Peterson v. Continental Cas. Co.
| Decision Date | 19 February 2002 |
| Docket Number | Docket No. 01-7068. |
| Parties | Joseph J. PETERSON, Plaintiff-Appellee, v. CONTINENTAL CASUALTY COMPANY, Defendant Appellant. |
| Court | U.S. Court of Appeals — Second Circuit |
Mark Scherzer (A. Christopher Wieber, on the brief), New York, NY, for Plaintiff-Appellee.
Randi F. Knepper, Del Mauro, DiGiaimo & Knepper, P.C., New York, NY, for Defendant-Appellant.
Before: MINER, McLAUGHLIN, and STRAUB, Circuit Judges.
Defendant-Appellant Continental Casualty Company ("Continental")1 appeals from a judgment entered in the United States District Court for the Southern District of New York (Colleen McMahon, Judge) directing Continental to pay benefits to Plaintiff Appellee Joseph Peterson pursuant to Peterson's long-term disability plan. For the reasons stated herein, we vacate the judgment of the District Court regarding Peterson's eligibility for long-term benefits beyond the initial twenty-four-month period described by his plan. We additionally vacate the District Court's award of attorneys' fees and costs that Peterson incurred during administrative proceedings before filing suit in the District Court but affirm the award of fees and costs incurred by Peterson after suit was filed. Finally, we hold that each party shall bear its own costs in connection with this appeal.
The facts of this case are fully detailed in the District Court's two prior published dispositions, see Peterson v. Cont'l Cas. Co., 116 F.Supp.2d 532 (S.D.N.Y.2000); Peterson v. Cont'l Cas. Co., 77 F.Supp.2d 420 (S.D.N.Y.1999); familiarity with the record is assumed and only the facts necessary for disposition of this appeal are recounted. Peterson was employed by CBS Broadcasting, Inc. ("CBS") for 37 years, serving most of that time as a venue production manager for the company. In September 1997, Peterson was diagnosed as suffering from carpal tunnel syndrome in his hands and an injury to his back. Because these conditions rendered him unable to work as a venue production manager, Peterson was temporarily reassigned to another position requiring no physical activity. In May 1998, Peterson realized that he would be unable to return to his old position and applied for benefits pursuant to the CBS-sponsored short and long-term disability plans, which were issued and administered by Continental.
Under the Continental plans, eligible employees can receive three types of disability benefits. First, the short-term disability plan allows eligible employees to receive 100 percent of their salary for thirteen weeks. Once short-term benefits are exhausted, an employee may receive benefits under the long-term disability plan. However, the long-term plan is further divided into two types of benefits: (1) benefits payable for an initial twenty-four-month period, referred to as the employee's "occupation period" (benefits provided for this period are referred to herein as "occupation-period benefits"); and (2) after the conclusion of the occupation period, benefits payable until the employee's 65th birthday if the employee is less than 61 years of age when injured (benefits provided for this period are referred to herein as "permanent benefits").2 Both the short and long-term plans vest discretionary authority in Continental to make coverage decisions regarding employee benefits under the plans.
Employees are eligible for long-term disability benefits if they can demonstrate a "Total Disability." However, the plan defines Total Disability differently for occupation-period and permanent benefits. According to the plan, to receive occupation-period benefits:
"Total Disability" means that, during the Elimination Period and Your Occupation Period3 shown in the Schedule of Benefits, You, because of Injury or Sickness, are:
(1) continuously unable to perform the substantial and material duties of Your regular occupation;
(2) under the regular care of a licensed physician other than Yourself; and
(3) not gainfully employed in any occupation for which You are or become qualified by education, training or experience.
To be eligible for permanent benefits, the policy provides:
After the Monthly Benefit has been payable for Your Occupation Period, "Total Disability" means that, because of Injury or Sickness, You are:
(1) continuously unable to engage in any occupation for which You are or become qualified by education, training or experience; and
(2) under the regular care of a licensed physician other than Yourself.
Peterson applied for both short and long-term benefits, claiming that his conditions rendered him incapable of performing the duties of a venue production manager. Peterson was granted short-term benefits from March 15, 1998 to August 10, 1998 while his claims were being investigated. On July 30, 1998, Continental notified Peterson that his claims for short and long-term benefits were denied. Continental determined that Peterson had not proven that he was continuously unable to perform the substantial and material duties of his occupation. Peterson appealed the decision in Continental's internal appeals process, but was unsuccessful.
Peterson then initiated the instant suit in the United States District Court for the Southern District of New York alleging that Continental's decision to deny him benefits violated the terms of his policy. The District Court had jurisdiction over the suit pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. ERISA provides federal district courts with jurisdiction over disputes involving employee welfare benefit plans. See id. § 1132(e). Peterson's short and long-term disability plans constitute employee welfare plans which fall within ERISA. See id. § 1003.
After initial discovery, both parties moved for summary judgment. The District Court denied full summary judgment, but found that Continental improperly defined Peterson's regular occupation as the position created by CBS to accommodate Peterson's disability. The court determined that Peterson's regular occupation should have been defined as venue production manager — the position in which he served prior to the onset of his disability. Because Continental evaluated Peterson's claim against the wrong occupation, the District Court remanded the claim. In its remand order, the court stated:
I am thus remanding the claim back to the Claim Administrator, who should determine whether Peterson's medical condition—evaluated against the duties of his "regular occupation," rather than his temporary accommodation—entitled him to benefits under the Long Term Plan. Because the Plan sets forth a tripartite test, the Administrator should also evaluate whether Peterson was disabled from being "gainfully employed in any occupation for which [he was or became] qualified by education, training or experience."
Peterson, 77 F.Supp.2d at 429 (alteration in original).
Upon remand, Continental examined the job requirements of a venue production manager, evidence of Peterson's past job duties, and the medical evidence submitted by Peterson. After doing so, on April 7, 2000, it again denied Peterson's claim, finding that "the evidence submitted does not support a functional impairment or medical complications that would have prevented Mr. Peterson from working in his regular occupation beyond May 15, 1998, or that would compromise his ability to perform the substantial and material duties associated with his occupation as a Venue Production Manager." Peterson asked for reconsideration, but on June 23, 2000, Continental confirmed its earlier denial.
Peterson again appealed to the District Court, which on October 23, 2000, issued a Memorandum Decision and Order granting Peterson's motion for summary judgment. The District Court held that Continental's denial of short-term and occupation-period benefits was improper. Because Continental failed to consider relevant information proffered by Peterson and used improper standards in assessing Peterson's claims, Continental's determination was deemed arbitrary and capricious. The court further stated:
Despite a specific direction by this Court that it do so, CNA failed to address whether Peterson is "qualified by training, education and experience for any occupation" other than venue production manager, which is a requirement under the Plan after a claimant receives 24 months of [long-term-disability] benefits. CNA's failure to make a finding on this issue, when it was specifically directed to do so and when Plaintiff had submitted evidence addressing the issue, is manifestly unreasonable. This Court will therefore make the determination based on the record that was before CNA.
Peterson, 116 F.Supp.2d at 545-46.
After conducting an independent review of the record, the court then found that Peterson had demonstrated a "Total Disability" within the meaning of the permanent benefits section of his long-term disability plan, and was therefore entitled to permanent benefits. In a separate judgment dated December 18, 2000, the District Court rejected Continental's motion for reconsideration and awarded attorneys' fees and prejudgment interest to Peterson. The court awarded fees to Peterson for costs incurred during both Peterson's appeal within Continental's internal appeals process and during the litigation in the District Court. This timely appeal by Continental followed.
On appeal, Continental does not challenge the District Court's finding that Peterson's regular occupation was a venue production manager. Nor does Continental contest the District Court's judgment that Continental improperly denied short-term and occupation-period benefits. Instead, Continental challenges only the District Court's decision regarding Peterson's eligibility for permanent benefits and its decision to award attorneys' fees. In addition, Peterson...
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