Wegner v. Standard Ins. Co.

• Decision Date: 09 December 1997
• Docket Number: No. 97-20062,97-20062
• Citation: 129 F.3d 814
• Parties: Robert P. WEGNER, Plaintiff-Appellee, v. STANDARD INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 814

129 F.3d 814

Robert P. WEGNER, Plaintiff-Appellee, v. STANDARD INSURANCE COMPANY, Defendant-Appellant.

No. 97-20062.

United States Court of Appeals, Fifth Circuit.

Dec. 9, 1997.

John G. Emerson, Jr., Bruce Martin Feichtinger, Whittington, von Sternberg, Emerson & Wilsher, Houston, TX, for Plaintiff-Appellee.

Mark T. Davenport, Stephen D. Howen, Figari & Davenport, Dallas, TX, for Defendant-Appellant.

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

Before REAVLEY, BARKSDALE and STEWART, Circuit Judges.

STEWART, Circuit Judge:

This case, which calls for us to construe the phrase "overtime pay and any other extra compensation" as it appears in a group disability insurance policy, arises from an injury suffered by Robert P. Wegner shortly after he accepted a higher-compensating, out-of-town job assignment from his employer. Standard Insurance Company, the issuer of the policy, contends that Wegner's higher earnings at the time he was injured constitute excluded "overtime" or "any other extra compensation" under the policy, and therefore the proper basis for calculating his disability benefit is his lower pre-assignment rate of compensation. In response to cross-motions for summary judgment, the district court held in favor of Wegner, finding that his higher compensation was not overtime or extra compensation and therefore serves as the proper basis for calculating the disability benefit. In a separate order, the district court also awarded Wegner attorneys' fees. Standard appeals both rulings, and we affirm.

BACKGROUND

On June 29, 1990, Robert P. Wegner ("Wegner") began work as a service technician/fabricator with CRC-Evans Pipeline, Inc. ("CRC-Evans") in Houston at the rate of $10.25 per hour. He received a pay increase to $10.75 per hour soon thereafter. On July 22, 1991, Wegner accepted an assignment to CRC-Evan's "Kern River Project" in Las Vegas. The Employee Assignment Agreement provided that he was being assigned to the project as a senior operator/technician; he would be paid a salary of $300 per day for working approximately 12 On September 4, 1991, while working on a construction site, Wegner fell from a truck and suffered shoulder and elbow injuries. On September 21, 1991, CRC-Evans executed another authorization form, terminating Wegner's assignment to the Kern River project and returning his status to that of an hourly employee paid at the rate of $10.75 per hour. At the time of his injury, Wegner was covered by a long-term disability insurance policy (the "policy") provided by CRC-Evans, as part of an employee welfare benefit plan within the purview of the Employee Retirement Income Security Act of 1974 ("ERISA"). ² Accordingly, Wegner applied for disability benefits pursuant to the policy. ³ Standard Insurance Company ("Standard"), the issuer of the policy, accepted Wegner's disability claim, but the present dispute as to the proper calculation of the benefit amount soon arose.

hours per day, 7 days a week; and his assignment would end upon either the successful completion of the project or termination of the project by CRC-Evans or the contractor. A Change Authorization/Employment Authorization form implementing Wegner's change in status from an hourly to a salaried employee qualified the compensation change as being effective for the duration of the assignment only. ¹

In the event of a disability, the policy provides coverage for 60% of an employee's "pre-disability earnings," subject to "maximum amount" limits not applicable here. The policy defines "predisability earnings" as follows:

PREDISABILITY EARNINGS means your monthly rate of earnings from your EMPLOYER including commissions and deferred compensation, but excluding bonuses, overtime pay and any other extra compensation.

(emphasis added). The predisability earnings used to compute the disability benefit is determined as follows:

If you become DISABLED, the ... PREDISABILITY EARNINGS used to compute your LTD BENEFIT will be based on your monthly rate of earnings in effect on your last full day of ACTIVE WORK before you become DISABLED. Any change in the amount of your monthly rate of earnings which is approved or becomes effective after that last full day of ACTIVE WORK will have no effect on the amount of your ... PREDISABILITY EARNINGS used to compute your LTD BENEFIT for that period of DISABILITY.

In determining the amount of disability benefits to be paid to Wegner, Standard based its calculation of Wegner's predisability earnings on the $10.75 per hour rate he was earning prior to his assignment to the Kern River project.

On or about March 14, 1995, Wegner filed suit in Texas state court, asserting that his predisability earnings should be calculated on the basis of his higher $300 per day rate of compensation at Kern River. Standard removed the case to the United States District Court for the Southern District of Texas, Houston Division, and subsequently filed a motion for summary judgment arguing that the $300 per day rate of compensation constituted "overtime" or "any other extra compensation" that was excluded from coverage under the policy. Wegner then filed a counter-motion for summary judgment, arguing that the increased pay did not constitute "overtime" or "any other extra compensation" and therefore was the proper basis on which to calculate predisability earnings. The parties stipulated that if Wegner's interpretation of the policy was adopted, the amount of back benefits payable to him through July 19, 1996 would be $221,846.40 On October 31, 1996, the district court ruled in favor of Wegner on the cross-motions for summary judgment; in addition, the district court requested further briefing and production of evidence on whether Wegner was entitled to attorneys' fees. On December 18, 1996, the district court awarded Wegner substantially all the relief he sought regarding attorneys' fees, and entered the final judgment in this case. Standard timely appeals, and this court has jurisdiction of this case pursuant to 28 U.S.C. § 1291.

should the court expand the benefits period beyond July 19, 1996, the appropriate rate would be $5,459.58 per month.

DISCUSSION

Construction of Policy

We review a district court's grant of summary judgment de novo. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1451 (5th Cir.1995). Summary judgment is appropriate if the record discloses "that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In making this determination, we must evaluate the facts in the light most favorable to the non-moving party. Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356; Todd, 47 F.3d at 1451.

Moreover, when we are called to interpret an ERISA-covered policy in cases involving the denial of benefits challenged under 29 U.S.C. § 1132(a)(1)(B), we construe the terms of the plan de novo "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, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989); Todd, 47 F.3d at 1451; Harms v. Cavenham Forest Indus., 984 F.2d 686, 688 (5th Cir.1993). The record in this case reveals no such grant of discretionary authority to a fiduciary or administrator. As such, the language of the policy will guide our de novo interpretation. Harms, 984 F.2d at 688.

Federal common law governs this case, including the construction of the policy provisions at the heart of this dispute. Todd, 47 F.3d at 1451; Jones v. Georgia Pacific Corp., 90 F.3d 114, 116 (5th Cir.1996). Although we may "draw guidance from analogous state law" in ascertaining the applicable federal common law, Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1325 (5th Cir.1994) (internal quotation omitted), "[w]e must nevertheless bear in mind that, in doing so, we may use [it] ... only to the extent that [it] is not inconsistent with congressional policy concerns." Todd, 47 F.3d at 1451 (internal quotation and brackets omitted).

In construing ERISA plan provisions, we interpret the contract language "in an ordinary and popular sense as would a person of average intelligence and experience," such that the language is given its generally accepted meaning if there is one. Todd, 47 F.3d at 1451 n. 1 (internal quotation omitted); Jones, 90 F.3d at 116 (internal quotation omitted). Only if the plan terms remain ambiguous after applying ordinary principles of contract interpretation are we compelled to apply the rule of contra proferentum and construe the terms strictly in favor of the insured. Id.

The primary issue in this case is whether Wegner, at the time of his injury, was earning "overtime" or "any other extra compensation" which was excluded from coverage under the policy. ⁴ After reviewing the policy, we hold that the terms "overtime" and "any other extra compensation" are not ambiguous, but rather have an ordinary and generally accepted meaning. A person of average intelligence and experience, reading these terms of limitation in the policy, would conclude that Wegner's $300 per day salary at the Kern River project did not constitute overtime or any other extra compensation.

We are unimpressed with Standard's argument that a person working 12 hours a day, 7 days a week must be working overtime. As the district court noted, the concept of "overtime" ordinarily applies only to hourly employees:

                once the employee exceeds his assigned number of hours, he is paid at a higher hourly rate for the excess. 5  Wegner's $300 per day rate of compensation at Kern River does not fall within the generally accepted meaning of the term overtime.  The relevant employment documents implementing Wegner's assignment to Kern River explicitly

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