirm the district

court’s decision denying him additional benefits.

The judgment of the district court is AFFIRMED.

Entered for the Court

Deanell Reece Tacha
Circuit Judge

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