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Principal Wrongly Applied Pre-Existing Condition Exclusion in Denying Coverage for Indiana Executive

A federal appellate court held that Principal Mutual Life Insurance Company (“Principal”) wrongly applied its pre-existing condition exclusion to deny coverage for Charlotte Pitcher’s breast cancer treatment, because a routine physical exam and mammogram did not constitute treatment for breast cancer.

Ms. Pitcher’s Disability and Claim for Benefits

For nearly twenty years, Charlotte Pitcher received treatment for a common fibrocystic breast condition that was not known to develop into breast cancer. When Ms. Pitcher began working for the Center for Real Estate Education and Research in August 1992, she became eligible for health benefits beginning the following month under a group policy with Principal.

The policy contained a provision that excluded coverage for a pre-existing condition, defined as a sickness or injury for which a member is confined or received treatment or service in the 90-day look-back period before she became insured under the policy. Thus, if Ms. Pitcher received “treatment or service” for a medical condition existing in the 90-day period prior to September 17, 1992, that condition would qualify as a pre-existing condition under the policy.

On July 31, 1992, Ms. Pitcher’s doctor discovered lumps in both of her breasts during a routine physical exam but suspected they were nothing more than fibrocystic breast changes. When the lumps did not subside two months later, Ms. Pitcher had a mammogram which warranted a biopsy but also showed findings consistent with her longstanding condition. However, the biopsy revealed a malignant tumor that was removed by lumpectomy in October 1992, followed by a two-month course of radiation treatments.

Ms. Pitcher sought reimbursement for the costs she incurred for the cancer-related procedures subsequent to the effective date of the policy. In response, Principal determined that Ms. Pitcher had received “treatment or service” for breast cancer within the 90-day look-back period and therefore denied coverage. After Principal denied her appeal, Ms. Pitcher filed a lawsuit seeking recovery for breach of contract among other claims.

District and Appellate Court Proceedings

Ms. Pitcher filed a motion for summary judgment with the District Court, arguing that Principal was liable for the cancer-related procedures as a matter of law because the cancerous tumor was discovered after the commencement of the coverage period and therefore was not a pre-existing condition as defined by the policy. Though Principal filed its own motion for summary judgment, the court agreed with Ms. Pitcher’s arguments and granted her motion.

Principal then appealed to the Seventh Circuit Court of Appeals, which:

  • Explained that the key question in the case was whether Ms. Pitcher received a “treatment or service” for breast cancer during the look-back period, and NOT whether she actually had breast cancer during this time period; and
  • Held that Ms. Pitcher did not receive a “treatment or service” for breast cancer during the look-back period because, as the District Court found, she was being monitored for the longstanding fibrocystic breast condition and not cancer during the look-back period.

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