Vercher v. Alexander & Alexander Inc.

• Decision Date: 26 July 2004
• Docket Number: No. 02-31135.,02-31135.
• Citation: 379 F.3d 222
• Parties: Barbara F. VERCHER, Plaintiff-Appellant, v. ALEXANDER & ALEXANDER INC.; et al., Defendants, Aon Services Corp.; Aon Risk Services Inc. of Louisiana, formerly known as Alexander & Alexander Inc.; Metropolitan Life Insurance Co.; Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 222

379 F.3d 222

Barbara F. VERCHER, Plaintiff-Appellant, v. ALEXANDER & ALEXANDER INC.; et al., Defendants Aon Services Corp.; Aon Risk Services Inc. of Louisiana, formerly known as Alexander & Alexander Inc.; Metropolitan Life Insurance Co.; Defendants-Appellees.

No. 02-31135.

United States Court of Appeals, Fifth Circuit.

July 26, 2004.

John Clayton Geiger, Alexandria, LA, for Plaintiff-Appellant.

Richard Edward McCormack, Brigid Brown Glorioso, Irwin, Fritchie, Urquhart & Moore, New Orleans, LA, for Defendants-Appellees.

Appeal from the United States District Court for the Western District of Louisiana.

Before GARWOOD and JONES, Circuit Judges, and ZAINEY,^* District Judge.

GARWOOD, Circuit Judge:

Plaintiff-appellant Barbara F. Vercher appeals the district court's grant of summary judgment in favor of defendants-appellees, Aon Services Corporation, Aon Risk Services, Inc. of Louisiana (formerly known as Alexander and Alexander, Inc.) (Alexander), and Metropolitan Life Insurance Company (MetLife), upholding the denial of Vercher's claim for long-term disability benefits. We affirm.

Facts and Proceedings Below

Barbara Vercher (Vercher), began working for Alexander in 1978 as an Accounting Clerk. She was first promoted in 1979, then again in 1980, 1983, 1986, and finally in May of 1993 to Manager of Administrative Services. Vercher continued to work at Alexander until March 7, 1995.

During the course and scope of her employment with Alexander, Vercher was injured in a motor vehicle accident on February 19, 1991. The accident resulted in injury to her knee, head, and back. In late 1991 she began to experience numbness in her arms and legs. She was referred to Dr. C. Babson Fresh who on October 27, 1992, performed an anterior cervical discectomy and fusion with bank bone at C5/C6 on Vercher. When Vercher returned to Dr. Fresh in December 1992 with continued pain at the base of her neck and in her right arm, Dr. Fresh assessed that the pain was myofascial, and not nerve root in origin. When Dr. Fresh released Vercher in February of 1993, he declared her at "Maximum Medical Improvement." Dr. Fresh eventually recommended medical retirement on April 13, 1995. Another doctor, Dr. Farley Tumbaco, who had treated Vercher from September 28, 1994, also recommended medical retirement.

Vercher ceased working for Alexander on March 7, 1995, because of her alleged disabilities stemming from the 1991 worked-related accident. Vercher had elected coverage under her employer's long-term disability plan which did not entitle her to benefits until six months later.¹ On August 22, 1995, Vercher submitted her application for long-term disability benefits. Soon thereafter, Alexander entered into an Administrative Services Agreement (ASA) with MetLife, which gave MetLife authority to perform certain administrative services related to the Alexander disability plan. The ASA also gave MetLife discretionary authority for determining eligibility for disability benefits and for construing plan terms.² Disability under the plan is determined as follows:

"You are disabled if, because of injury or sickness:

-You are completely unable to perform any and every duty of your regular occupation; and

-After benefits have been paid for 60 months, you are completely unable to perform the material duties of any gainful occupation for which you are reasonably suited by training, education, or experience."

MetLife denied Vercher's claim for long-term benefits on November 27, 1995. On January 17, 1996, Vercher appealed MetLife's denial of her claim, maintaining that she was totally disabled and entitled to long-term disability benefits. On November 5, 1996, MetLife denied her appeal adhering to its prior determination that she was not disabled.

Vercher filed this action in state court on February 12, 1998. Appellees then removed the case to federal court on April 21, 1998, asserting exclusive federal jurisdiction over actions for wrongful denial of benefits governed by the Employee Retirement Income Security Act of 1974 (ERISA). The parties filed cross motions of partial summary judgment, and the district court disposed of those motions holding that the MetLife ASA controlled the disposition of the claim, and that MetLife's decision to deny Vercher's claim for disability benefits would be reviewed for abuse of discretion. The parties then filed cross-motions for summary judgment. The district court granted appellees' motion, holding that MetLife did not abuse its discretion in denying Vercher's claim for long-term disability benefits. Vercher timely appealed.

Discussion

1. Standard of Review

This court reviews the district court's grant of summary judgment de novo. Hodges v. Delta Airlines, Inc., 44 F.3d 334, 335 (5th Cir.1995) (en banc). Standard summary judgment rules control in ERISA cases. See Barhan v. Ry-Ron Inc., 121 F.3d 198, 202 (5th Cir.1997). Summary judgment is appropriate when, viewing the evidence and all justifiable inferences in the light most favorable to the non-moving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Hunt v. Cromartie, 526 U.S. 541, 119 S.Ct. 1545, 1551-52, 143 L.Ed.2d 731 (1999); see also Fed.R.Civ.P. 56(c).

2. MetLife and the abuse of discretion standard

Vercher's long-term disability plan was sponsored by her employer, Alexander. The official plan administrator was the United States Benefit Administration Committee of Alexander and Alexander Services, Inc. The plan was not an insurance policy, and there was no insurance policy of which Vercher was a beneficiary. The employees paid into the plan monthly according to the character of plan benefit which they had elected and which the employer agreed to provide. Until October 1, 1995, benefits under the plan were paid by Alexander through an ASA with Aetna. While the Aetna ASA provided that Aetna would determine benefit claims under the plan, it did not expressly give Aetna "discretionary authority" to construe plan terms. The agreement with Aetna was in effect at the time of Vercher's injury, at the time she stopped working, and at the time she filed her initial claim. After Vercher's claim for benefits had been filed, but before it had been decided or presented to Aetna for determination, Alexander entered into the aforementioned ASA with MetLife, effective October 1, 1995.³ Under the agreement, MetLife had the "discretionary authority for determining eligibility for disability benefits and for construing Plan terms."

Vercher asserts that because there was no such discretionary provision in the agreement with Aetna, and because the Aetna agreement was in effect at the time she submitted her claim, her claim should have been reviewed under the terms of the non-discretionary Aetna ASA, and in turn, the district court should have applied a de novo, as opposed to an abuse of discretion, standard.

After the initial hearing, in its memorandum ruling of February 1, 2002, the district court determined that the MetLife, not the Aetna, agreement was controlling, and therefore decided that the standard of review would be abuse of discretion.

In her brief, Vercher "concedes that if [the MetLife] plan was the appropriate plan under which her claim should have been reviewed, then the arbitrary and capricious standard utilized by the District Court was the correct standard." However, Vercher disputes the district court's decision that the MetLife agreement controls. In addition to the fact that she made the required payments to the Plan for disability coverage thereunder, was injured, became disabled and filed her claim for benefits while the Aetna ASA was in effect, Vercher asserts that Alexander deliberately held her claim until the MetLife ASA came into effect.⁴

The district court held that because an ERISA cause of action accrues at the time the benefits claim is denied, the plan in effect at the time of that denial controls the claim. To support its holding, the district court cited an unpublished Fourth Circuit opinion, McWilliams v. Metropolitan Life Ins. Co., 172 F.3d 863, 1999 WL 64275, *2 (4th Cir.1999), in which the court held that an ASA expressly granting MetLife the discretion to determine eligibility for long-term disability benefits controlled because it was in effect when the applicant's claim was denied, even though it was not in effect when he became disabled.⁵

In the Fifth Circuit, the proper standard under which a district court is to review a plan administrator's benefit determination is governed both by the Supreme Court's decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), and our subsequent decision in Pierre v. Connecticut General Life Ins. Co., 932 F.2d 1552 (5th Cir.1991), cert. denied, 502 U.S. 973, 112 S.Ct. 453, 116 L.Ed.2d 470 (1991), in which we construed and applied Firestone. In Firestone, the Supreme Court held that judicial review of the administrator's determination of plan terms and eligibility for benefits provisions was to be de novo unless the plan expressly conferred upon the plan administrator discretionary authority in making such determinations. If discretion were granted, the "abuse of discretion" standard would apply instead. However, in Pierre, we held that even where the plan does not expressly give the administrator discretionary authority, "for factual determinations under ERISA plans, the abuse of discretion standard of review is the appropriate standard" (emphasis added). 932 F.2d at 1562; see also Southern Farm Bureau Life Ins. Co. v. Moore, 993 F.2d 98, 100-01 (5th Cir.1993); Sweatman v. Commercial Union Ins. Co., 39 F.3d 594, 597-98 (5th Cir.1994). Therefore, a plan administrator's factual determinations are always reviewed for abuse of discretion; but its construction of the meaning of plan terms or plan benefit entitlement provisions is reviewed de novo unless there is an...