Gallagher v. Reliance Standard Life Insurance Co.

• Decision Date: 25 September 2002
• Docket Number: No. 01-2467.,01-2467.
• Citation: 305 F.3d 264
• Parties: Patrick L. GALLAGHER, Plaintiff-Appellee, v. RELIANCE STANDARD LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

305 F.3d 264

Patrick L. GALLAGHER, Plaintiff-Appellee, v. RELIANCE STANDARD LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 01-2467.

United States Court of Appeals, Fourth Circuit.

Argued June 5, 2002.

Decided September 25, 2002.

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ARGUED; Joshua Bachrach, Rawle & Henderson, L.L.P., Philadelphia, Pennsylvania, for Defendant-Appellant. Edward G. Connette, III, Lesesne & Connette, Charlotte, North Carolina, for Plaintiff-Appellee.

Before WILLIAMS and GREGORY, Circuit Judges, and FREDERICK P. STAMP, JR., United States District Judge for the Northern District of West Virginia, sitting by designation.

Reversed and remanded with instructions by published opinion. Judge WILLIAMS wrote the opinion, in which Judge GREGORY and Judge STAMP joined.

OPINION

WILLIAMS, Circuit Judge.

Reliance Standard Life Insurance Company (Reliance) appeals the district court's entry of summary judgment in favor of Patrick L. Gallagher in this action for wrongful denial of benefits under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001 et seq. (West 2001). The issues on appeal are (1) whether the district court erred in applying an abuse of discretion standard to Reliance's decision to deny benefits and (2) whether the district court erred by reversing Reliance's decision to deny benefits and entering summary judgment in Gallagher's favor. We conclude that Reliance's decision to deny benefits to Gallagher is subject to de novo review and uphold Reliance's decision under this standard of review. Accordingly, we reverse the district court's entry of summary judgment in Gallagher's favor and remand for entry of judgment in Reliance's favor.

I.

Gallagher worked as a corporate officer and publisher for Goodwill Publishing, Inc. (GWP) for 26 years. His job required three to four hours a day of sedentary work, such as word processing, and some international travel. Gallagher suffered on and off from back pain during most of the time he was employed by GWP. In 1986, Gallagher sought medical treatment for pain in his lumbar spine. When his condition did not improve, he underwent a suction discectomy. The surgery improved Gallagher's condition, but walking, standing, and sitting remained difficult. In 1990, Gallagher began treatment at the Key Biscayne Medical Clinic and eventually took a leave of absence to enroll in a six-week rehabilitation program. During this time, Gallagher began to suffer nerve pain in his neck and left arm and was diagnosed with diffuse degenerative disc disease, disc herniation, and spurring on the facets¹ throughout his lumbar spine. In 1997 Gallagher's cervical spine pain became "severe." (J.A. at 936.) Dr. Eismont, a neurosurgeon, diagnosed Gallagher as suffering from arthritic changes and stenosis.² Because of the pain caused by his chronic back condition, Gallagher resigned from his job on May 2, 1998.

Gallagher is covered by GWP's long-term disability policy (the Plan), an employee welfare benefit plan governed by ERISA and funded by Reliance. GWP is the Plan Administrator, and Reliance is a fiduciary with responsibility for making claims determinations. On July 10, 1998, GWP forwarded Gallagher's disability benefit application to Reliance. On February 2, 1999, Reliance denied Gallagher's claim because it determined that his medical condition did not meet the definition of total disability under the Plan. On February 25, 1999, the Social Security Administration found Gallagher to be totally disabled under the Social Security regulations. On June 3, 1999, Gallagher requested Reliance to review the denial of his disability benefits under the Plan and submitted additional materials to support his claim. On October 13, 1999, Reliance, after conducting an independent review, determined that denial of benefits was appropriate based on Gallagher's failure to satisfy the definition of total disability. Specifically, Reliance concluded that Gallagher could perform one or more of the material duties of his regular occupation. Having exhausted his administrative remedies, Gallagher initiated this ERISA action in the United States District Court for the Western District of North Carolina. The district court concluded that Reliance had abused its discretion and entered summary judgment in favor of Gallagher. Reliance filed a timely notice of appeal.

II.

We examine the district court's grant of summary judgment de novo, applying the same legal test as the district court. Elliott v. Sara Lee Corp., 190 F.3d 601, 605 (4th Cir.1999). It is well-established that a court reviewing the denial of disability benefits under ERISA initially must decide whether a benefit plan's language grants the administrator or fiduciary discretion to determine the claimant's eligibility for benefits, and if so, whether the administrator acted within the scope of that discretion. Feder v. Paul Revere Life Ins. Co., 228 F.3d 518, 522 (4th Cir.2000); see also Johannssen v. District No. 1 — Pacific Coast District, 292 F.3d 159, 168 (4th Cir.2002) (explaining that if the language of the plan grants the administrator or fiduciary discretion to determine eligibility for benefits under the plan, the reviewing court determines whether a denial of benefits was an abuse of discretion).³ No specific phrases or terms are required in a plan to preclude a de novo standard of review. Feder, 228 F.3d at 522 ("[I]f the terms of a plan indicate a clear intention to delegate final authority to determine eligibility to the plan administrator, then this Court will recognize discretionary authority by implication."). The plan's intention to confer discretion on the plan administrator or fiduciary, however, must be clear. Sandy v. Reliance Standard Life Ins. Co., 222 F.3d 1202, 1207 (9th Cir.2000) ("Neither the parties nor the courts should have to divine whether discretion is conferred."). If a plan does not clearly grant discretion, the standard of review is de novo. Feder, 228 F.3d at 524. Any ambiguity in an ERISA plan "is construed against the drafter of the plan, and it is construed in accordance with the reasonable expectations of the insured." Bynum v. Cigna Healthcare, Inc., 287 F.3d 305, 313-14 (4th Cir.2002). Of course, because de novo review is more rigorous, if a reviewing court upholds a benefits decision under de novo review, it also would uphold it under a deferential standard. Feder, 228 F.3d at 522 (explaining that under the deferential standard, the reviewing court should uphold an administrator's decision if it is reasonable, even if the court would have reached a different conclusion).

With these principles in mind, we must determine whether the following language in the plan grants Reliance discretion to determine Gallagher's eligibility for benefits: "We will pay a Monthly Benefit if the Insured ... submits satisfactory proof of Total Disability to us."⁴ (J.A. at 89.) There are two possible ways to interpret this language: (1) that Gallagher must submit to Reliance satisfactory proof of his disability or (2) that he must submit proof of his disability that is satisfactory to Reliance.⁵ The former interpretation would require Gallagher to submit to Reliance proof of a total disability that is objectively satisfactory; to determine whether Gallagher met this objective standard, we would review Reliance's denial of his claim de novo. Feder, 228 F.3d at 523 (requirement that claimant submit written proof of disability and "proof to verify the continuance of any disability" establishes an objective standard); see also Herzberger v. Standard Ins. Co., 205 F.3d 327, 332 (7th Cir.2000) (explaining that merely requiring claimant to submit proof or satisfactory proof does not create a subjective standard). The latter interpretation, however, would require Gallagher to submit to Reliance proof of a total disability that Reliance finds subjectively satisfactory; to determine whether Gallagher met this subjective standard, we would review Reliance's denial of his claim for abuse of discretion. Bernstein v. CapitalCare Inc., 70 F.3d 783, 788 (4th Cir.1995) (concluding that an agreement gave discretion to the administrator because it provided that benefits would be paid out only if the administrator determined that certain conditions are met). We conclude that the language of the Plan does not grant Reliance discretionary authority. First, as noted above, a grant of discretion must be clear. Sandy, 222 F.3d at 1204 ("No matter how you slice it, requiring a claimant to submit `satisfactory proof does not unambiguously confer discretion...."); see also Perugini-Christen v. Homestead Mortgage Co., 287 F.3d 624, 626 (7th Cir. 2002) ("Because it is not clear from the plain language which interpretation is the correct one, ... Reliance failed to reserve discretionary authority."); Kinstler v First Reliance Standard Life Ins. Co., 181 F.3d 243, 252 (2d Cir.1999) ("[T]he needless ambiguity in the wording of the policy should be resolved against First Reliance."). Second, an insured employee reading this language would most likely interpret "to us" as an indication of where to submit the proof, not as granting Reliance discretion to determine whether the proof was satisfactory. The prepositional phrase "to us," as written in the Plan, is more naturally read as modifying "submit" rather than "satisfactory."⁶

Accordingly, we hold that the proper standard of review of Reliance's denial of Gallagher's claim for benefits is de novo, and we must next determine whether the proof of total disability he submitted to Reliance was objectively satisfactory.

III.

A.

Under the Plan, an insured employee is totally disabled when, as the result of an injury or sickness, the employee "cannot perform each and every material duty of his/her regular occupation" during the elimination period. (J.A. at 84.) An employee is unable to perform "each and every duty" if he is unable to perform "all the...