United States District Court, D. Oregon, Portland Division
PATRICE A. DELANEY, Plaintiff,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant
For Patrice A. Delaney, Plaintiff: John C. Shaw, LEAD ATTORNEY, Megan E. Glor Attorneys at Law, Portland, OR; Megan E. Glor, LEAD ATTORNEY, Megan E. Glor, Attorneys at Law PC, Portland, OR.
For Prudential Insurance Company of America, Defendant: Amanda A. Sonneborn, James C. Goodfellow, Jr., LEAD ATTORNEYS, PRO HAC VICE, Seyfarth Shaw LLP, Chicago, IL; Diane L. Polscer, LEAD ATTORNEY, Andrew S. Moses, Gordon & Polscer, LLC, Portland, OR.
FINDINGS AND RECOMMENDATIONS
Janice M. Stewart, United States Magistrate Judge.
Plaintiff, Patrice A. Delaney (" Delaney" ), is a former employee of Jeld-Wen Holding, Inc. (" Jeld-Wen" ), and was a participant in an employee benefits plan (" Plan" ) sponsored by Jeld-Wen that offered long-term disability (" LTD" ) benefits to eligible employees. Delaney filed this action on October 3, 2013, alleging that the Plan's Claims Administrator, Prudential Insurance Company of America (" Prudential" ), violated the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1132(a)(1)(B), by denying her application for LTD benefits. This court has jurisdiction over this case under 28 U.S.C. § 1331 and § 1132(e)(1).
The parties have filed cross-motions for judgment under FRCP 52 or, alternatively, for summary judgment pursuant to FRCP 56. For the reasons that follow, Prudential's Motion (docket #25) should be denied, and Delaney's Cross-Motion (docket #26) should be granted for a declaratory judgment that she has satisfied her burden of proof under both the " regular occupation" and the " any gainful occupation" standards of Prudential's policy and an award of her LTD benefits from June 20, 2012, through the date of judgment, but otherwise should be denied with leave to renew her request for prejudgment interest at the Oregon statutory rate.
STANDARD OF REVIEW
Initially this court must determine the applicable standard of review. In the Ninth Circuit, " unless plan documents unambiguously say in sum or substance that the Plan Administrator or fiduciary has authority, power, or discretion to determine eligibility or to construe the terms of the plan, the standard of review will be de novo." Sandy v. Reliance Standard Ins. Co., 222 F.3d 1202, 1207 (9th Cir 2000). Otherwise, the standard of review is for abuse of discretion.
I. Plan Terms
Jeld-Wen is the Contract Holder, Plan Sponsor and Plan Administrator, as those terms are defined in ERISA. AR 22, 64. Prudential is the Claims Administrator. AR 65.
In connection with the Plan, Jeld-Wen entered into a Group Insurance Contract with Prudential, Group Contract No. G-50278-OR (" Group Contract" or " Plan" ). AR 1-17. The Group Contract provides that " if the provisions of the Group Contract do not conform to the requirements of any state or federal law or regulation that applies to the Group Contract, the Group Contract is automatically changed to conform with Prudential's interpretation of the requirements of that law or regulation." AR 8. Pursuant to that Group Contract, Prudential issued to Jeld-Wen a Certificate of Insurance (" Certificate" ) which sets forth the terms and conditions governing determinations of claims for benefits and appeals of adverse determinations. AR 18-62. Jeld-Wen also issued a Summary Plan Description (" SPD" ). AR 63-69. LTD benefits under the Plan are insured and paid by Prudential. AR 1-17, 64.
The Certificate defines a participant as " disabled when Prudential determines that you are unable to perform the material and substantial duties of your regular occupation. . . ." AR 31. After the first 24 months of payments, a participant is " disabled when Prudential determines that due to the same sickness or injury: . . . you are unable to perform the duties of any gainful occupation. . . ." Id. The Certificate further states that " Prudential will assess your ability to work and the extent to which you are able to work . . . ." Id. In making that assessment, Prudential is permitted to require a participant " to be examined by doctors, other medical practitioners or vocational experts . . . as often as it is reasonable to do so" and " to be interviewed by an authorized Prudential Representative." Id.
Benefit payments begin only after a 90-day elimination period of " continuous disability." AR 33. To obtain benefits, a participant " must send Prudential written proof of your claim no later than 90 days after your elimination period ends" and, for a LTD claim, Prudential " may request that you send proof of continuing disability, satisfactory to Prudential . . . . " AR 54. The Certificate further requires a participant:
to give Prudential authorization to obtain additional medical information, and to provide non-medical information as part of your proof of claim, or proof of continuing disability. . . . Prudential will deny your claim or stop sending you payments if the appropriate information is not submitted.
Benefit payments cease when, among other things, a participant is " no longer disabled" or " fail[s] to submit proof of continuing disability satisfactory to Prudential." AR 46.
The SPD provides that Prudential:
as claims administrator has the sole discretion to interpret the terms of the Group Contract, to make factual findings, and to determine eligibility for benefits. The decision of the Claims Administrator shall not be overturned unless arbitrary and capricious.
The SPD also states that Prudential: (1) " shall notify you of the claim determination within 45 days of the receipt of your claim; " (2) send written notice of a denial of a claim; and (3) " make a determination of your claim appeal" and " second claim appeal" and issue written denials. AR 65-67.
Prudential contends that it has discretionary authority to interpret the Plan based primarily on language in the SPD which it contends is part of the Plan. However, " information about the plan provided by [the required] disclosures [in SPDs] is not itself part of the plan." CIGNA Corp. v. Amara, 131 S.Ct. 1866, 1877, 179 L.Ed.2d 843 (2011). Here the SPD expressly states that it " is not part of the Group Insurance Certificate," and the list of documents comprising the Plan does not include the SPD. AR 16, 63. Thus, the language in the SPD to the effect that Prudential has " sole discretion to interpret the terms of the Group Contract" (AR 65) provides no support for Prudential's argument that it has discretionary authority to interpret the Plan.
As further evidence of its discretionary authority to interpret Plan terms, Prudential points to language in the Group Contract which automatically changes the Group Contract to " conform with Prudential's interpretation" of any applicable state or federal law or regulation. AR 8. However, that provision merely sets out a method for ensuring that provisions in the Group Contract do not run afoul of applicable laws or regulations. It is not an unambiguous grant of discretionary authority to Prudential to interpret Plan terms, except perhaps to the extent the terms of the Group Contract conflict with federal or state statutes or regulations. No such conflict has even been identified, much less underlie Delaney's claim in this case.
As additional evidence of its discretionary authority, Prudential relies on other language in the Certificate stating that: (1) receipt of benefits is contingent upon the participant submitting proof of continuing disability that is " satisfactory to Prudential" (AR 40, 54); and (2) a participant is eligible for benefits only " when Prudential determines" (AR 31) that the claimant is disabled.
In support, Prudential relies on Prezioso v. Prudential Ins. Co. of Am., 748 F.3d 797 (8th Cir 2014), which interpreted virtually identical language in a LTD Plan to reject the de novo review standard. One provision stated that " in considering a claim for LTD benefits, Prudential 'may request . . . proof of continuing disability, satisfactory to Prudential,'" and another provision stated that " benefits, if granted, will cease on the date 'you fail to submit proof of continuing disability satisfactory to Prudential.'" Id at 803. The Eighth Circuit held that this " plan language as confirmed by the SPD explicitly granted Prudential discretion to interpret the plan and to determine eligibility for benefits." Id. In reaching this conclusion, Prezioso declined to follow the contrary decision of the Fourth Circuit in Cosey v. Prudential Ins. Co. of Am., 735 F.3d 161, 166-68 & n3 (4th Cir 2012), and cases it cites. In contrast to the Eighth Circuit, the Fourth Circuit in Cosey rejected the notion that language requiring " proof satisfactory to the plan administrator" could insulate an insurer from de novo review:
We observe that five of our sister circuits recently have held that language does not unambiguously confer such discretionary authority. In fact, earlier this year, the First Circuit followed the Seventh Circuit's example in departing from its own precedent to join a growing consensus of circuit courts that require stricter clarity in plan language before insulating insurance companies from full judicial review.
Cosey, 735 F.3d at 166 (citations omitted).
Among the five sister circuits followed by Cosey is the Ninth Circuit which held that policy language stating that proof of a disability claim " 'must be satisfactory to Sun Life'" was insufficient to confer discretion on the plan administrator. Feibusch v. Integrated Device Tech., Inc. Emp. Benefit Plan, 463 F.3d 880, 883-84 (9th Cir 2006). By reaching a contrary conclusion to Cosey, Prezioso directly conflicts with controlling authority in this circuit.
According to the Ninth Circuit, insurers wishing to cloak themselves with discretionary authority must unambiguously do so. Patching together various phrases from various documents, none of which come right out and grant such discretionary authority, is insufficient, as is relying on a provision which is not expressly incorporated into the plan terms. Instead, the insurer must go to the minimal effort of making clear its exact scope of authority:
We think it appropriate to insist . . . that the text of a plan be unambiguous. If an insurance company seeking to sell and administer an ERISA plan wants to have discretion in making claims decisions, it should say so. It is not difficult to write, " The plan administrator has discretionary authority to grant or deny benefits under this plan." When the language of a plan is unambiguous, a company purchasing the plan, and employees evaluating what their employer has purchased on their behalf, can clearly understand the scope of the authority the administrator has reserved for itself. [I]t is " easy enough" to confer discretion unambiguously " if plan sponsors, administrator, or fiduciaries want benefits decisions to be reviewed for abuse of discretion." Where they fail to do so, " in this circuit at least, they should expect de novo review."
Ingram v. Martin Marietta Long Term Disability Income Plan, 244 F.3d 1109, 1113-14 (9th Cir 2001), quoting Sandy, 222 F.3d at 1206.
Nothing identified by Prudential is sufficient to apply the abuse of discretion standard in this case Thus, review of Prudential's claim decision should ...