Fought v. UNUM Life Insurance Co. of America

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

SHIRLEY O. FOUGHT,

Plaintiff-Appellant,

v. No. 02-2176

UNUM LIFE INSURANCE
COMPANY OF AMERICA,

Defendant-Appellee.

ORDER
Filed August 13, 2004

Before TACHA, Chief Judge, McKAY, and HENRY, Circuit Judges.

This matter is before the court on appellee’s Petition For Rehearing and

Suggestion for Rehearing En Banc. The request for panel rehearing is granted.

The per curiam opinion filed on February 6, 2004 is vacated, and the attached

revised opinion is substituted in its place.

In light of the substantial revisions made by the panel, however, we will

suspend local rule 40.3, which prohibits successive rehearing petitions. See Fed.

R. App. P. 2 (giving court of appeals discretion, for good cause, to “suspend any
provision of [the] rules”); 10th Cir. R. 2.1 (providing court discretion to suspend

the local rules).

Entered for the Court
PATRICK FISHER, Clerk of Court

by:
Deputy Clerk

2
 F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
AUG 13 2004
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

SHIRLEY O. FOUGHT,

Plaintiff-Appellant,
v. No. 02-2176
UNUM LIFE INSURANCE
COMPANY OF AMERICA,

Defendant-Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
(D.C. NO. CIV-01-124)

Robert P. Warburton (Ray M. Vargas, II, with him on the briefs), Sheehan,
Sheehan & Stelzner, P.A., Albuquerque, New Mexico, for Plaintiff-Appellant.

Kathryn D. Lucero (Kerri L. Peck, with her on the brief), Foster, Johnson,
McDonald, Lucero, Koinis, LLP, Albuquerque, New Mexico, for Defendant-
Appellee.

Before TACHA, McKAY , and HENRY , Circuit Judges.

PER CURIAM .
 Shirley O. Fought challenges the decision by UNUM’s claims administrator

to deny long-term disability benefits under her employer’s group disability plan.

A severe staph infection that followed elective heart surgery hospitalized and

disabled Ms. Fought. UNUM’s plan administrator denied coverage by concluding

that Ms. Fought suffered from a pre-existing coronary artery condition that

“caused,” “contributed to,” or “resulted” in Ms. Fought’s disability, citing

language in the plan. After exhausting the company’s internal appeals process,

Ms. Fought brought a civil suit under 29 U.S.C. § 1132(a)(1)(B), alleging that she

was entitled to disability benefits under the plan. UNUM admitted to a conflict of

interest, as both payor and administrator of the plan. The magistrate judge denied

discovery regarding the extent of UNUM’s conflict of interest. The district court

then granted summary judgment in favor of UNUM.

Exercising jurisdiction under 28 U.S.C. § 1291, we hold that the district

court did not apply the appropriate standard of review when it considered the plan

administrator’s denial of benefits to Ms. Fought. Applying the correct standard of

review, we reverse the grant of summary judgment in favor of UNUM and remand

to the district court for further proceedings.

2
 I. BACKGROUND

A. Undisputed Facts

On May 18, 1998, Ms. Fought enrolled in her employer’s group long-term

disability plan, which was issued by UNUM with an effective date of June 1,

1998. The policy, under a provision entitled “What disabilities are not covered

under your plan?” states: “Your plan does not cover any disabilities caused by,

contributed to by, or resulting from your . . . pre-existing condition.” Aple’s

Supp. App. at 341-42.

The policy does not define the terms “caused by, contributed to by, or

resulting from.” The policy provides the following details regarding a pre-

existing condition:

You have a pre-existing condition when you apply for
coverage when you first become eligible if:

- you received medical treatment, consultation, care or
services including diagnostic measure or took prescribed
drugs or medicines in the 3 months just prior to your
effective date of coverage; or you had symptoms for which
an ordinarily prudent person would have consulted a health
care provider in the 3 months just prior to your effective
date of coverage; and

- the disability begins in the first 12 months after your
effective date of coverage.

Id. at 342.

3
 Prior to her enrollment in the plan, Ms. Fought had been diagnosed and

treated for coronary artery disease. In August 1998, approximately three months

after her enrollment in the plan, Ms. Fought underwent angioplasty. On March 8,

1999, she was admitted for unstable angina syndrome, and on March 15, 1999,

she underwent an elective coronary artery revascularization surgery. During

surgery, the doctors discovered that Ms. Fought’s sternum was narrow and

osteoporotic, requiring a special procedure to close the surgical wound. Her

doctors noted that “her postoperative course was anticipated to be quite

challenging[,] given the concerns about the wound.” Aplt’s App. at 79. She was

discharged six days after surgery on March 22, 1999. “At the time of [her]

discharge, there [was] no evidence of infection,” and “her wounds were healing

well.” Id. at 83; 166.

Three weeks later, the incision from Ms. Fought’s wound became

“dehisced,” or split open. On April 8, 1999, she was readmitted for care of her

dehisced sternal wound and a possible infection. Aple’s Supp. App. at 97.

At this time, her wound cultures tested positive for a “few” Klebsiella

pheumonia bacteria. She was placed on antibiotics and given intensive wound

care to prevent infection. After a hospital stay of five days, and a “dramatic

improvement in the appearance of the wound,” she was sent to a skilled nursing

facility. Aplt’s App. at 85. At the time, the “wound appearance looked

4
satisfactory.” Id. at 85. She was discharged from the facility on April 19, 1999.

On May 7, 1999, Ms. Fought complained of right-side chest pain. She was

readmitted to the hospital on May 11,1999, with a white blood cell count of

12,000 and a low grade fever. Two exposed sternal wires were detected. Her

sternal wound and blood cultures were positive for both Klebsiella pneumonia and

methicillin-resistant Staphylococcus aureus in the sternal wound and methicillin-

resistant Staphylococcus aureus in the blood stream. Id. at 139.

Ms. Fought was placed in the Intensive Care Unit. Over the next two

months, she underwent various operative procedures, was intubated, and received

hemodyanmic monitoring, nutritional support, and sedation. One surgery

involved extensive sternal wound reconstruction and required Ms. Fought to be

placed on a ventilator. She was discharged on July 15, 1999, when she was

transferred to another facility for intensive wound care.

On September 13, 1999, UNUM denied coverage under the long-term

disability plan, having determined that Ms. Fought’s pre-existing condition

“caused, contributed to, or resulted in the condition(s) for which [she was]

claiming disability.” Aplt’s App. at 33-34 (Letter to Ms. Fought from Anne

Dionne, Disability Benefit Specialist, dated Sept. 13, 1999). Ms. Fought

submitted a formal request to have her claim reopened, see id. at 143 (Letter from

Ms. Fought to Ann Dionne, dated Oct. 19, 1999), as well as letters from three

5
doctors certifying that the staph infection was neither a pre-existing condition nor

related to her pre-existing coronary artery disease. Id. at 156 (Note from Dr.

Robert T. Ferraro, dated Oct. 19, 1999) (“[T]he staph infection which is the basis

for multiple wounds on chest is not related to coronary artery disease. This is a

separate, unrelated diagnosis without preceding history.”) (emphasis added); id.

at 154 (Note from Dr. Robert Dubroff, dated Oct. 22, 1999) (“[Ms.] Fought is

totally disabled due to her heart condition. The staph infection was not a pre-

existing condition.”) (emphasis added); id. at 155 (Note from Dr. Neil T. Chen,

undated) (“[Ms.] Fought’s chest & abdominal wounds/infection is [sic] not a

preexisting condition.”) (emphasis in original).

UNUM’s medical department reviewed Dr. Ferraro’s letter, 1 but the

1
The letter from UNUM does not mention the other doctors’ letters, saying
only that “Dr. Ferraro’s note was reviewed by our medical department.” Aplt’s
App. at 147. Apparently, the other two doctors’ letters were faxed to UNUM on
October 25, 1999, the very day that UNUM sent Ms. Fought the letter confirming
its denial of disability benefits. See id. at 146. “Plan administrators, of course,
may not arbitrarily refuse to credit a claimant’s reliable evidence, including the
opinions of a treating physician.” Black & Decker Disability Plan v. Nord, 123 S.
Ct. 1965, 1972 (2003). We note that UNUM’s subsequent review, see Aplt’s
App. at 150, appeared to include consideration of Ms. Fought’s additional
doctors’ notes.
We also note that the parties do not argue that the plan administrator
misallocated the weight it gave to the treating physician’s opinion, so the
admonishments of Black & Decker do not apply. See Black & Decker, 123 S. Ct.
at 1972 (“[W]e hold [that] courts have no warrant to require administrators
automatically to accord special weight to the opinions of a claimant’s physician;
nor may courts impose on plan administrators a discrete burden of explanation
(continued...)

6
company declined to reverse its previous decision, stating that although “the staph

infection itself was not present during the pre-existing condition period (3/1/98-

5/31/98), it was the result of surgery that was performed for a cardiac condition

that was present, diagnosed and treated during that time frame.” Id. at 147-48

(Letter to Ms. Fought from Anne Dionne, dated Oct. 25, 1999).

Ms. Fought then retained legal counsel, who contacted UNUM’s Long-

Term Disability Quality Review Section, and informed the company that Ms.

Fought was appealing the denial of coverage. See id. at 159. After a review,

UNUM again denied coverage, stating that “the staph infection was the result of

surgery performed for a cardiac condition that was caused by, contributed to by,

or resulted from the cardiac condition that was present, diagnosed and treated

during the pre-existing period.” Id. at 150 (Letter from John J. Schifano, Senior

Benefit Analyst, dated Dec. 2, 1999).

Finally, Ms. Fought contacted the New Mexico Public Relations

Commission, which corresponded with UNUM concerning Ms. Fought’s situation.

Responding to the state agency’s inquiry, UNUM explained that the staph

infection was the result of coronary bypass surgery, which was performed to treat

her pre-existing condition. “She would not have had to have the surgery, later

1
(...continued)
when they credit reliable evidence that conflicts with a treating physician’s
evaluation.”).

7
developing an infection, if she did not have the cardiac conditions which were

present and treated for during the pre-existing period.” Id. at 158 (Letter from

Theresa-Ann Uminga, Senior Complaints Specialist, to James A. Chavez, Ms.

Fought’s Attorney, dated Feb. 11, 2000).

B. Procedural History

In August 2001, Ms. Fought filed suit in federal district court alleging

UNUM violated 29 U.S.C. § 1132 in denying her claim for benefits. UNUM

admitted that it operated under a conflict of interest, id. at 12 (Memorandum

Opinion and Order Granting Defendant’s Motion for Summary Judgment, filed

May 31, 2002), because it both administers claims and is the payor of those

claims. Ms. Fought requested discovery to allow inquiry into the extent of

UNUM’s conflict of interest. The magistrate judge denied this request.

UNUM moved for summary judgment. The district court, acknowledging

the conflict of interest, proceeded to interpret the contract language “caused by,

contributed to by, or resulting from” as meaning “related to” and “foreseeable

complication of” a pre-existing condition. The district court ruled that the “staph

infection [was] related to the coronary artery disease as a foreseeable

complication of treatment.” Aplt’s App. at 14. On that basis, the district court

granted UNUM’s motion for summary judgment, concluding that UNUM’s

8
decisions to deny Ms. Fought long-term disability benefits were not arbitrary or

capricious, and ordered Ms. Fought to pay UNUM’s costs.

Ms. Fought now appeals.

II. ANALYSIS

UNUM’s long-term disability plan is governed by the Employee Retirement

and Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. “ERISA was enacted

to promote the interests of employees and their beneficiaries in employee benefit

plans, and to protect contractually defined benefits.” Firestone Tire & Rubber

Co. v. Bruch, 489 U.S. 101, 113 (1989) (citations and internal quotation marks

omitted); see also 29 U.S.C. § 1001(b) (“It is hereby declared to be the policy of

this chapter to protect . . . the interests of participants in employee benefit plans

and their beneficiaries . . . by establishing standards of conduct, responsibility,

and obligation for fiduciaries of employee benefit plans.”).

In seeking coverage under her long-term disability benefit plan, Ms. Fought

advances three arguments. First, she argues that the district court erred by using

the wrong standard of review when it reviewed UNUM’s decision. Second, she

argues that UNUM’s denial of benefits was, in any event, an unreasonable

interpretation under the plan. Finally, she argues that the district court failed to

consider UNUM’s obligation to draft plan provisions in a manner calculated to be

9
understood by the average plan participant.

We begin with the appropriate standard of review, discussing (1) the

current state of the Tenth Circuit’s “sliding scale” standard of review, (2) the

application of the sliding scale standard of review in conflict of interest cases, (3)

the application of a reduced deference standard in this case.

We then combine our analysis of Ms. Fought’s second and third arguments.

Given our standard of review, we first analyze whether the plan administrator’s

construction of the plan language is a reasonable one. In so doing, we consider

(a) the plan’s pre-existing exclusion clause, (b) the role of causation in

interpreting the pre-existing exclusion clause, (c) the Department of Labor’s

regulations and a published example regarding pre-existing conditions, (d)

relevant circuit and district court case law involving similar questions, and (e)

whether clearer exclusionary language may have been available to UNUM.

Finally, we examine whether, given the record evidence and our reduced

deference standard of review, UNUM’s application of the pre-existing condition

exclusion was supported by substantial evidence.

A. The Standard of Review

“Summary judgment orders are reviewed de novo, using the same standards

as applied by the district court.” Pitman v. Blue Cross & Blue Shield of Okla, 217

10
F.3d 1291, 1295 (10th Cir. 2000). Accordingly, like the district court, we must

review UNUM’s decision to deny benefits to Ms. Fought, and we must determine

the appropriate standard to be applied.

The Supreme Court provided important guidance regarding the standard of

review in ERISA benefits cases in Firestone, 489 U.S. at 113-15. The Court

noted that deference to expert administrators is grounded in the most fundamental

premises of trust law. If a disinterested party exercising discretionary powers has

looked at evidence and rendered a decision, it is not only reasonable but a wise

conservation of judicial resources not to have judges replicate the administrator’s

work. See id.

Recognizing that parties to a contract can agree to vest discretionary

authority in an administrator, the Supreme Court held that “a denial of benefits

challenged under § 1132(a)(1)(B) [ERISA] is to be reviewed under a de novo

standard unless the benefit plan gives the administrator or fiduciary discretionary

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

Id. at 115. There is no dispute that here the plan expressly gives UNUM, as plan

administrator, the discretion to determine whether to deny a claimant insurance

benefits under the plan. Aplt’s. App. at 31. Therefore, because the plan grants

UNUM discretion, “[a] court reviewing a challenge to a denial of employee

benefits . . . applies an ‘arbitrary and capricious’ standard to a plan

11
administrator’s actions.” Charter Canyon Treatment Ctr. v. Pool Co., 153 F.3d

1132, 1135 (10th Cir. 1998). “[O]ur review is limited to determining whether

[the plan administrator’s] interpretation was reasonable and made in good faith.”

Hickman v. GEM Ins. Co., 299 F.3d 1208, 1213 (10th Cir. 2002). “[A]ssuming

full and expansive discretion has been conferred, then the plan administrator’s

interpretation of ambiguous plan provision should be judged as follows: (a) as a

result of reasoned and principled process (b) consistent with any prior

interpretations by the plan administrator (c) reasonable in light of any external

standards and (d) consistent with the purposes of the plan.” Kathryn J. Kennedy,

Judicial Standard of Review in ERISA Benefit Claim Cases, 50 A M . U.L. R EV .

1083, 1135, 1172 (2001) (hereinafter, Kennedy, Judicial Standard) (summarizing

and recommending the Fourth Circuit’s current set of reasonableness factors).

Finally, in reviewing a plan administrator’s decision under the arbitrary and

capricious standard, “the federal courts are limited to the ‘administrative record’

– the materials compiled by the administrator in the course of making his

decision.” Hall v. UNUM Life Ins. Co. of Am., 300 F.3d 1197, 1201 (10th Cir.

2002).

The possibility of an administrator operating under a conflict of interest,

however, changes the analysis. Caldwell v. Life Ins. Co. of N. Am., 287 F.3d

1276, 1282 (10th Cir. 2002) (“Indicia of arbitrary and capricious decisions

12
include . . . conflict of interest by the fiduciary.”). Thus, “if a benefit plan gives

discretion to an administrator or fiduciary who is operating under a conflict of

interest, that conflict must be weighed as a ‘facto[r] in determining whether there

is an abuse of discretion.’” Firestone, 489 U.S. at 115 (quoting R ESTATEMENT

(S ECOND ) OF T RUSTS § 187, cmt. d (1959)). 2 “The rationale for this approach is

clear. A conflicted fiduciary may favor, consciously or unconsciously, its

interests over the interests of the plan beneficiaries.” Brown v. Blue Cross &

Blue Shield, Inc., 898 F.2d 1556, 1565 (11th Cir. 1990); see also Pitman, 217

F.3d at 1296 (“‘[W]hen an insurance company serves as ERISA fiduciary . . . , it

is exercising discretion over a situation for which it incurs direct, immediate

expense as a result of benefit determinations favorable to plan participants.’”)

(quoting Brown , 898 F.2d at 1561).

Following Firestone, the various circuit courts attempted to put the Court’s

instructions into practice. “Since Firestone, all of the circuit courts agree that a

conflict of interest triggers a less deferential standard of review. The courts,

2
We continue to treat the terms “arbitrary and capricious” and “abuse of
discretion” as interchangeable in this context. See Chambers v. Family Health
Plan Corp., 100 F.3d 818, 825 n.1 (10th Cir. 1996) (“Some circuit courts have
recently distinguished between these two standards and have concluded that the
abuse of discretion standard is more appropriate. Most courts, however, have
held that this is a distinction without a difference. We agree and adhere to the
arbitrary and capricious standard of review.”) (internal citations and quotation
marks omitted).

13
however, differ over how this lesser degree of deference alters their review

process.” Chambers v. Family Health Plan Corp., 100 F.3d 818, 825 (10th Cir.

1996).

1. Sliding Scale

In Chambers, we identified two basic approaches that had emerged in

interpreting Firestone: the “sliding scale” approach and the “presumptively void”

approach. We explicitly adopted the former. Id. at 826-27.

“Under [the sliding scale] approach, the reviewing court will always apply

an arbitrary and capricious standard, but the court must decrease the level of

deference given to the conflicted administrator’s decision in proportion to the

seriousness of the conflict.” Id. at 825; see also Ladd v. ITT Corp., 148 F.3d 753,

754 (7th Cir. 1998) (noting that when “the administrator has a conflict of interest,

then, though the standard of review is nominally the same, the judicial inquiry is

more searching”); Spangler v. UNUM Life Ins. Co. of Am. , 38 F. Supp. 2d 952,

955-56 (N.D. Okla. 1999) (noting that where conflict of interest is “apparent,”

further discovery is not required; “the court’s review is a little more searching . . .

and the court is not as quick to defer to the administrator’s discretion”).

“[F]lexibility in the scope of judicial review need not require a proliferation of

different standards of review; the arbitrary and capricious standard may be a

14
range, not a point. There may be in effect a sliding scale of judicial review of

trustees’ decisions.” Van Boxel v. Journal Co. Employees’ Pension Trust, 836

F.2d 1048, 1052 (7th Cir. 1987); Chambers, 100 F.3d at 826 (quoting Van Boxel

for same proposition). Therefore, we recognize that “the wholesale importation

of the arbitrary and capricious standard into ERISA is unwarranted.” Firestone,

489 U.S. at 109.

To say that there is a sliding scale of deference, however, merely begs the

question: how much less deference ought a reviewing court afford? Our past

opinions in this area do not clearly address this question. See, e.g., McGraw v.

Prudential Ins. Co. of Am., 137 F.3d 1253, 1258 (10th Cir. 1998) (recognizing the

arbitrary and capricious standard as “inherently flexible” in that “the degree of

deference . . . will be decreased on a sliding scale in proportion to the extent of

conflict” without providing guidance as to what a deference reduction entails).

Our failure to articulate clearly the requirements of a less deferential arbitrary and

capricious standard has left district courts in this circuit without direction and has

encouraged litigation. 3

3
Our review of the law reveals a similar lack of direction from other
circuits. See, e.g., Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 390-93
(3d. Cir. 2000) (holding, without providing further guidance, that the deference
accorded the fiduciary will be lessened by the degree necessary to neutralize
influence resulting from conflict); Vega v. Nat’l Life Ins. Servs., Inc., 188 F.3d
287, 296 (5th Cir. 1999) (stating only that the “deference [provided to the
(continued...)

15
 2. Defining the sliding scale

In light of this lack of clarity, we capitalize on this opportunity to elaborate

more fully what a less deferential standard of review entails. We adopt the

following standards for reducing deference in instances in which a fiduciary has a

conflict of interest because it (1) adheres to ERISA common law, (2) promotes

3
(...continued)
administrator] will be lessened to the degree necessary to neutralize any untoward
influence resulting from the conflict”); Borda v. Hardy, Lewis, Pollard & Page,
P.C., 138 F.3d 1062, 1069 (6th Cir. 1998) (concluding that the fiduciary will be
entitled to some deference, but that “application of the standard should be shaped
by the circumstances of the inherent conflict of interest”); Mers v. Marriott Int’l
Group Accidental Death & Dismemberment Plan, 144 F.3d 1014, 1020 n.1 (7th
Cir. 1998) (recognizing that “[t]he arbitrary and capricious standard does not pose
an all-or-nothing choice between full deference or none”); Woo v. Deluxe Corp.,
144 F.3d 1157, 1161-62 (8th Cir. 1998) (describing the sliding scale as extremely
flexible in that courts may adjust for all relevant circumstances). The Third
Circuit states this well:

We acknowledge that there is something intellectually unsatisfying, or
at least discomforting, in describing our review as a “heightened
arbitrary and capricious” standard. The locution is somewhat awkward.
The routine legal meaning of an “arbitrary and capricious” decision is
that used, quite understandably, by the district court: a decision
“without reason, unsupported by substantial evidence or erroneous as
a matter of law.” Once the conflict becomes a “factor” however, it is
not clear how the process required by the typical arbitrary and
capricious review changes.

Pinto, 214 F.3d at 392.

16
sound public policy, and (3) provides clearer guidance to lower courts, lawyers,

and potential litigants. First we consider the scenario in which a fiduciary plays

more than one role pursuant to ERISA, which creates a conflict of interest. In

such situations, if the plaintiff cannot establish a serious conflict, then we will

view the conflict of interest as one factor in determining whether the plan

administrator’s denial of benefits was arbitrary and capricious. Second, we craft

a burden-shifting rule for fiduciaries that have an inherent conflict of interest. In

such instances, the burden is on the fiduciary to establish by substantial evidence

that the denial of benefits was not arbitrary and capricious.

A. Standard conflict of interest

ERISA envisions that a fiduciary “may ‘wear two hats,’ one of a trustee

or fiduciary and one of a settlor.” See Kennedy, Judicial Standard, 50 A M . U.L.

R EV . at 1161; see 29 U.S.C. § 1102(c)(1) (“[A]ny person or group of persons may

serve in more than one fiduciary capacity with respect to the plan.”). We hold

that in every case in which the plan administrator operates under a conflict of

interest – or a “standard” conflict of interest case – the plaintiff is required to

prove the existence of the conflict.” Kennedy, Judicial Standard, 50 A M . U.L.

R EV . at 1173. “Evidence of a conflict of interest requires ‘proof that the plan

administrator’s dual role jeopardized his impartiality.’” Cirulis v. UNUM Corp.,

321 F.3d 1010, 1017 n.6 (10th Cir. 2003) (quoting Kimber v. Thiokol Corp., 196

17
F.3d 1092, 1097 (10th Cir.1999).

[T]he mere fact that the plan administrator was a [company] employee
is not enough per se to demonstrate a conflict. Rather, a court should
consider various factors including whether: (1) the plan is self-funded;
(2) the company funding the plan appointed and compensated the plan
administrator; (3) the plan administrator’s performance reviews or level
of compensation were linked to the denial of benefits; and (4) the
provision of benefits had a significant economic impact on the company
administering the plan.

Id. (internal quotation marks omitted). If the plaintiff cannot establish a serious

conflict of interest, we consider defendant’s standard conflict of interest as one

factor in determining whether defendant’s denial of disability benefits to plaintiff

was arbitrary and capricious. See Firestone, 489 U.S. at 115 (holding that when

“a benefit plan gives discretion to an administrator . . . who is operating under a

conflict of interest, that conflict must be weighed as a factor in determining

whether there is an abuse of discretion”) (internal quotations omitted); Charter

Canyon Treatment Ctr. v. Pool Co., 153 F.3d 1132, 1135 (10th Cir. 1998) (where

a plan administrator is operating under a conflict of interest, “the court may weigh

that conflict as a factor in determining whether the plan administrator's actions

were arbitrary and capricious”).

B. Inherent conflict of interest

When the plan administrator operates under either (1) an inherent conflict

of interest, Kennedy, Judicial Standard, 50 A M . U.L. R EV . at 1173); see also

Pitman, 217 F.3d at 1296 n.4 (noting that “as both insurer and administrator of

18
the plan, there is an inherent conflict of interest between its discretion in paying

claims and its need to stay financially sound”); (2) a proven conflict of interest; or

(3) when a serious procedural irregularity exists, and the plan administrator has

denied coverage, an additional reduction in deference is appropriate. Under this

less deferential standard, the plan administrator bears the burden of proving the

reasonableness of its decision pursuant to this court’s traditional arbitrary and

capricious standard. See Kennedy, Judicial Standard, 50 A M . U.L. R EV . at 1174.

In such instances, the plan administrator must demonstrate that its interpretation

of the terms of the plan is reasonable and that its application of those terms to the

claimant is supported by substantial evidence. The district court must take a hard

look at the evidence and arguments presented to the plan administrator to ensure

that the decision was a reasoned application of the terms of the plan to the

particular case, untainted by the conflict of interest.

Professor Kennedy suggests a procedure for decreasing deference in

inherent conflict of interest cases that we find persuasive.

[T]o further protect participants and beneficiaries in such conflict of
interest contexts, [courts should] shift[] the burden to the fiduciary to
justify the reasonableness of its decision. This puts the plan
administrator on notice that its decisions will be judged for their
reasonableness and provides the courts with a record that must show
that the conflict of interest did not taint such decision. Such a result is
still consistent with the Firestone admonition to consider as a factor any
conflict of interest, but provides more direction for the courts in the
application of the reasonableness standard.

19
Id. at 1174.

This burden-shifting approach for such conflict of interest cases has

numerous advantages. First, as noted, it comports with our post-Firestone

holdings that, even in cases of conflict of interest, the arbitrary and capricious

standard provides the appropriate level of review. See Chambers, 100 F.3d at 827

(“[T]he arbitrary and capricious standard is sufficiently flexible to allow a

reviewing court to adjust for the circumstances alleged, such as trustee bias in

favor of a third-party or self-dealing by the trustee.”) (quotation marks omitted);

see also Jones v. Kodak Med. Assistance Plan, 169 F.3d 1287, 1291 (10th Cir.

1999) (noting that we are required to “decreas[e] the level of deference in

proportion to the severity of the conflict”); Ellis v. Metro. Life Ins. Co., 126 F.3d

228, 233 (4th Cir. 1997) (“The more incentive for the administrator or fiduciary

to benefit itself by a certain interpretation of benefit eligibility or other plan

terms, the more objectively reasonable the administrator or fiduciary’s decision

must be and the more substantial the evidence must be to support it.”). Second, it

provides clear direction to district courts, lawyers, and potential litigants. Third,

it provides the less deferential review that we must accord an inherently

conflicted plan administrator without unduly raising insurance costs. See

Sandoval v. Aetna Life & Cas. Ins. Co., 967 F.2d 377, 380 (10th Cir. 1992) (“A

primary goal of ERISA was to provide a method for workers and beneficiaries to

20
resolve disputes over benefits inexpensively and expeditiously.”).

As applied to this case, there is no question that both an inherent conflict of

interest and a serious procedural irregularity existed: UNUM conceded a conflict,

but persistently resisted discovery as to the extent of that conflict. In addition,

UNUM denied Ms. Fought’s claim in a complicated set of circumstances without

seeking any independent review.

Thus, when an inherent conflict of interest, or a serious procedural

irregularity exists, such as here, and the plan administrator has denied coverage,

the district court is required to slide along the scale considerably and an

additional reduction in deference is appropriate.

Furthermore, application of this heightened standard of review does not

contradict established law. 4 Under ERISA, an insurer bears the burden to prove

4
There is correlating line of authority which places the burden on the
insurer to establish that the denial of benefits fell within the narrowly construed
exclusionary clause. See Caffey v. UNUM Life Ins. Co., 302 F.3d 576, 580 (6th
Cir. 2002) (“ERISA places the burden of proving an exclusion from coverage in
an ERISA-regulated welfare plan on the plan administrator.”); Frerking v. Blue
Cross-Blue Shield of Kan., 760 F. Supp. 877, 881 (D. Kan. 1991) (noting that “[i]t
is also well-established that the burden is upon the insurer to demonstrate that the
insured’s claim falls within the terms of the exclusionary clause, and that such
clauses are interpreted narrowly”) (citing Tex. E. Transmission Corp. v. Marine
Office-Appleton & Cox Corp., 579 F.2d 561, 564 (10th Cir. 1978) and Milliken v.
Fidelity & Cas. Co., 338 F.2d 35, 41 & n.13 (10th Cir. 1964)); Cleary v. Knapp
Shoes, Inc., 924 F. Supp. 309, 315 (D. Mass. 1996) (noting that “it is a general
rule of insurance law that the insurer bears the burden of showing that a covered
injury falls within an exclusion provision”) (citing McGee v. Equicor-Equitable
(continued...)

21
facts supporting an exclusion of coverage. McGee v. Equicor-Equitable HCA

Corp., 953 F.2d 1192, 1205 (10th Cir. 1992). Federal courts treat insurer claims

of policy exclusions as affirmative defenses. See 5 C HARLES ALAN W RIGHT &

A RTHUR R . M ILLER , F EDERAL P RACTICE AND P ROCEDURE : C IVIL 2 D § 1271 (1990)

(“[F]ederal courts have treated as [an] affirmative defense[] for purposes of Rule

8(c) . . . [a] claim by an insurer that the loss suffered by the insured was excepted

by the policy’s terms.”). See, e.g., Brownlow v. Aman, 740 F.2d 1476, 1486-88

(10th Cir. 1984) (holding that a defendant must prove its affirmative defenses by

a preponderance of the evidence); Cleary v. Knapp Shoes, Inc., 924 F. Supp. 309,

315 (D. Mass. 1996) (“[A] plan administrator attempting to establish exclusion

from coverage has the burden to establish by a preponderance of evidence that a

covered employee’s illness or medical condition is excludable.”) (internal

quotation marks omitted).

3. The district court’s application of the standard of review

Here, the district court noted that UNUM had admitted its inherent conflict

of interest. Aplt’s App. at 12-13. The court then stated that it was “[f]ully

recognizing” that conflict. Id. at 13. UNUM argues that the district court’s use

(...continued)
4

HCA Corp., 953 F.2d 1192, 1205 (10th Cir. 1992)).

22
of the word “fully” in the order indicates that the district court engaged in the

appropriate re-calibration along the sliding scale, while Ms. Fought argues that

the district court did not reduce its deference in recognition of the conflict.

We certainly do not question the district court’s awareness of a conflict.

However, it is not completely clear how the district court’s full “recognition” of

the conflict of interest affected its review of the plan administrator’s decision to

deny benefits to Ms. Fought.

Immediately after recognizing the conflict, the district court provided the

following description of its analysis: “[T]he guiding inquiry must be whether the

plan administrator’s decision was objectively reasonable given the administrative

record–not whether a different reasonable decision could have been made.”

Aplt’s App. at 13. This statement is difficult to distinguish from pure arbitrary

and capricious deference:

When reviewing under the arbitrary and capricious standard, [t]he
Administrator[’s] decision need not be the only logical one nor even
the best one. It need only be sufficiently supported by facts within
[his] knowledge to counter a claim that it was arbitrary or capricious.
The decision will be upheld unless it is not grounded on any
reasonable basis.

Kimber, 196 F.3d at 1098 (internal citations and quotation marks omitted).

Notably, in Kimber, upon which the district court relied, see Aplt’s App. at 13,

the court had considered and rejected the possibility that the administrator’s

conflict of interest required it to slide away from the pure arbitrary and capricious

23
standard. See Kimber, 196 F.3d at 1098 (“[T]here is insufficient evidence of a

conflict of interest and review with deference is appropriate.”).

The Kimber court’s “reasonable basis” language, echoed by the district

court here, is thus not the proper inquiry in this case. In Kimber, there was

insufficient evidence of a conflict of interest. Here, the conflict was clear and

uncontested. Under the standard we have set forth in this opinion, UNUM was

required to justify its decision to exclude coverage by substantial evidence.

Under that standard, we now proceed to consider the district court’s grant of

summary judgment to UNUM. In so doing, we examine the language of the plan

and the evidence on which UNUM relies in denying Ms. Fought’s claims for

benefits.

B. The Plan’s Language

The policy at issue here, as noted above, includes the following language

relevant to this appeal: “Your plan does not cover any disabilities caused by,

contributed to by, or resulting from your . . . pre-existing condition.” Aple’s

Supp. App. at 341-42.

You have a pre-existing condition when you apply for coverage when
you first become eligible if:

- you received medical treatment, consultation, care or
services including diagnostic measures or took prescribed
drugs or medicines in the 3 months just prior to your

24
 effective date of coverage; or you had symptoms for which
an ordinarily prudent person would have consulted a health
care provider in the 3 months just prior to your effective
date of coverage; and

- the disability begins in the first 12 months after your
effective date of coverage.

Id. at 342.

Applying our more searching and less deferential standard of review in

light of UNUM’s admitted conflict of interest, we must take a hard look and

determine whether UNUM established by substantial evidence that Ms. Fought’s

claim was not covered by the plan.

“We are mindful that the objective in construing a health care
agreement, as with general contract terms, is to ascertain and carry out
the true intention of the parties. However, we do so giving the
language its common and ordinary meaning as a reasonable person in
the position of the [plan] participant, not the actual participant, would
have understood the words to mean.”

Pitman, 217 F.3d at 1298 (quoting Blair v. Metropolitan Life Ins. Co., 974 F.2d

1219, 1221 (10th Cir. 1992) (internal quotation marks omitted)).

1. The role of causation in interpreting the pre-existing condition
clause

“Cause” means “[t]o be the cause of,” which is “[s]omething that produces

an effect, result, or consequence.” W EBSTER ’ S II N EW R IVERSIDE U NIVERSITY

D ICTIONARY 239 (1988). “Contributed” is defined broadly as “[t]o act as a

25
determining factor.” Id. at 306. “Results” means “to happen or exist as a result

of a cause.” Id. at 1002.

Ms. Fought argues that UNUM impermissibly extended the language of the

policy such that it excludes coverage for disabilities that result from surgery, not

those that result from pre-existing conditions. The major difficulty presented by

this case is that UNUM’s policy excludes coverage for disabilities caused by pre-

existing conditions, whereas it seeks here to apply its policy as if it excludes

coverage for disabilities caused by complications from surgery for pre-existing

conditions. Surgery is not, of course, a pre-existing condition, but at most a

necessary consequence of a pre-existing condition. In essence, therefore, this

case becomes a matter of where we draw the line on chains of causation.

UNUM responds that the broad language of the pre-existing condition

dictates a similarly broad interpretation of the exclusion: the exclusion does not

require that the disabling condition be the sole or direct result of the pre-existing

condition. Here, UNUM applies the limitation because it believes the disabling

condition was “caused by, contributed to, or resulted from” Ms. Fought’s pre-

existing condition. Based on the common ordinary meaning of the terms “cause,”

“contribute,” and “result,” UNUM contends, the “exclusion merely requires that

[Ms.] Fought’s pre-existing heart condition be ‘something’ that brought about the

disabling condition or that played a significant part in bringing about the

26
disabling condition, or that the disabling condition arose as a consequence of the

pre-existing condition.” Aple’s Br. at 25.

In practice, however, UNUM’s arguments rely upon classic but/for

causation: But for the coronary artery disease, none of the rest of the chain of

events would have happened. Or, as Ms. Fought herself put it: “It is kind of like

saying ‘If I hadn’t went outside in the rain, I wouldn’t have got struck by

lightening. [sic]’” Aplt’s App. at 157 (Letter to New Mexico Public Relations

Commission, dated Jan. 31, 2000).

As Ms. Fought persuasively argues, the chain of non-proximate causation

that UNUM asserts in her case is attenuated to the point of absurdity:

[UNUM’s] argument necessarily goes something like
this: but for the pre-existing coronary artery disease, Ms.
Fought probably would not have the surgery; but for the
surgery, Ms. Fought would not have had a surgical
wound; but for the surgical wound, Ms. Fought’s
previously undetectable osteoporotic sternum would not
have prevented her doctors from closing her wound in a
more conventional manner, which might have given the
wound greater stability and resistence to the lateral
tension in the wound exerted by Ms. Fought’s large
breasts; but for the combination of the surgical wound,
Ms. Fought’s osteoporotic sternum and her large breasts,
the wound probably would not have dehisced, thereby
providing an entry point for the staph infection several
weeks after the surgery; and, but for the fact that the
staph infection was resistant to antibiotics, entered Ms.
Fought’s bloodstream, and eventually spread to other
parts of her body, Ms. Fought would not be disabled.

Aplt’s Br. at 21-22.

27
 While the steps of causation are undoubtedly drawn out for effect, the

larger point is a valid one. For Ms. Fought, there were at least five intervening

stages between the pre-existing coronary artery disease and the disability: The

failure of non-surgical alternatives, initially successful elective surgery, later

complications from that surgery, initially successful treatment of those

complications, and finally a drug resistant infection due to those complications,

which in itself may have been caused by the intervening presence of

Staphylococcus aureus due to faulty sterilization, sanitation, etc. UNUM seems to

suggest that it need not cover anything for which it can construct a but/for story.

If we were to accept this contention, we would effectively render meaningless the

notion of the pre-existing condition clause by distending the breadth of the

exclusion.

2. Department of Labor’s regulations and example

The Department of Labor’s regulations also undermine UNUM’s

interpretation of the plan. Those regulations provide the following example

regarding the scope of a pre-existing condition exclusion: 5

5
Those regulations generally provide that “a group health plan, and a
health insurance issuer offering group health insurance coverage, may impose,
with respect to a participant or beneficiary, a preexisting condition exclusion only
if the requirements of this paragraph (a) are satisfied.” 29 C.F.R. § 2590.701-
(continued...)

28
 Example 4. (i) Individual D, who is subject to a preexisting exclusion
imposed by Employer U’s plan, has diabetes, as well as a foot
condition caused by poor circulation and retinal degeneration (both
of which are conditions that may be directly attributed to diabetes).
After enrolling in the plan, D stumbles and breaks a leg.
(ii) In this Example 4, the leg fracture is not a condition related to
D’s diabetes, even though poor circulation in D’s extremities and
poor vision may have contributed towards the accident. However,
any additional medical services that may be needed because of D’s
preexisting diabetic condition that would not be needed by another
patient with a broken leg who does not have diabetes may be subject
to the preexisting condition exclusion imposed under Employer U’s
plan.

29 C.F.R. § 2590.701-3 (a)(i)(C), Example 4.

In addition, the Practicing Law Institute provided these guidelines in

interpreting § 2590.701-3:

Thus, before imposing a preexisting condition limitation, plan sponsors
must carefully evaluate whether a particular condition is “directly
attributable” to the preexisting condition. Medical conditions which
merely “contribute towards” accidents or illnesses, but are not “directly
attributable” to the preexisting condition may not be excluded. This
causal connection requirement will undoubtedly open the door for
arguments that preexisting conditions were not the “proximate cause”
of a particular injury or sickness -- e.g., treatment of pneumonia for an
individual who was previously diagnosed with AIDS.

John R. Hickman, Insurance Law: What Every Lawyer and Businessperson Needs

to Know , H EALTH I NSURANCE B ASICS : ERISA, FMLA, ADA, ADEA, COBRA,

5
(...continued)
3(a)(i). Those regulations include the length of time during which the condition
was treated and the kind of treatment that has been received for the condition.
See id.

29
HIPAA, AND PARCA, 584 PLI/Lit 413, 487 (May 1998).

When applying the above example from § 2590.701-3 to Ms. Fought’s case,

we determine that UNUM’s expansive reading of the exclusion may be overly

broad: The exclusion cannot merely require that the pre-existing condition be one

in a series of factors that contributes to the disabling condition; the disabling

condition must be substantially or directly attributable to the pre-existing

condition. See also W EBSTER ’ S II N EW R IVERSIDE D ICTIONARY 306 (defining

contribute as to mean “to act as a determining factor”). Ms. Fought’s staph

infection is not a condition related to her coronary artery disease, even though her

unstable angina, which was related to her coronary artery disease, undoubtedly

contributed to the need for surgery. To read the exclusion as broadly as UNUM,

counters the essential tenets of contract law: Exclusions must be interpreted

narrowly. See 29 C.F.R. § 2590.701-3 (a)(i)(C), Example 4 (applying narrow

definition of “contributed towards”); Frerking, 760 F. Supp. at 881 (noting that in

the context of plans governed by ERISA, “[i]t is also well-established that the

burden is upon the insurer to demonstrate that the insured’s claim falls within the

terms of an exclusionary clause, and that such clauses are interpreted narrowly”).

3. Illustrative cases

The few cases that have focused on the application of proximate cause to

exclusions for pre-existing conditions are not inapposite. In Cash v. Wal-Mart

30
Group Health Plan, 107 F.3d 637 (8th Cir. 1997), the plaintiff was diagnosed

with diverticular disease. He later developed diverticulitis. The Eighth Circuit

held the denial of benefits was reasonable, because the diverticulitis was a

complication and secondary condition of the presence of diverticula in the wall of

the colon. Id. at 643. In other words, the diverticular disease was a “necessary

precursor” to the later illness of diverticulitis. Id. Here, in contrast, Ms.

Fought’s coronary condition was not a prerequisite to the onset of the staph

infection: There is no necessary precursor link.

Similarly, in Holsey v. UNUM Life Ins. Co. of Am., 944 F. Supp. 573, 579

(E.D. Mich. 1996), relied upon by the district court, “[Plaintiff’s] blindness was

caused by, contributed to by or resulted from diabetes where blindness was

related to diabetes and glaucoma was a well-known complication of diabetes;

preexisting condition exclusion enforced.” Aplt’s App. at 14. Holsey, like Cash,

clearly describes a situation where an insurer denied coverage for the results of

diabetes, not for the complications from treatment or surgery for diabetes.

Blindness certainly is a well-known complication of diabetes. Staph infections

are not, so far as we are aware, a well-known complication of coronary artery

disease.

The district court also cited to Currie v. Metropolitan Life Ins. Co., No.

CIV-A-1665, 1998 WL 214761, at *3-4 (E.D. La. April 29, 1998), and noted the

31
Currie court “reject[ed the] argument that plaintiff was suffering from a different

sickness or injury when she received treatment within the pre-existing period; all

treatment stemmed from prior car wreck; preexisting condition exclusion

enforced.” Aplt’s App. at 14. The plaintiff in Currie was disabled because of

back pain. She had been treated for back pain after a car accident that had

occurred before she was covered by the insurance policy, so the insurer denied

coverage for a pre-existing condition. She tried to claim that she was at that point

suffering from a different kind of back pain, whereas the back pain for which she

had received treatment was from a different cause; but the court held that all of

the back pain had arisen from the car accident. This scenario, however, has

nothing in common with Ms. Fought’s case. The question is not whether her

disability arose from a different surgery or a different form of heart disease but

simply whether the causal connection between the disease and the disability is

insufficiently proximate.

Next, in Reinert v. Giorgio Foods, Inc., 15 F. Supp. 2d 589 (E.D. Pa.

1998), the plaintiff, Ms. Giorgio, suffered from three pre-existing conditions

before she became eligible for plan benefits: diabetes, Charcot joint disease, and

diabetic neuropathy. She later suffered from a series of ulcerations on her left

foot. Two of the ulcerations were manifestations of her pre-existing conditions.

A third ulceration developed from an insulin needle that became embedded in the

32
plaintiff’s foot. The needle ulceration was a “separate and distinct injury which

was aggravated by those underlying conditions.” Id. The court found improper

the denial of benefits for the treatment of this injury.

The court recognized, however, that the distinction between the ulcers was

subtle. Ulcerations similar to those suffered by Ms. Giorgio were frequently

caused by continuing deterioration of the bones and tissue in her foot, which was

in turn caused by the diabetes, Charcot joint disease, and diabetic neuropathy.

Thus, applying a strict arbitrary and capricious standard, with no conflict of

interest present, the court determined that the improper denial of benefits as to the

third ulcer was not arbitrary and capricious.

Here, UNUM cannot point to such nuances. The staph infection was a

separate and distinct injury, not a manifestation of the underlying coronary

disease.

Finally, and most importantly, in Vander Pas v. UNUM Life Ins. Co. of

Am., 7 F. Supp. 2d 1011 (E.D. Wisc. 1998), the plaintiff had suffered from a pre-

existing heart condition for which he took the drug Coumadin. Coumadin puts a

patient at risk for a subdural hematoma. The patient did suffer a subdural

hematoma, and UNUM attempted to deny coverage on the theory that the pre-

existing heart condition had caused him to take Coumadin, which had then caused

the hematoma. The district court in Vander Pas described the chain of causality

33
as “attenuated: [T]he plaintiff’s atrial fibrillation caused him to take Coumadin,

which brought about his subdural hematoma, which produced his disability.” Id.

at 1018. The court faulted UNUM for not providing a “proximate cause

analysis,” among other failings. Id. The district court therefore denied UNUM’s

motion for summary judgment.

UNUM attempts to distinguish Vander Pas by asserting that the court did

not actually rule against UNUM on the basis of lack of proximate cause, but

because UNUM “had not set forth that, or any, explanation of a chain of

causation.” Aple’s Br. at 15 (bold-faced type in original). This misreads Vander

Pas. The court clearly based its decision on UNUM’s failure to explain how the

treatment itself, Coumadin, was the “pre-existing condition.” Vander Pas, 7 F.

Supp. 2d at 1018. In other words, the district court properly required UNUM to

show that the proximate cause of the disability (taking Coumadin) pre-existed.

That the patient would not have been taking Coumadin but for the pre-existing

heart condition did not make the pre-existing condition the “cause” of the

disability. See id. (“[T]he proposition that Coumadin played a part in causing

plaintiff’s subdural hematoma . . . is not equivalent to a studied conclusion that

plaintiff’s use of Coumadin satisfies the definition for ‘pre-existing condition,’ or

that his disability was ‘caused by, contributed to by, or result[ed] from’ the use of

Coumadin.”). Similarly here, UNUM must demonstrate that the proximate cause

34
of the disability, here, the staph infection, was a pre-existing condition.

4. Availability of clearer language

Ms. Fought next argues that there is certainly a clearer way to write a

contract that would exclude coverage for complications from surgery. Indeed, she

notes a district court case from this circuit that considered a contract with

precisely that language: “Pursuant to the Plan, long-term disability benefits . . .

are not payable for any[] . . . [d]isability caused or contributed to by a Preexisting

Condition or medical or surgical treatment of a Preexisting Condition.” Kaus v.

Standard Ins. Co., 985 F. Supp. 1277, 1279 (D. Kan. 1997) (emphasis added),

aff’d, No. 97-3378, 1998 WL 778055 (10th Cir. Nov. 5, 1998); see also Reinert,

15 F. Supp. 2d at 595 (suggesting the redrafting of the exclusion to encompass

“all conditions relating to pre-existing illnesses” so as to avoid similar claims).

In addition, the exclusion might be drafted to cover bacterial infections. See, e.g.,

Lewin v. Metropolitan Life Ins. Co., 394 F.2d 608, 609 (3d Cir. 1968) (applying

accident insurance policy). The district court acknowledged that the language

“may be clearer in Kaus” but it reasoned that the contract language here is “broad

enough to encompass the treatment received in this case.” Aplt’s App. at 15.

UNUM is a sophisticated party, and the plan’s language is, on the whole,

careful and thorough. The existence of policies, as in Kaus, that specifically deny

35
coverage on the basis of complications from surgery lends support to the

argument that it is unreasonable as a matter of law to conclude that the general

language in Ms. Fought’s contract encompasses the same result. UNUM had

every opportunity to add the words “or medical or surgical treatment of a

Preexisting Condition,” Kaus, 985 F. Supp. at 1279, but it did not do so. It is

unreasonable to allow it to do so post facto, to the detriment of Ms. Fought and

other insureds.

Given the Department’s regulations invoking proximate cause, the

illustration above, and the availability of clearer language, we conclude that the

language of the exclusion provision in the contract should not be extended to the

degree that UNUM attempts to do here. See 29 C.F.R. § 2590.701-3 (a)(i)(C),

Example 4; Frerking, 760 F. Supp. at 881 (citing caselaw requiring a narrow

interpretation of exclusion clauses).

C. Sufficiency of the evidence

Our inquiry does not end here, however. We still must determine whether

the improper denial of benefits was supported by substantial evidence.

In denying disability benefits to Ms. Fought, UNUM relied in part on the

discharge report presented by Dr. Waljii. Dr. Waljii’s report indicated that, during

the heart bypass surgery, he discovered that Ms. Fought’s sternum was “narrow

36
and “very osteoporotic.” Aplt’s App. at 79. Dr. Waljii attempted to

“reapproximate the sternum,” using wires that tore through it. Id. He removed the

wires and reapproximated the sternum using a surgical procedure called “Robichek

reinforcement.” Id. The remainder of the wound was closed in a “standard three

layer closure.” Id. He reported:

Because of the large and pendulous breasts as well as significant
adiposity, the lower portion of the skin incision was also at risk of
dehiscence as indeed was the full sternum. Clearly her post-operative
course was anticipated to be quite challenging given the concerns about
the wound as indeed her other medical problems.

Id.

Ms. Fought returned to the hospital a few weeks later for “wound care of

this sternal dehiscence and quite possibly sternal infection.” Aplt’s App. at 53.

She was sent to a nursing facility a few days later. Approximately three weeks

later she was readmitted because of increased wound pain. After two exposed

sternal wires were detected, the methicillin-resistant Staphylococcus aureus

infection was diagnosed in her bloodstream.

Ms. Fought’s initial application for long term disability, filed in June 1999,

while she was hospitalized, indicates that she was unable to work since the time of

her open heart surgery. Her application’s physician statement indicated that she

had coronary artery disease, that she underwent bypass surgery, and that she

continued to be hospitalized due to the sternal wound infection. As described

37
above and as the medical records indicate, Ms. Fought was hospitalized for two

months and underwent several operations and procedures as a result of the

inability to clear up the staph infection.

UNUM’s in-house pre-existing medical review concluded that the conditions

were “most likely caused by, contributed to, or resulted from [Ms. Fought’s

previously diagnosed severe hypertension and mod/severe left ventricle

hypertrophy.]” Aplt’s App. at 72. The in-house review took one day to complete

and yielded a one-paragraph opinion that indicated that “[m]edical records from

this period could further strengthen this opinion.” Id. UNUM acknowledges that

the staph infection was not present during the pre-existing time period, but that it

resulted from the surgery “that was performed for a cardiac condition that was

present . . . during that time frame.” Aplt’s App. at 147.

In support of her argument, Ms. Fought presents notes from three doctors

indicating that the staph infection was a separate condition, unrelated to the

coronary artery disease, without a preceding history. See Aplt’s App. at 156.

(Note from Dr. Robert T. Ferraro, dated Oct. 19, 1999) (“[T]he staph infection

which is the basis for multiple wounds on chest is not related to coronary artery

disease. This is a separate, unrelated diagnosis without preceding history.”); id. at

154 (Note from Dr. Robert Dubroff, dated Oct. 22, 1999) (“[Ms.] Fought is totally

disabled due to her heart condition. The staph infection was not a pre-existing

38
condition.”); id. at 155 (Note from Dr. Neil T. Chen, undated) (“[Ms.] Fought’s

chest and abdominal wounds/infection is [sic] not a preexisting condition.”).

(emphasis in original). Two of the three physicians were treating physicians.

UNUM counters that the notes do not state that the staph infection caused

her disabling condition, in fact, one note indicates that the disability was “due to

her heart condition.” Id. at 154. UNUM thus contends its reliance on the medical

records, in conjunction with the medical notes, supports the plan administrator’s

conclusion that it was the coronary artery disease that set in motion the staph

infection.

We acknowledge that, in some instances, the presence of conflicting

evidence in the record may establish that a plan administrator’s decision was

reasonable. See Sandoval, 967 F.2d at 382. However, here, applying the less

deferential standard, UNUM must establish by substantial evidence that its denial

of benefits was reasonable. Moreover, the only arguably conflicting evidence here

is the note from Dr. Dubroff that states both that Ms. Fought may be disabled “due

to her heart condition” and that her “staph infection was not a pre-existing

condition.” Aplt’s App. at 154. The bulk of Ms. Fought’s medical records

indicate that she was recovering well from the surgery; the onset of the staph

infection, which originated from an unknown origin, was the debilitating

condition. UNUM is unable to offer “more than a scintilla” of evidence, Sandoval,

39
967 F.2d at 382, that the staph infection was a manifestation of the pre-existing

coronary artery condition, that it was caused by the pre-existing condition, or that

it was substantially contributed to by or resulted from the pre-existing condition.

In addition, despite its apparent and admitted conflict of interest, UNUM

undertook no independent evaluation or investigation. We note that, while not

required, independent medical examinations are often helpful. Where a conflict of

interest exists, the Seventh Circuit encourages, if not requires, such an inquiry:

“When it is possible to question the fiduciaries’ loyalty, they are obliged at a

minimum to engage in an intensive and scrupulous independent investigation of

their options to insure that they act in the best interests of the plan beneficiaries.”

Hightshue v. AIG Life Ins. Co., 135 F.3d 1144, 1148 (7th Cir. 1998) (internal

quotation marks omitted). “Seeking independent expert advice is evidence of a

thorough investigation.” Id.; see also Woo v. Deluxe Corp., 144 F.3d 1157, 1161

(8th Cir. 1998) (holding that administrator erred in failing to obtain an

independent review of the claim by an expert when treating physician determined

applicant was disabled and when there was evidence of an uncommon disease);

Morgan v. UNUM Life Ins. Co. of Am., 346 F.3d 1173, 1177 (8th Cir. 2003)

(noting that “[i]n some circumstances, the administrator’s use of an in-house

physician rather than a specialist to review a disability claim involving an

uncommon disease can be a serious procedural irregularity affecting the

40
administrator’s decision”). Where, as here, a conflict of interest may impede the

plan administrator’s impartiality, the administrator best promotes the purposes of

ERISA by obtaining an independent evaluation. See 29 U.S.C. § 1001(b).

In sum, we cannot say that, given UNUM’s conflict of interest, and our

sliding scale review, that UNUM has justified its denial of benefits by substantial

evidence. UNUM’s repeated denials of Ms. Fought’s claims merely echo the terms

of the pre-existing condition plan language, and offer at most thin support from

the record before us.

III. CONCLUSION

We thus hold that the plan’s language here does not reasonably apply to the

attenuated chain of events between Ms. Fought’s pre-existing coronary artery

disease and her disabling staph infection and that UNUM’s denial of benefits was

not supported by substantial evidence. Accordingly, we REVERSE the district

court’s grant of summary judgment to UNUM and REMAND for further

proceedings consistent with this opinion. 6

6
Because we reverse the district court’s grant of summary judgment in
favor of UNUM, we also vacate the district court’s order that UNUM recover its
costs of action from Ms. Fought.

41