## Facts

- Valerie K. Hall had employer-provided long-term disability (LTD) insurance issued by Continental Casualty Company (Continental).
- The policy excluded coverage for disability caused by a “preexisting condition,” defined as a condition for which medical treatment or advice was rendered, prescribed, or recommended within three months before the policy’s effective date.
- During the three-month look-back period, Hall, a longtime smoker, went to the emergency room with nonspecific symptoms, including chest pain, shortness of breath, and left-arm numbness.
- She was initially assessed with conditions such as pneumonia, tachycardia, and asthma.
- Chest imaging revealed a spot on her lung; physicians considered possible lung cancer given her smoking history, but also considered pneumonia and ordered additional testing to determine the cause.
- After the policy became effective, Hall was diagnosed with lung cancer.
- Hall became disabled and submitted an LTD claim.
- Continental denied benefits, asserting the lung cancer was a preexisting condition because Hall had received medical attention and diagnostic testing during the look-back period.
- Hall sued Continental for breach of contract (wrongful denial of benefits) and for insurer bad faith under Wisconsin law.
- Continental removed the case to federal court; the court proceeded under diversity jurisdiction because the plan was a government plan exempt from ERISA.
- Continental moved for summary judgment on both claims.

## Issues

1. Whether Hall’s lung cancer fell within the policy’s preexisting-condition exclusion when, during the look-back period, she received medical attention for symptoms and testing that could have indicated cancer but no treatment or advice was given for lung cancer itself.
2. Whether Continental was entitled to summary judgment on Hall’s Wisconsin bad-faith claim based on its handling and denial of the LTD claim.

## Decision

- The court held the preexisting-condition exclusion did not apply because Hall did not receive treatment or advice for lung cancer before the policy’s effective date; the pre-policy care addressed nonspecific symptoms and possible alternative causes.
- The court denied Continental’s motion for summary judgment on the breach-of-contract claim and entered summary judgment for Hall on that claim because the material facts were undisputed and coverage existed as a matter of law.
- The court denied Continental’s motion for summary judgment on the bad-faith claim, concluding that factual disputes about the reasonableness of Continental’s conduct precluded judgment as a matter of law at that stage.

## Legal Principles

- Under Wisconsin law, a preexisting-condition exclusion defined by “treatment or advice” applies when the insured received treatment or advice for the condition at issue during the look-back period, not merely care for symptoms that might later be traced to that condition.
- Medical evaluation and treatment for general or ambiguous symptoms, without a diagnosis and without treatment or advice directed to the later-diagnosed disease, may be insufficient to trigger a preexisting-condition exclusion.
- A federal court may grant summary judgment to a nonmoving party when the record shows there is no genuine dispute of material fact and that party is entitled to judgment as a matter of law.
- Under Wisconsin law, insurer bad faith generally requires showing (1) the absence of a reasonable basis for denying benefits and (2) the insurer’s knowledge or reckless disregard of the lack of a reasonable basis; where the record permits competing inferences about claim handling, summary judgment may be inappropriate.

## Conclusion

Hall’s pre-policy medical visit involved nonspecific complaints and testing that did not amount to treatment or advice for lung cancer, so the court ruled the LTD policy’s preexisting-condition exclusion did not bar coverage and entered judgment for Hall on breach of contract; however, because the reasonableness of Continental’s investigation and denial presented factual questions, the court allowed Hall’s Wisconsin bad-faith claim to proceed.


Hall v. Continental Casualty Company, 207 F. Supp. 2d 903 (2002)