Ruiz, Alfredo v. Continental Casualty ( 2005 )


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  •                              In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________
    No. 03-3911
    ALFREDO RUIZ,
    Plaintiff-Appellant,
    v.
    CONTINENTAL CASUALTY COMPANY
    and STERLING, INCORPORATED, LONG
    TERM DISABILITY PLAN,
    Defendants-Appellees.
    ____________
    Appeal from the United States District Court for the
    Northern District of Indiana, Hammond Division.
    No. 02 C 73—Rudy Lozano, Judge.
    ____________
    ARGUED OCTOBER 27, 2004—DECIDED MARCH 11, 2005
    ____________
    Before FLAUM, Chief Judge, and MANION and WILLIAMS,
    Circuit Judges.
    MANION, Circuit Judge. Alfredo Ruiz worked as a produc-
    tion supervisor for Application Engineering Corp. (“AEC”),
    a subsidiary of Sterling, Inc. (“Sterling”), where he partici-
    pated in Sterling’s long-term disability plan. When he was
    denied long-term disability benefits he sued the insurance
    company, Continental Casualty Co. (“Continental”) and
    2                                                No. 03-3911
    Sterling’s disability plan. The district court granted summary
    judgment for the defendants, holding that Continental’s
    decision to not extend long-term disability benefits to Ruiz
    was neither arbitrary nor capricious. We affirm.
    I.
    A. Ruiz’s Injury, Medical Examinations, and Continental’s
    Decisions Regarding Benefits
    In late 1998, Ruiz aggravated a prior back injury when he
    fell down a flight of stairs. This was not Ruiz’s first back
    problem. Ruiz had apparently experienced problems with
    his back since 1981 and underwent surgery that year, and
    again in 1987, for the problems. On July 14, 1999, Ruiz
    submitted a claim to Continental for disability benefits. Ruiz
    was forty-one years old when he submitted his claim and
    had not worked since February 9, 1999.
    Ruiz’s claim form he submitted to Continental stated that
    he was totally disabled and could not perform his job
    because he was unable to walk, stand, or sit. Ruiz also sub-
    mitted a “Physician’s Statement” completed by Dr. Ronald
    Pavelka. Dr. Pavelka diagnosed Ruiz with “marked gener-
    alized bulging” of a spinal disc. Dr. Pavelka included with
    his statement an MRI of Ruiz’s spine. Dr. Pavelka’s state-
    ment also included a comment that because of physical
    limitations Ruiz “may not work” and suggested that Ruiz’s
    prognosis was indefinite.
    During the second half of 1999, Continental received more
    medical records from doctors who had evaluated Ruiz
    (Dr. Pavelka and a second doctor, Dr. Marc Levin), as well
    as assessments from these doctors concerning Ruiz’s phys-
    ical and occupational limitations. Dr. Pavelka continued to
    assert that Ruiz could not work and that he could not sit,
    No. 03-3911                                                   3
    stand, or walk for any time during an eight-hour workday.
    Dr. Levin initially concluded that Ruiz had some limited
    ability to sit, walk, and stand during an eight-hour work-
    day. Dr. Levin later reconsidered his evaluation, however,
    and suggested that Ruiz could sit up to three hours at one
    time and could stand and walk for up to two hours at one
    time. On January 21, 2000, Continental approved Ruiz’s
    claim, retroactive to August 9, 1999 (six months after Ruiz’s
    last day at work). Under the terms of the insurance policy
    issued by Continental, this approval entitled Ruiz to up to
    twenty-four months of disability benefits.
    Continental’s policy has two phases of disability benefits.
    During the first phase, an employee is considered disabled
    if he is unable to perform the duties of his job at Sterling (or
    in Ruiz’s case, the subsidiary, AEC). The second phase
    begins if an employee has been disabled, as defined by the
    first phase, for twenty-four months. In the second phase,
    however, an employee is disabled only if he is unable to
    engage in any job for which he is qualified, as measured by
    his education, training, or experience.
    Continental’s January 2000 approval, therefore, was a rec-
    ognition that Ruiz was unable to return to his job at AEC.
    Continental continued, however, to monitor Ruiz’s progress.
    In July 2000, Continental wrote to Ruiz to inform him that
    it believed he was capable of performing alternate work
    (thus disqualifying Ruiz for the longer-term benefits under
    the second phase of the policy) and that Ruiz’s benefits
    would be terminated on August 8, 2001 (twenty-four
    months after his benefits began).
    In November 2000, Ruiz submitted a supplemental claim
    form. As part of that form, a new physician, Dr. Kathryn
    Hanlon, diagnosed Ruiz with an “intervertebral disc dis-
    order” and “postlaminectomy syndrome.” Dr. Hanlon also
    4                                                No. 03-3911
    indicated that Ruiz was totally disabled but that he would
    “recover sufficiently to perform duties” as of December 1,
    2000.
    On August 31, 2001, after his entitlement to benefits had
    ended, Continental received an appeal letter from Ruiz. The
    letter included medical records from a new doctor, Dr.
    Ramesh Kanuru. The records indicated that Dr. Kanuru
    performed surgery to implant a spinal cord stimulator in
    Ruiz. The records also noted that Ruiz was using a “spine
    patch.” Continental reviewed these records but decided that
    they did not change its decision to terminate Ruiz’ benefits.
    B. Sterling’s Plan for Disability Benefits and Continental’s
    Insurance Policy
    The Summary Plan Description (“SPD”) for Sterling’s long-
    term disability plan (the “Plan”) lists the Plan Administrator
    as Sterling and named subsidiaries (including AEC). The
    SPD also states that “[t]he Plan is administered by the Plan
    Administrator through an insurance contract purchased
    from [Continental].” In addition, the SPD provided that
    “[t]he Administrator and other Plan fiduciaries have dis-
    cretionary authority to interpret the terms of the Plan and to
    determine eligibility for and entitlement to benefits in
    accordance with the Plan.”
    Continental issued to each eligible employee of Sterling a
    policy certificate (the “Certificate”). The Certificate states
    that “[w]hen making a benefit determination under the policy,
    We [defined in the policy as Continental] have discretionary
    authority to determine Your [defined in the policy as the
    employee] eligibility for benefits and to interpret the terms
    and provisions of the policy.” (Emphasis in the original.)
    The Certificate also notes that “[t]he policy is delivered in
    and governed by the laws of the governing jurisdiction and
    No. 03-3911                                                  5
    to the extent applicable by the Employee Retirement Income
    Security Act of 1974 (ERISA) and any amendments.” There
    are no other documents relevant to the Plan.
    C. The Present Action
    On February 27, 2002, Ruiz filed the present action in
    the district court seeking damages for wrongful denial of
    benefits under the Employment and Retirement Income
    Security Act of 1974, 
    29 U.S.C. § 1132
    (a)(1)(B) (“ERISA”).
    Continental moved for summary judgment which the dis-
    trict court granted. The district court held that under ERISA,
    Continental was a fiduciary. The district court also held that
    Continental’s decision to deny Ruiz benefits was subject to
    an arbitrary and capricious standard of review. Finally, the
    district court concluded that the decision was neither arbi-
    trary nor capricious and granted summary judgment in
    favor of Continental. This appeal followed.
    II.
    We review a grant of summary judgment de novo. Vallone
    v. CNA Fin. Corp., 
    375 F.3d 623
    , 631 (7th Cir.), cert. denied,
    
    125 S. Ct. 670
     (2004). A party is entitled to summary judg-
    ment in its favor when “there is no genuine issue of material
    fact and that he or she is entitled to judgment as a matter of
    law.” Id.; Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 
    477 U.S. 317
    , 322 (1986).
    A. The Standard of Review of Continental’s Decision
    As a preliminary matter, the standard of review we utilize
    with respect to the underlying decision of Continental to
    deny benefits to Ruiz is vigorously disputed by the parties.
    6                                                   No. 03-3911
    This court recently explained the possible standards of
    review in cases asserting a wrongful denial of benefits:
    Ordinarily, “[a] denial of benefits will be reviewed
    de novo ‘unless the benefit plan gives the administrator
    or fiduciary discretionary authority to determine eligibil-
    ity for benefits or to construe the terms of the plan.’ ”
    Militello v. Cent. States, Southeast & Southwest Areas Pension
    Fund, 
    360 F.3d 681
    , 685 (7th Cir. 2004) (quoting Firestone
    Tire & Rubber Co. v. Bruch, 
    489 U.S. 101
    , 115, 
    109 S.Ct. 948
    , 
    103 L.Ed.2d 80
     (1989)). If the plan’s language
    “indicates with the requisite if minimum clarity that a
    discretionary determination is envisaged,” Herzberger v.
    Standard Ins. Co., 
    205 F.3d 327
    , 331 (7th Cir. 2000), “then
    a denial of benefits will be reviewed under an arbitrary
    and capricious standard.” Militello, 
    360 F.3d at
    685
    (citing Hess v. Hartford Life & Accident Ins. Co., 
    274 F.3d 456
    , 461 (7th Cir. 2001)).
    Vallone, 
    375 F.3d at 631
    .
    Our analysis has two parts. First, is Continental a fiduciary?
    Second, assuming Continental is a fiduciary, are fiduciaries
    granted sufficient discretionary authority under the terms
    of Sterling’s Plan? If the answer to either of these questions
    is no, we will review Continental’s decision to deny Ruiz
    benefits de novo. If, on the other hand, the answer to both
    questions is yes, we will review Continental’s decision un-
    der the highly deferential arbitrary and capricious standard.
    Continental argues, and the district court held, that it is a
    fiduciary for the Plan and that the Plan vests fiduciaries
    with discretionary authority with respect to claims for
    benefits. Therefore, its decision to deny benefits should be
    reviewed under the arbitrary and capricious standard. Ruiz
    instead argues that Continental is not a fiduciary and, there-
    fore, we should review Continental’s decision to deny Ruiz
    benefits de novo.
    No. 03-3911                                                       7
    1.     Is Continental a Fiduciary?
    Section 3(21)(A) of ERISA defines a fiduciary as any
    person who:
    exercises any discretionary authority or discretionary
    control respecting management of such plan or exercises
    any authority or control respecting management or
    disposition of its assets, (ii) . . . renders investment
    advice for a fee or other compensation, direct or indi-
    rect, with respect to any moneys or other property of
    such plan, or has any authority or responsibility to do
    so, or (iii) . . . has any discretionary authority or discre-
    tionary responsibility in the administration of such plan.
    
    29 U.S.C. § 1002
    (21)(A). The measure of whether a person is
    a fiduciary is not whether that person is formally designated
    as such. Instead, a fiduciary should be viewed “in functional
    terms of control and authority over the plan.” Mertens v.
    Hewitt Assocs., 
    508 U.S. 248
    , 262 (1993); see also ABA Section
    of Labor and Employment Law, Employment Benefits Law
    626 (2d ed. 2000) (“A fiduciary with respect to a plan is any
    person that in fact performs any of the functions described
    in the statutory definition, regardless of the formal relation-
    ship, if any, that person has with the plan.”). A court should
    thus look to whether a proposed fiduciary exercises control
    or authority over a particular benefit in an ERISA plan.
    In this case we are concerned with whether Continental
    fits the third criterion. That is, whether it “has any discretion-
    ary authority or discretionary responsibility in the adminis-
    tration of [the] plan.” 
    29 U.S.C. § 1002
    (21)(A)(iii).
    In Aetna Health Inc. v. Davila, 
    124 S. Ct. 2488
     (2004), the
    Supreme Court held that “[w]hen administering employee
    benefit plans, HMOs must make discretionary decisions
    regarding eligibility for plan benefits, and, in this regard,
    must be treated as plan fiduciaries.” 
    Id. at 2502
    . The Court
    8                                                    No. 03-3911
    concluded that “[c]lassifying any entity with discretionary
    authority over benefits determinations as anything but a
    plan fiduciary would . . . conflict with ERISA’s statutory and
    regulatory scheme.” 
    Id.
    In light of Davila, we conclude that Continental was acting
    as a fiduciary when it determined that Ruiz was not eligible
    for disability benefits. As the Supreme Court noted, “[a]
    benefit determination under ERISA . . . is generally a
    fiduciary act.” 
    Id. at 2501
    .
    2.   Does the Plan grant Continental the authority to construe
    its terms or determine eligibility for benefits?
    Having determined that Continental is indeed a fiduciary,
    we must determine whether the Plan grants it the authority
    to construe the terms of the Plan or determine eligibility for
    benefits. Donato v. Metro. Life Ins. Co., 
    19 F.3d 375
    , 379 (7th
    Cir. 1994).
    Continental argues that the Plan does, pointing to the
    Certificate issued to Ruiz that states that “[w]hen making a
    benefit determination under the policy, [Continental has]
    the discretionary authority to determine Your eligibility for
    benefits and to interpret the terms and provisions of the
    policy.” (Emphasis in the original.) While this court has held
    that no “magic words” are necessary for a grant of discre-
    tionary authority, 
    id.
     (quoting Sisters of the Third Order of St.
    Francis v. SwedishAmerican Group Health Benefit Trust, 
    901 F.2d 1369
    , 1379 (7th Cir. 1990)), the language in the Certificate is
    surely sufficient.
    Ruiz, however, argues that the Certificate and the insur-
    ance policy issued by Continental are not plan documents
    and, therefore, there is no language in a plan document that
    vested Continental with the authority to construe the terms
    No. 03-3911                                                      9
    of the Plan or determine eligibility for benefits. In support
    of his argument, Ruiz quotes from this court’s decision in
    Wallace v. Reliance Standard Life Ins., 
    318 F.3d 723
     (7th Cir.
    2003). In Wallace, this court noted that “Pegram [v. Hedrich,
    530 U.S. U.S. 211 (2000)] concluded that a contract of
    insurance sold to a plan is not itself ‘the plan’ . . . .” Wallace,
    
    318 F.3d at 724
    . Ruiz takes this to mean that an insurance
    policy issued pursuant to a contract for insurance does not
    constitute a plan document.
    Pegram, however, does not hold that an insurance policy
    is not a plan document. Pegram holds only that “the pro-
    visions of documents that set up [an] HMO are not as such,
    a plan.” Pegram, 530 U.S. at 223. In fact, the Court went on
    to suggest that provisions of a contract between an HMO
    (and, by extension, an insurer such as Continental) and an
    employer can be part of a plan. Id. (“[T]he agreement be-
    tween an HMO and an employer who pays the premiums
    may provide . . . elements of a plan by setting out rules under
    which beneficiaries will be entitled to care.”) (emphasis
    added).
    Moreover, we have considered an insurance policy a plan
    document before. In Postma v. Paul Revere Life Insurance Co.,
    
    223 F.3d 533
    , 537-40 (7th Cir. 2000), this court considered
    whether an insurance policy issued by Paul Revere gave the
    company the necessary discretion to entitle it to the arbi-
    trary and capricious standard of review of its decision to
    deny a plaintiff disability benefits. See also Houston v.
    Provident Life and Accident Ins. Co., 
    390 F.3d 990
    , 994 (7th Cir.
    2004) (in concluding that a defendant was entitled to the
    arbitrary and capricious standard noted that “the policy
    grants Provident ‘full, exclusive, and discretionary authority
    to control, manage, and administer claims.’ ”) (emphasis
    added). Other circuits have also held that insurance policies
    are plan documents. Ross v. Rail Car Am. Group Disability
    10                                                    No. 03-3911
    Income Plan, 
    285 F.3d 735
    , 739 n.5 (8th Cir. 2002); Cinelli v.
    Sec. Pac. Corp., 
    61 F.3d 1437
    , 1441 (9th Cir. 1995); Gable v.
    Sweetheart Cup Co., 
    35 F.3d 851
    , 856 (4th Cir. 1994); Musto v.
    Am. Gen. Corp., 
    861 F.2d 897
    , 900-01 (6th Cir. 1988); see also
    Shaw v. Conn. Gen. Life Ins. Co., 
    353 F.3d 1276
    , 1282-83 (11th
    Cir. 2003) (treating an insurance policy as plan document).
    In this case, the insurance policy and the Certificate are
    plan documents. The plan documents granted Continental
    the requisite discretionary authority. Continental is entitled,
    therefore, to have its decision to deny Ruiz benefits re-
    viewed under an arbitrary and capricious standard.
    B. Continental’s Decision
    A fiduciary’s decision to deny a claim for benefits is enti-
    tled to “great deference” under the arbitrary and capricious
    standard of review. Blickenstaff v. R.R. Donnelley & Sons Co.
    Short Term Disability Plan, 
    378 F.3d 669
    , 677 (7th Cir. 2004).
    It is not enough that we might disagree with a fiduciary’s
    decision concerning benefits; we cannot overturn a decision
    to deny benefits unless the decision was “downright
    1
    unreasonable.” 
    Id.
    Continental’s decision was not “downright unreasonable.”
    The Plan required Ruiz to submit objective medical findings
    1
    Ruiz has not presented specific evidence that Continental
    suffered from a conflict of interest that would require this court
    to apply the sliding scale of deference described in Manny v. Cent.
    States, S.E. & S.W. Areas Pension & Health & Welfare Funds, 
    388 F.3d 241
    , 242-43 (7th Cir. 2004). See Mers v. Marriott Int’l Group
    Accidental Death & Dismemberment Plan, 
    144 F.3d 1014
    , 1020 (7th
    Cir. 1998) (requiring “specific evidence of actual bias that there is
    a significant conflict”). We apply, therefore, a “simple” arbitrary
    and capricious standard of review. Manny, 
    388 F.3d at 243
    .
    No. 03-3911                                                 11
    to support his claim for disability. The reports of the doctors
    who opined that Ruiz could not perform even sedentary
    work (the level of exertion a vocational consultant em-
    ployed by Continental concluded Ruiz could perform) are
    not supported by objective evidence. Instead, the primary
    evidence supporting Ruiz’s claim that he cannot perform
    any work for which he is trained was his own subjective
    complaints of pain.
    Further, the physicians’ opinions about Ruiz’s ability
    to work are somewhat inconsistent. At roughly the same
    time (the fall of 1999), Drs. Pavelka and Levin offered con-
    tradictory assessments of Ruiz’s capacities. As noted above,
    Dr. Pavelka suggested Ruiz could perform no work while
    Dr. Levin suggested that Ruiz could perform jobs that al-
    lowed Ruiz to sit, stand, or walk such that he was standing
    for no more than two hours at one time, sitting for no more
    than three hours at one time, and walking for no more than
    three hours at a time. In conflict with both these earlier de-
    terminations is Dr. Hanlon’s conclusion, a year later, that,
    although Ruiz was disabled at the time of the report, he would
    able to return to work duties only a short time thereafter.
    Finally, Dr. Kanuru’s opinion, the most recent of the four,
    was not supported by objective medical evidence and, in-
    stead, relied solely on Ruiz’s complaints regarding his pain;
    evidence, as noted above, that was not sufficient under the
    Plan to support a claim for disability benefits.
    In light of the lack of objective medical evidence support-
    ing Ruiz’s claim that he can perform no work he is trained
    to do, and the inconsistent conclusions of physicians re-
    viewing Ruiz’s medical records, it was not “downright un-
    reasonable” for Continental to conclude that Ruiz was not
    entitled to long-term disability benefits. Blickenstaff , 
    378 F.3d at 677
    .
    12                                               No. 03-3911
    III.
    The district court properly granted summary judgment in
    favor of Continental. Continental served as a fiduciary to the
    Plan and its decision to deny Ruiz long-term disability
    benefits was neither arbitrary nor capricious. The decision
    of the district court is
    AFFIRMED.
    A true Copy:
    Teste:
    _____________________________
    Clerk of the United States Court of
    Appeals for the Seventh Circuit
    USCA-02-C-0072—3-11-05
    

Document Info

Docket Number: 03-3911

Judges: Per Curiam

Filed Date: 3/11/2005

Precedential Status: Precedential

Modified Date: 9/24/2015

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95-cal-daily-op-serv-6218-95-daily-journal-dar-10622-pens-plan , 61 F.3d 1437 ( 1995 )

Mertens v. Hewitt Associates , 113 S. Ct. 2063 ( 1993 )

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22-employee-benefits-cas-1172-pens-plan-guide-cch-p-23946z-pamela , 144 F.3d 1014 ( 1998 )

Bruce A. Wallace v. Reliance Standard Life Insurance Co. , 318 F.3d 723 ( 2003 )

Christine M. Donato v. Metropolitan Life Insurance Company , 19 F.3d 375 ( 1994 )

Celotex Corp. v. Catrett, Administratrix of the Estate of ... , 106 S. Ct. 2548 ( 1986 )

anthony-j-militello-v-central-states-southeast-and-southwest-areas , 360 F.3d 681 ( 2004 )

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Robert L. Musto v. American General Corporation , 861 F.2d 897 ( 1988 )

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