Hodges v. Life Ins. Co. of N. Am., Ins. Co. , 920 F.3d 669 ( 2019 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS April 2, 2019
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
LOU HODGES,
Plaintiff - Appellee,
v. No. 18-1279
LIFE INSURANCE COMPANY OF
NORTH AMERICA, a Pennsylvania
insurance company,
Defendant - Appellant.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:14-CV-00958-WYD-NYW)
_________________________________
Jack M. Englert, Jr., Holland and Hart LLP, Greenwood Village, Colorado, for Appellant.
David Lichtenstein (Matthew Molinaro, with him on the brief), Law Office of David
Lichtenstein, LLC, Denver, Colorado, for Appellee.
_________________________________
Before MATHESON, PHILLIPS, and EID, Circuit Judges.
_________________________________
PHILLIPS, Circuit Judge.
_________________________________
Lou Hodges submitted a claim for long-term-disability (LTD) benefits to Life
Insurance Company of North America (LINA) through his employer’s group-
insurance plan. Although LINA approved his claim, Hodges asserted that LINA
should have classified him as a “sales” employee under the group-insurance policy,
which would have entitled him to more benefits. This led Hodges to sue LINA. The
district court remanded for further factfinding, but LINA once again reached the
same result. The district court then reversed LINA’s decision, concluding that
Hodges qualified as a salesperson under the policy. LINA now appeals that ruling.
Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
BACKGROUND
Until 2012, Hodges worked for Endo Pharmaceuticals, Inc. as a cryotherapy
technician. That year a degenerative eye condition forced him to retire. He
participated in Endo’s employee-welfare-benefit plan, for which Endo had appointed
LINA as the administrator. In 2011, LINA issued to Endo a group LTD insurance
policy (the Policy), governed by the Employee Retirement Income Security Act of
1974 (ERISA), 29 U.S.C. §§ 1000–1461. Under “Claims Procedures,” the Policy
names LINA the fiduciary for deciding claims as well as appeals of denied claims.
Appellant’s App. vol. 2 at 312. The Policy allows LINA “45 days from the date it
receives a claim for disability benefits . . . to determine whether or not benefits are
payable in accordance with the terms of the Policy.” Id.The Policy divides employees into two classes: Class 1, which includes “[a]ll
active, Full-time and part-time Employees of the Employer, excluding Sales
personnel, regularly working a minimum of 20 hours per week”; and Class 2, which
includes “[a]ll active, Full-time Employees of the Employer classified as Sales
Personnel regularly working a minimum of 20 hours per week.” Id. at 290. The
2
Policy entitles all covered employees to monthly disability payments worth 60% of
their average pre-disability earnings, but it defines the pay of sales personnel more
broadly than that of non-sales personnel. Specifically, the Class 2 definition of
earnings includes payments “received from bonuses or target incentive compensation
bonus[es],” but the Class 1 definition “does not include amounts received as
bonus[es].”1 Id. Despite favoring sales personnel in the provision of benefits,
however, the Policy defines neither “sales” nor “sales personnel.”
Before leaving the company, Hodges submitted a claim under the Policy. After
granting him short-term-disability benefits, LINA informed Hodges that it would
begin evaluating his eligibility for LTD benefits. LINA eventually concluded that
Hodges was medically eligible for LTD benefits, but later sought information from
Hodges and Endo about Hodges’s job description and duties to determine whether he
qualified as “sales personnel” under the Policy. In a telephone interview, Hodges
explained to a LINA claim manager that “he was a technician, but often times did
things to sell the compan[y’]s products.” Id. at 516. And in an e-mail to another
LINA claim manager, an Endo representative “confirmed” that Hodges “received
monthly sales bonuses based on the number of cases he treated,” which totaled
“$9[,]800 for the nine months he worked in 2011.” Id. vol. 5 at 1226. But the
representative also stated, “These earnings are not part of the overall bonus or
1
Both the Class 1 and Class 2 definitions of earnings specifically exclude
“commissions, overtime pay, or extra compensation.” Appellant’s App. vol. 2 at 291,
294.
3
[incentive compensation] program at Endo and were not included in the premium
calculation.” Id.On March 21, 2012, LINA informed Hodges that it had approved his claim for
LTD benefits but that it deemed him a Class 1 employee, not a Class 2 salesperson.
Hodges objected to this classification, arguing that he “sold products while out in the
field” and that the classification would significantly reduce his benefits.2 Id. vol. 2 at
494. About 70% of Hodges’s earnings came from his base salary, and about 30%
came from sales-driven compensation, including bonuses.
In November 2012, Hodges filed an administrative appeal asking LINA to
reconsider its decision to classify him as a Class 1 employee. Hodges attached
several supporting documents to his appeal. First, he submitted e-mails from two
senior Endo officials referring to the “bonuses” that Hodges and other cryotherapy
technicians had earned selling the company’s products and services. Id. vol. 4 at
1044–46. Second, he submitted e-mails from senior Endo staff emphasizing the
importance of marketing the company’s products. In one such e-mail, Allyn Chung,
Endo’s Senior Director of Cryo Operations, wrote to Hodges and other employees, “I
cannot stress enough the importance of making regular visits to your physician[s’]
offices and helping to market the technology.” Id. at 1039. In another e-mail (subject:
“job descriptions and 2011 goals”), Chung declared that cryotherapy technicians’
goals for the year included a “requirement to submit a minimum of [one] lead a
2
Hodges estimates that he would collect an additional $902 per month if he
were classified as a Class 2 salesperson.
4
month for new cryo[therapy] users, new applications for existing cryo[therapy] users,
or any other lead for any of our business lines.” Id. at 1042. Third, Hodges submitted
pay stubs withholding a higher rate of the payments for federal taxes than for his
regular income.3 Finally, Hodges submitted the company’s official job description of
a cryotherapy technician. The job description’s “summary of purpose” requires
cryotherapy technicians to “[a]ssist in the growth and development of existing and
new business lines,” though none of the job’s “essential functions” involve sales
responsibilities. Id. at 1035–36. Based on this evidence, Hodges complained to LINA
that “Endo appears to have recharacterized . . . [his bonus] compensation as
commissions solely for the purpose of reducing [LINA’s] exposure, and presumably
reducing Endo’s indirect exposure . . . .” Id. at 1032.
Before deciding the appeal, LINA asked Endo for more information about
Hodges’s job classification and duties. Lori Capozzi, Endo’s benefits consultant,
responded that “Hodges was not classified as ‘sales,’” that “[h]e worked in a mobile
unit that permitted him to perform medical tests at doctor[s’] offices based on a pre-
determined schedule,” and that “he was paid a ‘bonus’ for those additional tests.” Id.
at 949, 1008. On January 7, 2013, LINA affirmed its initial decision. LINA
acknowledged that the Policy did not define “sales personnel” but explained:
The Employer has confirmed Mr. Hodges[’s] occupation as a
CryoTherapy Technician is not classified as a sales position with the
employer. According [to] the Employer, Mr. Hodges worked in a mobile
unit that permitted him to perform medical tests at doctor[s’] offices
3
The IRS treats bonuses as “supplemental wages” and taxes them differently
than “regular wages.” See 26 C.F.R. § 31.3402(g)-1.
5
based on a pre-determined schedule. If he was able to incorporate and
schedule a few more tests during his work week, he was paid a bonus for
those additional tests. According to the [d]efinition of Covered Earnings
under Class 1, earnings do not include bonus[es], commissions, overtime
pay or extra compensation, [and] therefore would not be considered as
part of the Disability Benefits Calculation.
Id. vol. 3 at 833.
On March 28, 2013, Hodges sent LINA a letter requesting further
reconsideration of his Class 1 classification and protesting that “the extent of
[LINA’s] consideration” of his first appeal “involved a single e-mail to Endo’s
benefits consultant Lori Capozzi inquiring into whether the company classified Mr.
Hodges’s position as a sales position.” Id. vol. 4 at 948. LINA responded that it
“w[ould] accept two (2) appeals from a claimant for any single denial” but that “the
second request for appeal is a voluntary level of appeal” and requires “additional
information that has not previously been reviewed.” Id. vol. 3 at 606. So Hodges
wrote back, attaching several more documents. Among these were various e-mails
from Endo supervisors to cryotherapy technicians, including one mentioning plans to
discuss “the development of [their] specific geographic territory” and another about
the protocol for questions regarding “marketing materials.” Id. vol. 4 at 875, 888.
Hodges also submitted a company PowerPoint presentation with a slide instructing
cryotherapy technicians to “help growth” by (1) “[a]sk[ing] [their] partners if they
know of any other doc[tor] that might be interested in performing cryo[therapy],”
(2) “[v]isit[ing] offices of former users and doctors who seldom do cases,”
(3) “[m]ak[ing] sure that [they] always have literature,” and (4) “[b]e[ing] persistent
6
[because] they might say no a couple of times.” Id. at 879. But LINA replied that the
PowerPoint presentation and e-mails “ha[d] already been reviewed” and would “not
be considered new evidence.” Id. vol. 3 at 836. As such, LINA denied Hodges a
second appeal.
In April 2014, Hodges filed suit in the United States District Court for the
District of Colorado. In February 2017, the district court, having concluded that the
Policy failed to reserve to LINA discretion to decide employee-classification
questions, reviewed LINA’s decision de novo and ruled that LINA had breached its
fiduciary duty to Hodges by “accept[ing] Endo’s bare assertion that Hodges was not
‘Sales personnel’ without requiring documentation or a justification for that
assertion.” Id. vol. 1 at 181–82. The court remanded the case for LINA to conduct
“further factfinding” on Hodges’s employment classification. Id. at 183.
On remand, Hodges submitted three additional documents, which governed
Endo’s “Incentive Compensation Plan” for cryotherapy technicians. Id. vol. 6 at
1423–34. Meanwhile, LINA requested that Endo submit further information showing
that Hodges was not a salesperson. Douglas Macpherson, Endo’s Senior Vice
President and Associate General Counsel, responded:
[Hodges] was a C[ry]oTherapy Technician whose job it was to operate
C[ry]o equipment. His [job description] does not classify hi[m] as a sales
employee, nor are any sales responsibilities included in the job
description. The record reflects that Hodges did not participate in a sales
incentive plan. The plan he did participate in . . . was based on the number
of procedures he performed. The record also reflects that no part of his
pay was tied to sales. It is true that he was asked to provide one lead a
month for sales reps to call on. All that was required was to provide a
lead, there was no requirement that the lead result in sales.
7
Id. at 1397. On May 23, 2017, LINA issued its remand determination, relying
primarily on Macpherson’s statement to conclude (once again) that Hodges was a
Class 1 employee.
Hodges asked the district court to reopen the case. The court agreed and, in
June 2018, it ruled that LINA had once again failed to adequately investigate
Hodges’s employment classification. Concluding that a second remand would be
futile, the district court determined that Hodges was a salesperson under the ordinary
meaning of that term, reversed LINA’s contrary decision, and awarded Hodges
Class 2 benefits “retroactive to the date his long term disability benefits
commenced.” Id. vol. 1 at 282. LINA now appeals that ruling.
ANALYSIS
LINA raises two issues. First, LINA argues that the Policy gives it discretion
to decide whether Hodges is a salesperson. If so, we would apply the arbitrary-and-
capricious standard of review to its decision denying Hodges Class 2 benefits, not the
de novo standard. But second, LINA contends that it doesn’t matter what standard of
review we apply: Hodges is not a Class 2 salesperson under the Policy. We consider
each issue in turn.
I. Standard of Review
In an ERISA case like this one, the appellate standard of review contains two
layers: first, the standard of review applicable to the plan administrator’s denial of
benefits; and second, the standard of review applicable to the district court’s ruling—
8
including its determination of what standard of review to apply to the administrator’s
denial of benefits. When, as here, “the district court’s determination of the standard
of review [applicable to the denial of benefits] did not require it to resolve any
disputed historical facts, we do not defer to its determination but decide de novo what
[that] standard of review should be.” Hancock v. Metro. Life Ins. Co., 590 F.3d 1141,
1146 (10th Cir. 2009).
We review de novo a plan administrator’s denial of benefits “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). But if the plan gives the administrator
discretionary authority, “we employ a deferential standard of review, asking only
whether the denial of benefits was arbitrary and capricious.” LaAsmar v. Phelps
Dodge Corp. Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan,
605 F.3d 789, 796 (10th Cir. 2010) (quoting Weber v. GE Grp. Life Assurance Co.,
541 F.3d 1002, 1010 (10th Cir. 2008)). Under this standard, “our ‘review is limited to
determining whether the interpretation of the plan was reasonable and made in good
faith.’” Id. (quoting Kellogg v. Metro. Life Ins. Co., 549 F.3d 818, 825–26 (10th Cir.
2008)). “De novo review is the default position,” and “the burden to establish that
this court should review [the administrator’s] benefits decision under an arbitrary-
and-capricious standard falls upon the plan administrator.” Eugene S. v. Horizon Blue
Cross Blue Shield of N.J., 663 F.3d 1124, 1130 (10th Cir. 2011) (internal quotation
marks and citation omitted). Consistent with this burden, when a plan is ambiguous
9
about whether it grants discretion, we apply the doctrine of contra proferentem to
construe that ambiguity in the insured’s favor. See Miller v. Monumental Life Ins.
Co., 502 F.3d 1245, 1253 (10th Cir. 2007).4
To enjoy deferential judicial review of its benefits decision, the administrator
of an ERISA plan must reserve its discretion “in explicit terms” in the plan
document. Id. at 1250. At the same time, our court has been “comparatively liberal in
construing language to trigger the more deferential standard of review under ERISA.”
Nance v. Sun Life Assurance Co. of Canada, 294 F.3d 1263, 1268 (10th Cir. 2002)
(citing McGraw v. Prudential Ins. Co. of Am., 137 F.3d 1253, 1259 (10th Cir. 1998),
and Chambers v. Family Health Plan Corp., 100 F.3d 818, 825 (10th Cir. 1996)). For
example, we have held that a policy provision requiring claimants to submit
4
See also Stephanie C. v. Blue Cross Blue Shield of Massachusetts HMO Blue,
Inc., 813 F.3d 420, 428 (1st Cir. 2016) (“[A] grant of discretionary decisionmaking
authority in an ERISA plan must be couched in terms that unambiguously indicate
that the claims administrator has discretion . . . .”) (emphasis in original); Woods v.
Prudential Ins. Co. of Am., 528 F.3d 320, 322 (4th Cir. 2008) (“[I]n the context of
determining whether a plan sufficiently confers discretion, . . . any ambiguity in an
ERISA plan is construed against the drafter of the plan . . . .”) (internal quotations
and alterations omitted); Walke v. Grp. Long Term Disability Ins., 256 F.3d 835, 840
(8th Cir. 2001) (“[W]hen the insurer instead issues a policy containing ambiguous
claims submission language commonly used in non-ERISA contexts, the presumption
should be there was no intent to confer such discretion.”); Kearney v. Standard Ins.
Co., 175 F.3d 1084, 1090 (9th Cir. 1999) (“[A]n administrator ha[s] discretion only
where discretion was ‘unambiguously retained’ by the administrator. This is
consistent with the established principles that ambiguities are construed contra
proferentem, and that ambiguities are construed in favor of the insured.”) (internal
quotations omitted); Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1258 (3d Cir.
1993) (“[A] court’s choice of the standard of review is itself a question of contract
construction. . . . Application of contra proferentem in this case requires us to find
the Plan did not grant [the administrator] discretion to determine which procedures
are experimental because the Plan and the evidence are ambiguous.”).
10
proof “satisfactory to [the plan administrator]” suffices to give the administrator
discretion to determine facts relating to a disability. Id. at 1267–68.5
As proof that the Policy grants it discretion to decide whether Hodges was a
salesperson, LINA quotes three Policy provisions. Primarily, LINA relies on
language in the Policy’s “Claims Procedures” section, which states that “[t]he Plan
Administrator has appointed the Insurance Company as the named fiduciary for
deciding claims for benefits under the Plan” and that “[t]he Insurance Company has
45 days from the date it receives a claim for disability benefits . . . to determine
whether or not benefits are payable in accordance with the terms of the Policy.”
Appellant’s App. vol. 2 at 312. LINA also cites two other portions of the Policy using
similar language: (1) the “Termination of Disability Benefits” section, which states,
5
Our “comparatively liberal” approach puts us on the minority side of a circuit
split. Most circuits have expressly rejected Nance’s interpretation of “proof
satisfactory to the administrator.” See Cosey v. Prudential Ins. Co. of Am., 735 F.3d
161, 166 (4th Cir. 2013) (“[T]he phrase ‘proof satisfactory to us’ is inherently
ambiguous.”); Gross v. Sun Life Assurance Co. of Canada, 734 F.3d 1, 14 (1st Cir.
2013) (“[T]he ‘satisfactory to us’ construct fails to alert plan participants to the
administrator’s discretion because it is ambiguous as to what must be satisfactory to
[the administrator].”); Viera v. Life Ins. Co. of N. Am., 642 F.3d 407, 417 (3d Cir.
2011) (same); Feibusch v. Integrated Device Tech., Inc. Emp. Benefit Plan, 463 F.3d
880, 884 (9th Cir. 2006) (same); Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635,
639 (7th Cir. 2005) (same); Fitts v. Fed. Nat’l Mortg. Ass’n, 236 F.3d 1, 5 (D.C. Cir.
2001) (same); Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 252
(2d Cir. 1999) (same). But see Tippitt v. Reliance Standard Life Ins. Co., 457 F.3d
1227, 1233 (11th Cir. 2006) (holding that requiring proof “satisfactory to [the
administrator]” is sufficient to convey discretion); Ferrari v. Teachers Ins. & Annuity
Ass’n, 278 F.3d 801, 806 (8th Cir. 2002) (same); Perez v. Aetna Life Ins. Co., 150
F.3d 550, 557 (6th Cir. 1998) (holding that the term “satisfactory,” even without
specifying to whom the proof must be satisfactory, is sufficient to grant discretion if
the administrator is “the only named party with the right to request such evidence”).
11
in part, that an employee’s benefits will terminate when “[LINA] determines he or
she is not [d]isabled,” id. at 304; and (2) the “Reporting Requirements” provision,
which provides that “[t]he Employer must, upon request, give [LINA] any
information required to determine who is insured, the amount of insurance in force[,]
and any other information needed to administer the plan of insurance,” id. at 306.
LINA zeroes in on the word “determine” in each provision. See Appellant’s
Opening Br. at 27–29. LINA maintains that this wording “is consistent with the sort
of plan language that this Court has found to trigger the deferential standard of
review.” Id. at 29; see generally id. at 28–31 (citing Eugene S., Nance, McGraw, and
Chambers). But Hodges counters that in those cases applying the deferential
standard, “the [plan] language emphasize[d] the specific definition or decision as to
which the insurer or plan [administrator] reserve[d] discretion.” Appellee’s Response
Br. at 36. We agree with Hodges.
Under our ERISA jurisprudence, “it is essential to focus precisely on what
decision is at issue, because a plan may grant the administrator discretion to make
some decisions but not others.” Nance, 294 F.3d at 1266 (“Depending on the specific
language of the Plan, the standard for our review of [the administrator’s]
interpretation of the Plan and the standard for our review of [the administrator’s] fact
finding may or may not be the same.”). And “[i]t is only when a plan specifically
confers discretion to decide the question on which the benefit denial is based that the
arbitrary and capricious standard applies.” Hubbert v. Prudential Ins. Co. of Am., 105
F.3d 669, 1997 WL 8854 at *4 (10th Cir. 1997) (unpublished); see also McGee v.
12
Equicor-Equitable HCA Corp., 953 F.2d 1192, 1200 (10th Cir. 1992) (“[W]e review
the terms of the health agreement and [the administrator’s] denial of benefits de
novo, but we apply the abuse of discretion standard to the plan physician’s exercise
of medical judgment in determining [the claimant’s] eligibility for benefits.”).6
Consistent with this principle, each of the cases LINA relies on identified a
specific issue that the administrator retained discretion to determine. In Chambers,
plan language “exclud[ing] from coverage ‘medical or surgical procedures which in
the judgment of [the administrator] are experimental’” granted the administrator
“discretion to determine whether to deny a claimant insurance benefits for an
‘experimental’ procedure.” 100 F.3d at 825 (alterations omitted). In McGraw, a plan
6
Other circuits apply the same principle. See, e.g., Knopick v. Metro. Life Ins.
Co., 457 F. App’x 25, 28 (2d Cir. 2012) (“Where the plan provides discretionary
authority to the fiduciary or administrator to make certain determinations but does
not provide blanket discretion to construe other plan terms, we review those
determinations committed to the discretion of the fiduciary or administrator to ensure
that they are not arbitrary or capricious; otherwise, we review the fiduciary or
administrator’s determinations de novo.”) (citing Fay v. Oxford Health Plan, 287
F.3d 96, 104 (2d Cir. 2002)); Kearney v. Standard Ins. Co., 175 F.3d 1084, 1090 (9th
Cir. 1999) (“[T]he dissent goes too far, by suggesting that if anything is committed to
the administrator’s discretion, then everything is.”); Haley v. Paul Revere Life Ins.
Co., 77 F.3d 84, 89 (4th Cir. 1996) (“While other plan provisions may give [the
administrator] discretion to decide peripheral issues, such as whether [a] claim was
properly documented or timely filed, none of the plan’s discretionary grants of
authority covers [the administrator’s] decision to deny [the claimant] benefits under
the preexisting condition exclusion.”); Anderson v. Great W. Life Assurance Co., 942
F.2d 392, 395 (6th Cir. 1991) (“[D]iscretion is not an all-or-nothing proposition. A
plan can give an administrator discretion with respect to some decisions, but not
others.”); Frank v. Colt Indus., Inc., 910 F.2d 90, 99 (3d Cir. 1990) (noting that “an
ERISA plan may reserve discretionary authority to management with regard to
certain decisions” as opposed to “reserv[ing] complete discretion over employee
eligibility for benefits”).
13
provision stating that “[t]o be considered ‘needed[,’] a service or supply must be
determined by [the administrator] to meet” various tests “expressly g[ave the
administrator] discretion to decide what [wa]s medically necessary.” 137 F.3d at
1259 (bolding omitted). Likewise, in Eugene S., the administrator retained discretion
to decide what care was “medically necessary” because the plan (1) “limit[ed]
‘Medically Necessary and Appropriate’ services or supplies to those ‘determined by
[the administrator]’ to be such” and (2) “limit[ed] payment for benefits to services
that, ‘in [the administrator’s] judgment, are provided at the proper level of care.’”
663 F.3d at 1132. Finally, in Nance, the administrator had discretion to “find[] the
facts relating to disability” because the plan required the claimant to submit proof
“satisfactory to” the administrator. 294 F.3d at 1267–68.
Here, by contrast, the Policy does not require “proof satisfactory to” LINA.
See Nance, 294 F.3d at 1268; Ray v. Unum Life Ins. Co. of Am., 314 F.3d 482, 486
(10th Cir. 2002). Nor has LINA directed us to any language that grants it discretion
over any specific determination. Rather, LINA argues that the authority “to determine
whether or not benefits are payable in accordance with the terms of the Policy”
conveys “broad authority to decide all matters relevant to a claim for LTD
benefits . . . .” Appellant’s Reply Br. at 5 (emphasis added). But we have never
allowed such vague language to encompass all decisions that go into the claims
process.
We acknowledge that we have often interpreted plan language as granting
discretion to the administrator over all decisions that arise in the claims process,
14
including fact determinations and the interpretation of terms. But such cases involve
clear and unambiguous discretion-conveying language—for instance, language
reserving to the administrator the discretion “to construe the terms of the Plan, to
resolve any ambiguities, and to determine any questions which may arise with the
Plan’s application or administration, including but not limited to determination of
eligibility for benefits,” Martinez v. Plumbers & Pipefitters Nat’l Pension Plan, 795
F.3d 1211, 1214 (10th Cir. 2015), or language “grant[ing] the Plan Administrator
‘complete authority,’ . . . to ‘determine eligibility for benefits,’ ‘make factual
findings,’ ‘construe the terms of the Plan,’ and ‘control and manage the operation of
the Plan,’” Foster v. PPG Indus., Inc., 693 F.3d 1226, 1232 (10th Cir. 2012).7 But
here, the Policy contains no such language.
In other cases, we have construed narrower plan language to convey discretion
to the administrator to interpret all policy terms (though not necessarily to resolve
factual questions). See, e.g., Pratt v. Petroleum Prod. Mgmt., Inc. Emp. Sav. Plan &
7
Indeed, many of our cases have construed plan language to grant all-
encompassing discretion when it does so explicitly. See, e.g., Kellogg v. Metro. Life
Ins. Co., 549 F.3d 818, 826 (10th Cir. 2008) (giving the administrator authority to
“make, in its sole discretion, all determinations arising in the administration,
construction, or interpretation of these Plans, including the right to construe disputed
or doubtful Plan terms and provisions”); Arfsten v. Frontier Airlines, Inc. Ret. Plan
for Pilots, 967 F.2d 438, 440 (10th Cir. 1992) (giving the administrator the authority
“to construe the Plan and to determine all questions of fact that may arise
thereunder”); Woolsey v. Marion Labs., Inc., 934 F.2d 1452, 1457 (10th Cir. 1991)
(giving the administrator “sole discretion” and “full and complete authority,
responsibility, and control over the management, administration and operation of the
Plan, including, but not limited to, the authority to make appropriate determinations
of the distributions due Members under the Plan and authorize and direct payment of
benefits”) (alterations omitted).
15
Tr., 920 F.2d 651, 658 (10th Cir. 1990) (holding that a plan that granted the
administrator the authority to “construe and interpret the Plan” conveyed discretion
to decide “questions of plan interpretation”). But the policy language in such cases
gives the administrator authority to “interpret” or “construe” the policy,8 something
that the Policy here does not do.
In short, nothing in the Policy grants LINA the discretion to conclude who
qualifies as a salesperson. Rather, by stating that LINA “determines” eligibility, the
Policy merely clarifies that LINA, and no one else, decides in the first instance
whether to award benefits. As the Seventh Circuit put it, “All plans require an
administrator first to determine whether a participant is entitled to benefits before
paying them; the alternative would be to hand money out every time someone
knocked on the door . . . .” Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635, 637 (7th
Cir. 2005); see also Herzberger v. Standard Ins. Co., 205 F.3d 327, 332 (7th Cir.
2000) (“[T]his truism in the plan document implies nothing one way or the other
about the scope of judicial review of [the administrator’s] determination, any more
than our statement that a district court ‘determined’ this or that telegraphs the scope
of our judicial review of that determination.”). The Nance court made the same point,
8
See, e.g., Dycus v. Pension Ben. Guar. Corp., 133 F.3d 1367, 1369 (10th Cir.
1998) (applying the arbitrary-and-capricious standard of review to an administrator’s
interpretation of a policy term where the plan granted it authority to “decide all
questions concerning the application or interpretation of the provisions of the plan”)
(alteration omitted); Winchester v. Prudential Life Ins. Co. of Am., 975 F.2d 1479,
1483 (10th Cir. 1992) (deferring to the administrator’s policy interpretation where the
plan stated that the administrator “has the exclusive right to interpret the provisions
of the Plan”).
16
albeit in dicta, suggesting that discretion doesn’t arise “from language that merely
‘requires a determination of eligibility or entitlement by the administrator . . . .’” See
294 F.3d at 1268 (quoting Herzberger, 205 F.3d at 332); see also Kinstler v. First
Reliance Standard Life Ins. Co., 181 F.3d 243, 252 (2d Cir. 1999) (“No plan provides
benefits when the administrator thinks that benefits should not be paid!”).
The plan language that LINA quotes simply directs who makes the initial
benefits decision—in this case, the plan administrator, rather than the employer or
employee—but we cannot stretch that language into a conveyance of any
discretionary authority. If LINA wanted to reserve discretion to decide other aspects
of a claim (such as whether an employee qualifies as a salesperson), then it should
have done so explicitly. Thirty years have passed since the Supreme Court first held
that de novo judicial review applies unless the benefit plan “gives the administrator
or fiduciary discretionary authority to determine eligibility for benefits or to construe
the terms of the plan.” See Firestone, 489 U.S. at 115. Obviously, plan drafters have
had ample time to include language giving discretion. And for nearly twenty years,
Nance (and its progeny) have warned drafters of the consequences of vagueness:
[P]lan drafters who wish to convey discretion to plan administrators are
ill-advised to rely on language that is borderline in accomplishing that
task. . . . [A]s more and more courts emphasize the need for clear
language to convey discretion, courts that have found borderline language
acceptable in the past may assume that plan drafters who have not
clarified the language were not intent on conveying discretion.
Nance, 294 F.3d at 1268 n.3; see also Gross v. Sun Life Assur. Co. of Canada, 734
F.3d 1, 16 (1st Cir. 2013) (“[I]t is not difficult to craft clear language.”); Cosey v.
17
Prudential Ins. Co. of Am., 735 F.3d 161, 168 (4th Cir. 2013) (“[D]rafters of ERISA
plans have had every opportunity to avoid adverse rulings on this issue, especially in
light of the gradual but unmistakable change in the precedential landscape of federal
appellate decisions.”); Feibusch v. Integrated Device Tech., Inc. Employee Ben. Plan,
463 F.3d 880, 883-84 (9th Cir. 2006) (“[I]t is easy enough to confer discretion
unambiguously . . . .”) (citation omitted); Kinstler v. First Reliance Standard Life Ins.
Co., 181 F.3d 243, 252 (2d Cir. 1999) (“[C]lear language can be readily drafted and
included in policies . . . .”). Further, LINA is no stranger to ERISA litigation,9 so its
failure to clarify its policy language over the years leads us to “assume that . . . [it
was] not intent on conveying discretion” in the Policy. See Nance, 294 F.3d at 1268
n.3. Indeed, under a separate heading of the Policy, titled “Additional Benefits,” the
contract provides, “The Insurance Company has the sole discretion to approve the
Employee’s participation in a Rehabilitation Plan and to approve a program as a
Rehabilitation Plan.” Appellant’s App. at 303 (emphasis added). This language
9
See, e.g., Null v. Cmty. Hosp. Ass’n, 379 F. App’x 704, 706 (10th Cir. 2010)
(“In contrast to LINA’s lack of discretion when considering LTD benefits, the life-
insurance component of the plan afforded LINA discretion to decide questions of
eligibility for coverage or benefits under the plan and to make any related findings of
fact.”); Jewell v. Life Ins. Co. of N. Am., 508 F.3d 1303, 1308 (10th Cir. 2007)
(“Where, as here, a plan administrator did not have discretionary authority to
determine eligibility for benefits or to construe the terms of the plan, district courts
will review a benefit denial de novo.”) (internal quotation marks omitted); Gilbertson
v. Allied Signal, Inc., 328 F.3d 625, 630 (10th Cir. 2003) (“AlliedSignal’s Plan
expressly vests discretionary authority to determine benefits eligibility in the Plan
Administrator (AlliedSignal), who has delegated its discretion to LINA.”).
18
further demonstrates that LINA knows how to draft discretion-conferring language.
It simply chose not to here.
In sum, LINA has failed to meet its burden to show that it is entitled to
deference in deciding who qualifies as a salesperson under the Policy. See Eugene S.,
663 F.3d at 1130. As such, we review the question de novo.10 See id.II. Whether Hodges Qualifies as a Salesperson
“In deciding whether an ERISA employee welfare benefit plan provides for
vested benefits, we apply general principles of contract construction.” Deboard v.
Sunshine Min. & Ref. Co., 208 F.3d 1228, 1240 (10th Cir. 2000). “[T]he insured
ultimately carries the burden of showing he is entitled to [ERISA] benefits . . . .”
Rasenack ex rel. Tribolet v. AIG Life Ins. Co., 585 F.3d 1311, 1324 (10th Cir. 2009).
“Unless the parties intend otherwise, terms in an insurance policy should be assigned
their plain and ordinary meaning.” Berry & Murphy, P.C. v. Carolina Cas. Ins. Co.,
586 F.3d 803, 808 (10th Cir. 2009) (citation omitted). In interpreting policy
language, we use an objective standard, considering the “common and ordinary
10
Even if the Policy had granted discretion, LINA concedes that, because it is
both the claim administrator and the funder of the LTD benefits, it has a conflict of
interest, so it would not enjoy the benefit of pure arbitrary-and-capricious review. See
Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 117 (2008) (explaining that in reviewing
a conflicted administrator’s benefit determination under the arbitrary-and-capricious
standard, the conflict should be weighed as a “factor”); accord Scruggs v.
ExxonMobil Pension Plan, 585 F.3d 1356, 1361 (10th Cir. 2009). And though we
generally agree with the district court that LINA “deferred entirely to Endo’s
assessment” of Hodges’s employment classification, see Appellant’s App. vol. 1 at
270, we need not decide whether this constituted a procedural irregularity warranting
de novo review, because the Policy clearly fails to grant LINA any discretion. See
LaAsmar, 605 F.3d at 797.
19
meaning as a reasonable person in the position of the [plan] participant, not the actual
participant, would have understood the words to mean.” Miller, 502 F.3d at 1250(internal quotation marks omitted). Accordingly, the question before us is whether a
reasonable person in Hodges’s position would have believed himself to be a
salesperson. See id.According to Hodges, a “salesperson” is one “whose job involves selling or
promoting commercial products.” Appellee’s Response Br. at 48 (citing Oxford
English Dictionary). LINA has not disputed this definition, either in the district court
or on appeal, and this definition comports with this court’s understanding of the term,
see Oxford English Dictionary (online ed. 2018) (defining “salesman” as “[a] man
whose business it is to sell goods or conduct sales”); Merriam-Webster (online ed.
2019) (defining “salesman” as “one who sells in a given territory, in a store, or by
telephone”). The Supreme Court recently endorsed this “ordinary meaning”
definition of “salesman.” See Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134,
1140 (2018) (“The ordinary meaning of ‘salesman’ is someone who sells goods or
services.”).
After due consideration, we conclude that Hodges qualified as a Class 2
salesperson. We agree with the district court, which summarized the supporting
evidence as follows:
Hodges had responsibilities to sell and promote Endo’s
commercial products and services at every available juncture . . . [and]
could only have more [cryotherapy] cases to treat if he had successfully
sold new doctors on Endo’s products and services or sold existing doctors
on performing more cryotherapy procedures. Also, . . . the “Summary of
20
Purpose” in the description of his job stated that part of Hodges’ duties
was to “[a]ssist in the growth and development of existing and new
business lines.” . . . Hodges was also supposed to “market the
technology” and was required “to submit a minimum of [one] lead a
month for new cryo[therapy] users, new applications for existing
cryo[therapy] users, or any other lead for any of Endo’s business.” . . .
The record reflects that Hodges received a significant portion from
bonuses when he did sell products and services, and these earnings were
designate[d] as bonuses on pay stubs. . . . As his counsel noted, Hodges
“received benefits for the leads that he provided for prospective
cryotherapy customers—he was given a bonus of $3,000 for every
$100,000 of pathology work that a doctor performed using Endo’s
equipment and services, and he received a monthly bonus for every case
that he worked on. . . . [T]hese substantial sales responsibilities and sales-
driven compensation would cause a reasonable insured to believe that he
was Sales Personnel—and to devote his efforts to sales in order to
increase his compensation . . . .
The three Incentive Compensation Plans also support a finding that
Hodges had sales responsibilities . . . . These plans provided bonuses,
also referred to as “incentive compensation payments,” to employees like
Hodges who recruit[ed] new physicians and convince[d] those physicians
to treat cases using Endo’s methods. . . . While LINA insists that those
plans cannot be indicative of sales responsibilities because they
“expressly apply to those ‘performing cryotherapy procedures,’ not sales
personnel” . . . LINA never explains why the two are mutually exclusive.
Appellant’s App. vol. 1 at 280–81.
Clearly, Hodges’s job “involved selling” Endo’s products. The record contains
numerous e-mails and presentations from Endo supervisors emphasizing to
cryotherapists the importance of “help[ing] growth” by “[a]sk[ing] [their] partners if
they know of any other doc[tor] that might be interested in performing
cryo[therapy],” “[m]ak[ing] sure that [they] always have literature,” and “[b]e[ing]
persistent [because] they might say no a couple of times.” Id. vol. 4 at 879.
Persistence is the hallmark of a good salesperson. And one e-mail references “the
development of [cryotherapy technicians’] specific geographic territory,” id. at 875,
21
another telltale sign that Hodges was a salesperson. See Merriam-Webster (online ed.
2019) (defining “salesman” as “one who sells in a given territory, in a store, or by
telephone”) (emphasis added). LINA’s post hoc characterization of Hodges’s sales
bonuses as “commissions” is not credible, given that it withheld federal taxes on
those payments at the rate for bonuses. Appellant’s App. vol. 4 at 1048–49. Nor does
its reasoning (borrowed from Endo’s Senior Vice President) that “there was no
requirement that the [one lead per month that Hodges was required to obtain] actually
result[] in sales,” id. vol. 6 at 1395, convince us otherwise. A salesperson may have a
bad day or a bad week when he is unable to close any sales, but that doesn’t change
his job, which is to sell products. It is true that Hodges derived a majority of his
income from non-sales activities, namely performing cryotherapy services. But
without selling the company’s products, Hodges could not continue cryotherapy, and
the Policy does not define how much selling one must do to be considered “sales
personnel.” We therefore agree with the district court that a reasonable person in
Hodges’s position would have believed himself to be a salesperson. See Miller, 502
F.3d at 1250.
CONCLUSION
Consistent with the foregoing, we affirm the ruling of the district court.
22