Thomas v. OR Fruit Prod.

• Decision Date: 05 October 2000
• Docket Number: No. 98-36065,98-36065
• Citation: Thomas v. OR Fruit Prod., 228 F.3d 991 (9th Cir. 2000)
• Parties: (9th Cir. 2000) ROBERT THOMAS, in his capacity as the personal representative of the Estate of CAROL THOMAS, Plaintiff-Appellant, v. OREGON FRUIT PRODUCTS (TMC)COMPANY, an Oregon corporation; RELIANCECOMPANY, an Illinois corporation, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 991

228 F.3d 991 (9th Cir. 2000)

ROBERT THOMAS, in his capacity as the personal representative of the Estate of CAROL THOMAS, Plaintiff-Appellant, v. OREGON FRUIT PRODUCTS (TMC)COMPANY, an Oregon corporation; RELIANCECOMPANY, an Illinois corporation, Defendants-Appellees.

No. 98-36065

United States Court of Appeals for the Ninth Circuit

Argued and Submitted June 14, 2000

Filed October 5, 2000

J. Michael Alexander, Burt, Swanson, Lathen, Alexander & McCann, PC, Salem, Oregon, for the plaintiff-appellant.

R. Daniel Lindahl, Bullivant, Houser, Bailey, Portland, Oregon, for the defendants-appellees.

Appeal from the United States District Court for the District of Oregon; Michael R. Hogan, District Judge, Presiding. D.C. No.CV-95-06425-MRH

Before: Mary M. Schroeder, Michael Daly Hawkins and Raymond C. Fisher, Circuit Judges.

FISHER, Circuit Judge:

Carol Thomas appeals the district court's determination that Reliance Standard Life Insurance Company ("Reliance") did not abuse its discretion in denying her application for long-term disability benefits.¹ On appeal, Thomas' principal arguments are that the district court applied an incorrect standard of review -abuse of discretion, rather than de novo -and that she had a right to a trial by jury because her claim is legal in nature. The district court had jurisdiction over Thomas' Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. SS 1001 et seq., claim under 29 U.S.C. S 1132(e), and we have jurisdiction to review the district court proceedings, see 28 U.S.C. S 1291. In light of Kearney v. Standard Ins. Co., 175 F.3d 1084 (9th Cir.) (en banc), cert. denied, 120 S. Ct. 398 (1999), we agree that the district court used an erroneous standard of review in evaluating Reliance's benefits decision; therefore, we remand to the district court for de novo review of Thomas' claim. We conclude, however, that Thomas is not entitled to a jury trial upon remand.

FACTUAL AND PROCEDURAL BACKGROUND

Carol Thomas began working at Oregon Fruit Products Co. ("Oregon Fruit") on June 3, 1993. Oregon Fruit offered long term disability benefits to its eligible employees, and Thomas became eligible for such benefits on July 1, 1993.

On June 22, 1994 (less than one year after becoming eligible for benefits), Thomas ceased work due to bronchitis. In early July (more than one year after becoming eligible for benefits), Thomas' condition worsened and she was hospitalized for treatment. Thomas' employer terminated her on July 18, 1994. Thomas had not returned to work between June 22 and July 18. On the day following her termination, Thomas' doctor determined that she could not return to work because of her worsening myasthenia gravis (a condition she has had since 1979).

Oregon Fruit's employee benefits were provided through a Group Life, Accidental Death & Dismemberment, and Long Term Disability Insurance Policy issued by Reliance (the "Policy"). On October 7, 1994, Thomas filed a claim for longterm disability benefits. Reliance rejected Thomas' claim, finding that her disability was caused by a pre-existing condition and that the Policy contained an exclusion for such conditions.²

Thomas contested Reliance's denial of her claim. She did not dispute Reliance's finding that her myasthenia gravis constituted a pre-existing condition under the terms of the Policy, but argued that her absence from work during June and early July due to bronchitis was unrelated to her myasthenia gravis. As additional support for her request for reconsideration, Thomas submitted letters from two physicians, both of whom stated explicitly that her bronchitis was not caused by myasthenia gravis. Despite the additional evidence, Reliance again rejected Thomas' claim. Reliance based its decision on the fact that, when she was admitted to the hospital on July 4, Thomas' diagnosis was "acute bronchitis related to her myasthenia gravis."

Thomas filed suit in Oregon state court, seeking damages in the amount of her lost benefits from September 19, 1994 and a determination that she was entitled to future benefits. Reliance removed the case to federal court and sought summary judgment. The district court granted Reliance's third summary judgment motion. The district court concluded that, as long as Reliance had considered the contrary opinion of Thomas' doctors when making its coverage decision, Reliance had not abused its discretion in discrediting those opinions and denying Thomas' claim.

DISCUSSION

I. Standard of Review

"[A] denial of benefits challenged under [ERISA] 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." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The principal issue on appeal is whether the district court erred in reviewing Reliance's decision for abuse of discretion based on its conclusion that the Policy granted Reliance discretionary authority. We review the district court's grant of summary judgment de novo. See Lang v. Long Term Disability Plan, 125 F.3d 794, 797 (9th Cir. 1997). We also review de novo Thomas' "contention that the district court did not apply the proper standard of review." McDaniel v. Chevron Corp., 203 F.3d 1099, 1107 (9th Cir. 2000).

Our consideration of Thomas' claim is guided by our recent en banc decision, Kearney v. Standard Ins. Co., in which we held that district courts must review claims de novo unless the discretion to grant or deny claims is "unambiguously retained" by a plan administrator or fiduciary. 175 F.3d at 1090 (quoting Bogue v. Ampex Corp., 976 F.2d 1319, 1325 (9th Cir. 1992)). We concluded that unambiguous retention of discretion by an administrator or fiduciary is required because of the well-settled rule of policy interpretation dictating that "ambiguities are construed in favor of the insured." Id. Applying this principle to the plan at issue in that case, we held that a policy that conditions payment of benefits on the "receipt of satisfactory written proof" of disability is ambiguous because it is susceptible of at least three interpretations, two of which would not confer absolute discretion on the administrator or fiduciary. Id. at 1089-90 (quoting benefit plan) (internal quotation marks omitted).

The Policy provision at issue in this case is substantially similar. The Policy establishes that benefits will be paid only upon submission of "satisfactory proof of Total Disability to us." The only material distinction between this provision and the provision found to be ambiguous in Kearney is the inclusion of the words "to us." Reliance, which carries the burden of showing that the Policy is unambiguous, see id. at 1089, argues that this additional language resolves the ambiguity in its favor. We do not agree. The additional language has the opposite effect because it is unclear what the phrase "to us" is intended to modify. One possible interpretation is that the submitted proof must be "satisfactory to us" (Reliance), thereby arguably conferring discretion on Reliance. Another interpretation, however, is that proof "satisfactory" (to a reasonable person) must be submitted "to us" (Reliance). Under the latter interpretation, the Policy does not grant Reliance discretion.³ We therefore hold that the Policy does not unambiguously grant Reliance discretion to evaluate claims as it sees fit. As in Kearney, the district court should have reviewed Thomas' claim de novo.

Our holding is buttressed by Sandy v. Reliance Standard Life Ins. Co., 222 F.3d 1202 (9th Cir.2000), a decision filed by this court subsequent to submission of Thomas' appeal. Sandy analyzed a provision substantially similar to the Policy's provision and held that the provision was ambiguous. ⁴. See id. We reasoned in Sandy that the language utilized by Reliance is not sufficiently distinguishable from Kearney to justify a different result. See id. ("Reliance argues that its `satisfactory proof' language is different from Standard's in Kearney, and it is -but not meaningfully so.").

Reliance stresses that our interpretation directly conflicts with Yeager v. Reliance Standard Life Ins. Co. , 88 F.3d 376 (6th Cir. 1996), in which the Sixth Circuit interpreted the exact language included in the Policy and held that the abuse of discretion standard applied. See id. at 380-81. However, in Yeager, the Sixth Circuit's decision was based on its conclusion that "[a] determination that evidence is satisfactory is a subjective judgment that requires a plan administrator to exercise its discretion." Id. at 381. That conclusion is not sufficient under Kearney, which establishes that a subjective provision must clearly confer discretion and define the scope of that discretion in order to be considered unambiguous. See Kearney, 175 F.3d at 1090.

The district court, which decided this case pre-Kearney and therefore proceeded without its guidance, incorrectly reviewed Reliance's decision for an abuse of discretion. Under that standard, the district court was required to review Reliance's factual findings for clear error. See Taft v. Equitable Life Assurance, 9 F.3d 1469, 1473 (9th Cir. 1994) (amended opinion) ("[A]n administrator . . . abuses its discretion if it relies on clearly erroneous findings of fact in making benefit determinations."). Under de novo review, however, the district court would have been able to conduct a much broader review, considering anew both the legal and factual aspects of Thomas' claim. See Walker v. American Home Shield Long Term Disability Plan, 180 F.3d 1065, 1069 (9th Cir. 1999). Accordingly, we must reverse the summary judgment and remand unless we conclude that the record fails to establish a genuine issue of fact to be resolved by the district court. See Kearney, 175 F.3d at 1093-94.

Remand is appropriate because a genuine issue of fact does exist as to whether...