Arnold v. Life Ins. Co. of North America

• Decision Date: 01 March 1990
• Docket Number: No. 89-8374,89-8374
• Citation: 894 F.2d 1566
• Parties: Cecil Ray ARNOLD, Plaintiff-Appellant, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1566

894 F.2d 1566

Cecil Ray ARNOLD, Plaintiff-Appellant, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellee.

No. 89-8374.

United States Court of Appeals, Eleventh Circuit.

March 1, 1990.

Richard D. Phillips, Ludowici, Ga., for plaintiff-appellant.

James B. Durham, Fendig, McLemore, Taylor & Whitworth, Brunswick, Ga., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Georgia.

Before JOHNSON and ANDERSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.

TUTTLE, Senior Circuit Judge:

This is an appeal from the dismissal by the trial court of appellant Arnold's complaint in which he had alleged defendant Life Insurance Company of North America had refused to pay for the loss of plaintiff's sight in one eye.

I. STATEMENT OF THE CASE

The insurance policy in question was provided to the plaintiff by his employer under an employee welfare benefit plan. His claim, therefore, fell within the purview of the Employee Retirement Insurance Security Act, 29 U.S.C. Sec. 1001 et seq. (ERISA). The plan administrator ruled that the plaintiff was not entitled to benefits under ERISA because, as he held, plaintiff did not meet the definition of "entire and irrecoverable loss of sight" under the policy. The petitioner then sought review in the district court. The court, considering the matter de novo, affirmed the decision of the plan administrator and held that the plaintiff was not entitled to recover.

II. STATEMENT OF FACTS

The facts are not disputed. The plaintiff suffered an injury to his eye while on the job. He had surgery in an effort to correct the vision which, uncorrected, gave him a vision represented by 20/400 but, by the use of corrective lenses was 20/50 minus one. The undisputed evidence was that appellant could see well enough by the use of a corrective lens for his injured eye, to permit him to perform his usual duties.

The policy provision upon which plaintiff relied reads as follows:

Coverage A--Loss of Life, Limb or Sight Indemnity. If such injuries shall result in any one of the following specific losses within one year from the date of accident, the Company will pay the benefit specified as applicable thereto, based upon the Principal Sum stated in the Policy Schedule; ... Loss of one member ... One-Half The Principal Sum. "Member" means hand, foot or eye. "Loss" means, with regard to hand or foot, actual severance through or above the wrist or ankle joints; with regard to eye, entire and irrecoverable loss of sight.

III. ISSUES ON APPEAL

1. By what legal standard is the language of this contract to be construed?

2. Did the trial court err in its construction of the contract under such proper standard?

IV. DISCUSSION

The parties are in agreement that the Supreme Court's decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. ----, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), prescribes the law that federal courts are to apply in ERISA actions. The federal courts are to develop a "federal common law of rights and obligations under ERISA-regulated plans," 109 S.Ct. at 954, citing Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41 at 56, 107 S.Ct. 1549 at 1558, 95 L.Ed.2d 39 (1987). The Court also referred to Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 24 n. 26, 103 S.Ct. 2841, 2854 n. 26, 77 L.Ed.2d 420 (1983) (" 'a body of federal substantive law will be developed by the courts to deal with issues involving rights and obligations under private welfare and pension plans.' ").

We agree with the trial court that this does not mean that the federal courts attempt merely to decide what a majority of state courts have done in their interpretations of an insurance policy provision to establish the federal common law. Federal common law is that law fashioned by the federal courts through their interpretation of policy language and is not based upon any calculation of the majority of decisions from other jurisdictions.

A. Standard of Review

The appellee here contends that the district court's review of the decision by the plan administrator should have been on a deferential basis rather than de novo. In other words, appellee claims that the court should not set aside the administrator's decision unless it was "arbitrary and capricious"; see generally, Firestone, supra, 109 S.Ct. at 953.

We conclude that it is not necessary for us to determine which standard of review should be applied here, because under either standard the federal common law requires us to give effect to the unambiguous language of the policy when construed in accordance with its terms.

B. Meaning of the Policy

It is clear that the terms of this contract respecting Coverage A, under which plaintiff claims, clearly and unambiguously deal with the "entire and irrecoverable loss of sight." This is first made clear by the first line in Coverage A, which is: "Loss of life, limb or sight indemnity." This language indicates that any loss of sight was considered differently from a loss of life or a loss of limb, especially since in the further provision of Coverage A, it is clear that the policy protected against a complete loss of the hand or foot but with respect to the eye, it "means ... with regard to eye, entire and irrecoverable loss of sight." It did not state "irrecoverable injury to eye."

While the eye may have been irrecoverably damaged, the sight clearly was not. The evidence is undisputed that with corrective lenses, the sight was substantially normal.

We conclude, therefore, that there is only one construction that can be made of this provision, and that construction requires that we find that the trial court did not err in dismissing the plaintiff's complaint.

We recognize that there are state court decisions holding similar contract terms in the manner contended for by the plaintiff, but there are also state court opinions, holding as we do, including the Georgia case involving this same plaintiff, claiming under a different insurance policy, Arnold v. Equitable Life Assurance Society of the U.S., 189 Ga.App. 66, 374 S.E.2d 782 (1988), citing Smith v. Great American Life Insurance Co., 125 Ga.App. 587, 188 S.E.2d 439 (1972).

V. CONCLUSION

The judgment of the trial court is therefore AFFIRMED.

JOHNSON, Circuit Judge, dissenting:

Because I cannot agree with the Court's approach to interpreting the insurance policy at issue in this case, and because I ultimately reach a different conclusion as to its meaning, I respectfully dissent.

I. STANDARD OF REVIEW

It is clear that if deferential "arbitrary and capricious" review were applied to the plan administrator's decision to deny benefits in this case, we would be obliged to uphold that decision. I have no doubt that the plan administrator's interpretation of the policy is rationally supportable. As discussed below in Part II, however, my de novo interpretation of the policy leads me to the opposite conclusion. Therefore, while the majority is able to avoid deciding what level of scrutiny must be applied to the plan administrator's decision, ¹ I must necessarily resolve that question at the outset.

The answer is straightforward. Under Firestone Tire & Rubber Co. v. Bruch, --- U.S. ----, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989), a denial of benefits under an ERISA-governed plan "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." Applying Firestone, this Court has held that the administrator's decisions and interpretations "must be reviewed de novo unless the plan expressly gives the administrator discretionary authority to make eligibility determinations or to construe the plan's terms"; otherwise, "application of the more deferential arbitrary and capricious standard is appropriate." Guy v. Southeastern Iron Workers' Welfare Fund, 877 F.2d 37, 38-39 (11th Cir.1989) (emphasis added). The only language in the present policy to which appellee, the Life Insurance Company of North America ("the Company"), can point in support of such discretionary authority is the statement that "[a]fter your claim has been processed, you will be notified in writing if any benefits are denied in whole or in part." This language does not even refer to the plan administrator and says nothing about the deference to be accorded to his decisions. It merely describes the initial procedure for claim determination. It thus fails to meet the standard cited above. Cf. Jett v. Blue Cross and Blue Shield of Alabama, 890 F.2d 1137, 1139 (11th Cir.1989) (discretionary authority found where plan stated that "whenever the Claims Administrator makes reasonable determinations ... such determinations shall be final and conclusive" and that "Blue Cross ... has the exclusive right to interpret [the plan], so its decision is conclusive and binding"). The district court therefore correctly applied de novo review to the meaning of the policy in this case and this Court in turn is obligated to conduct de novo review. ²

II. THE MEANING OF THE POLICY

A. The Proper Measure of Post-Accident Vision

The majority's brief discussion of the policy's meaning proceeds from the premise that the policy language is unambiguous and can bear only one construction. I am at a loss to understand this approach. The majority finds informative the fact that the relevant policy heading refers to "[l]oss of life, limb or sight indemnity" (emphasis supplied by the Court) and that the policy refers to "entire and irrecoverable loss of sight" rather than "irrecoverable injury to eye." These observations, however, beg the question. ³ It is of no moment that the policy deals with loss of the ability to see, rather than loss of the eye as a physical organ. Appellant Arnold has never claimed or suggested otherwise. Nor, as the Court notes, has Arnold ever disputed that with corrective lenses his sight...