Beth Cosey v. The Prudential Insurance Company

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2360
BETH A. COSEY,
Plaintiff - Appellant,
v.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA; BIOMERIEUX,
INC.,
Defendants - Appellees.
Appeal from the United States District Court for the Middle
District of North Carolina, at Greensboro. Thomas D. Schroeder,
District Judge. (1:11-cv-00121-TDS-JEP)
Argued: September 20, 2013 Decided: November 12, 2013
Before DAVIS, KEENAN, and FLOYD, Circuit Judges.
Vacated and remanded by published opinion. Judge Keenan wrote
the opinion, in which Judge Davis and Judge Floyd joined.
Norris Arden Adams, II, ESSEX RICHARDS, P.A., Charlotte, North
Carolina, for Appellant. Patrick C. DiCarlo, ALSTON & BIRD LLP,
Atlanta, Georgia, for Appellees.
BARBARA MILANO KEENAN, Circuit Judge:
In this appeal, we primarily consider whether certain
short-term and long-term disability benefits plans provided by
an employer unambiguously confer discretionary decision-making
authority on the plan administrator, requiring judicial review
of the administrator’s benefits determinations under an abuse-
of-discretion standard.
Upon our review, we conclude that the language at issue in
both plans is ambiguous and does not clearly confer
discretionary decision-making authority on the plan
administrator. Therefore, we hold that the administrator’s
eligibility determinations denying benefits to a covered
employee are subject to de novo judicial review, and that the
district court erred in reaching a contrary conclusion. We
further hold that the district court erred in concluding that
the employer’s group insurance plan requires objective proof of
disability in order for an employee to qualify for plan
benefits. Accordingly, we vacate the district court’s judgment
and remand the case for further proceedings.
I.
Beth A. Cosey was employed as a senior clinical marketing
manager for BioMerieux, Inc., a large medical diagnostics
company. BioMerieux has a group insurance contract with the
2
Prudential Insurance Company of America (Prudential), which acts
as claims administrator for short-term disability (STD) and
long-term disability (LTD) benefits under employee welfare
benefits plans (collectively, the benefits plans) issued by
Prudential. Cosey was a participant in the STD and LTD benefits
plans. Under both plans, a participating employee is entitled
to disability benefits if she is “unable to perform the material
and substantial duties of [her] regular occupation due to [her]
sickness or injury” (emphasis omitted).
Near the end of May 2007, Cosey did not report for work and
submitted a claim for disability benefits, citing fatigue,
hypotension, weight loss, and sleep apnea. 1 Prudential initially
1
The evidence in the record before us contains a number of
medical terms, several of which are defined, in relevant part,
as follows:
(1) “Disequilibrium” is “[a] disturbance or absence of
equilibrium,” Stedman’s Medical Dictionary 566 (28th ed. 2006);
(2) “Dysautonomia” is “[a]bnormal functioning of the
autonomic nervous system,” id. at 595;
(3) “Fibromyalgia” is “[a] common syndrome of chronic
widespread soft-tissue pain accompanied by weakness, fatigue,
and sleep disturbances,” id. at 725;
(4) “Hypersomnia” is “[a] condition in which sleep periods
are excessively long, but the person responds normally in the
intervals,” id. at 926;
(5) “Hypotension” is “[s]ubnormal arterial blood pressure,”
id. at 937;
(6) “Myoclonus” is “[o]ne or a series of shocklike
contractions of a group of muscles, of variable regularity,
synchrony, and symmetry, generally due to a central nervous
system lesion,” id. at 1272;
(Continued)
3
approved Cosey’s claim and allowed benefits covering about a
three-week period, after which Prudential determined that Cosey
had presented insufficient evidence of an impairment preventing
her from performing the material and substantial duties of her
regular occupation. BioMerieux eventually terminated Cosey’s
employment in June 2008, and Cosey filed a civil action in
federal court to recover STD and LTD benefits.
BioMerieux re-hired Cosey in August 2008, allowing her to
work from home and assigning her to a limited travel schedule.
Several months later, BioMerieux and Cosey reached a settlement
agreement in Cosey’s lawsuit.
In March 2009, after Cosey had been working at BioMerieux
in a limited capacity for about seven months, Cosey took
unscheduled leave and filed another claim for disability
benefits. In support of her claim, Cosey complained of fatigue,
sleep disorder, fibromyalgia, dysautonomia, myoclonus, and
dizziness. Prudential initially approved Cosey’s claim and paid
her STD benefits for about seven weeks.
(7) “Sleep apnea” is a disorder “associated with frequent
awakening” during sleep and “often with daytime sleepiness,” id.
at 119;
(8) “Tremor[s]” are “[r]epetitive, often regular,
oscillatory movements caused by alternate, or synchronous, but
irregular contraction of opposing muscle groups; usually
involuntary,” id. at 2023.
4
Cosey’s consultations with various physicians produced
varying medical opinions with regard to her condition. For
instance, Cosey initially was evaluated for “overwhelming
fatigue” by a primary care physician in May 2007, but that
physician noted that Cosey had “[n]o diagnosis/treatment
established.” Later that month, a different doctor diagnosed
Cosey with hypersomnia despite her “normal sleep at night,” an
essential tremor that was “currently asymptomatic,” and chronic
disequilibrium despite there being “no evidence of cerebellar
dysfunction.”
Further consultations yielded similarly inconclusive
impressions. A neurologist diagnosed Cosey with sleep apnea,
but stated that the disorder was “not severe enough to explain
the degree of day time sleepiness.” An endocrinologist remarked
that Cosey had lost more than thirty pounds in six months, but
also noted that Cosey had “improved 60% over the last few
months” of that period and was “spontaneously getting better.”
Although Cosey reported experiencing dizziness, fatigue,
and tremors, one neurologist stated that an examination of Cosey
was “relatively unremarkable” after a “near complete workup,”
and a neuropsychologist stated that “there are not suggestions
of neurocognitive impairment.” A cardiologist reported that
Cosey had experienced a temporary drop in blood pressure, but
opined that she otherwise was in normal cardiovascular
5
condition. Cosey initially told the cardiologist that she was
experiencing “overwhelming fatigue,” but later told the same
doctor that she was “able to play golf on the weekends,” and was
“no longer having the dizziness or lightheaded episodes.”
On the basis of this mixed record, the various physicians
reached different conclusions about Cosey’s ability to return to
work. In support of Cosey’s claim for disability benefits,
Cosey’s primary care physician opined that “[t]here is no
occupation that [Cosey] can sustain at this time and I deem her
condition permanent.” Also, Cosey’s chiropractor thought that
Cosey suffered from a “structural deficit in her cervical spine”
and doubted whether Cosey “could handle the everyday needs of
work.”
In contrast, four medical reviewers hired by Prudential
studied Cosey’s patient records and concluded that Cosey’s test
results did not support a finding of impairment, that there was
no medical explanation for Cosey’s self-reported symptoms, and
that Cosey’s condition did not preclude her from engaging in
full-time work. Additionally, Prudential hired a company to
conduct surveillance of Cosey, which revealed that Cosey had
opened a coupon-related business in Myrtle Beach, South
Carolina, less than one month after she most recently had
stopped working for BioMerieux. Also, Cosey was observed
6
outside her house “standing, walking, bending, entering and
exiting a vehicle and driving.”
On May 15, 2009, Prudential notified Cosey that it would
not authorize further payments unless Cosey submitted additional
medical information supporting her continued disability. Cosey
did not timely submit additional evidence in response to that
request. Prudential informed Cosey that it had determined that
the evidence of her claimed impairment was insufficient, and
that, therefore, she was not entitled to further STD benefits.
Cosey filed an administrative appeal of Prudential’s
termination of her STD benefits, but the plan administrator
upheld the earlier decision and also declared Cosey ineligible
for LTD benefits. Cosey retained counsel and filed a second
administrative appeal, requesting reconsideration of both
decisions. The plan administrator again upheld its earlier
determinations, stating its finding that Cosey’s “self-reported
symptoms are out of proportion to the medical evidence.”
After exhausting her administrative remedies, Cosey filed
the present civil action against Prudential and BioMerieux. The
district court applied an abuse-of-discretion standard of review
to Prudential’s denial of LTD and STD benefits. The court held
that the plan administrator’s decisions did not constitute an
abuse of discretion, and that Cosey had failed to create a
genuine issue of material fact for the court’s determination.
7
The court alternatively held that even applying a de novo review
standard, the court “would still find that Cosey failed to meet
the definition of disability” under the benefits plans. The
district court entered summary judgment in favor of Prudential
and BioMerieux, and Cosey timely filed the present appeal.
II.
Before considering the district court’s award of summary
judgment, we first must determine whether the district court
employed the appropriate standard of review in examining the
plan administrator’s denial of LTD and STD disability benefits.
We consider the LTD and STD benefits plans in turn.
A.
The LTD benefits plan before us is subject to the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
§§ 1001 through 1461. In the ERISA context, courts conduct de
novo review of an administrator’s denial of benefits unless the
plan grants the administrator discretion to determine a
claimant’s eligibility for benefits, in which case the
administrator’s decision is reviewed for abuse of discretion.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989);
see also Williams v. Metro. Life Ins. Co., 609 F.3d 622, 629-30
(4th Cir. 2010).
8
This Court explained in Gallagher v. Reliance Standard Life
Insurance Co. that no specific words or phrases are required to
confer discretion, but that a grant of discretionary authority
must be clear. 305 F.3d 264, 268 (4th Cir. 2002); see also
Sandy v. Reliance Standard Life Ins. Co., 222 F.3d 1202, 1207
(9th Cir. 2000) (“Neither the parties nor the courts should have
to divine whether discretion is conferred.”). We further have
stated that any ambiguity in an ERISA plan “is construed against
the drafter of the plan, and it is construed in accordance with
the reasonable expectations of the insured.” Gallagher, 305
F.3d at 269 (citation and internal quotation marks omitted).
The LTD plan administered by Prudential states that
benefits only will be paid to a claimant who “submit[s] proof of
continuing disability satisfactory to Prudential” (emphasis
added). Prudential and BioMerieux (collectively, Prudential)
argue that under our decision in Gallagher, we are required to
determine that this language in the LTD plan unambiguously
confers discretion on the plan administrator. We disagree.
In Gallagher, we observed that plan language requiring a
claimant to “submit[] satisfactory proof of [t]otal [d]isability
to us” was ambiguous, and could be interpreted as requiring
either an objective or a subjective standard for determining
whether a claimant’s “proof” was “satisfactory.” Id. (emphasis
added). Therefore, we held that the plan language did not
9
clearly convey that the plan administrator had discretionary
decision-making authority in deciding benefits claims. Id. at
269-70.
In explaining our decision in Gallagher, we provided an
example of a subjective standard different from the language at
issue in that case. We noted hypothetically that a requirement
that a claimant submit “proof . . . that is satisfactory to [the
plan administrator]” would refer to proof that the administrator
“finds subjectively satisfactory,” and would occasion abuse-of-
discretion review. Id. at 269. However, because the language
provided in the above hypothetical example was not before us for
decision in Gallagher, we hold that our discussion of that
language was dictum and does not bind our consideration of the
plan language before us. Accordingly, we consider as a matter
of first impression whether the phrase “proof satisfactory to
[the plan administrator]” unambiguously confers discretionary
decision-making authority on a plan administrator.
We observe that five of our sister circuits recently have
held that this 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. See Gross v. Sun
10
Life Assurance Co. of Can., --- F.3d ---, 2013 WL 4305006, at
*8-12 (1st Cir. Aug. 16, 2013); Diaz v. Prudential Ins. Co. of
Am., 424 F.3d 635, 639-40 (7th Cir. 2005); see also Viera v.
Life Ins. Co. of N. Am., 642 F.3d 407, 417 (3d Cir. 2011);
Feibusch v. Integrated Device Tech., Inc. Emp. Benefit Plan, 463
F.3d 880, 883-84 (9th Cir. 2006); Kinstler v. First Reliance
Standard Life Ins. Co., 181 F.3d 243, 252 (2d Cir. 1999).
We agree with the conclusions reached by our five sister
circuits. Three major themes pervade the opinions of those
courts and are relevant to our analysis. We consider: (1) the
inherent ambiguity in the wording of the phrase “proof
satisfactory to us”; (2) the likelihood that such language will
fail to provide sufficient notice to employees that their
disability claims will be subject to a plan administrator’s
discretionary determination; and (3) the responsibility of
insurance companies to draft clear plan language.
First, we conclude that the phrase “proof satisfactory to
us” is inherently ambiguous. As the Second Circuit has
explained, such language could be construed as simply stating
the truism that the administrator is the decision-maker who
initially must be persuaded that benefits should be paid before
any amounts actually are paid. See Kinstler, 181 F.3d at 252.
Or, as the First, Third, and Seventh Circuits have observed, the
phrase could be interpreted as describing the “inevitable
11
prerogative” of a plan administrator to insist that the form of
proof complies with prescribed standards, on the theory that an
administrator ought to be able to require production of
particular types of proof that the administrator deems most
reliable. Diaz, 424 F.3d at 637, 639 (“[E]very plan requires
submission of documentary proof, and the administrator is
entitled to insist on [one form of proof over another].”
(citations omitted)); see also Viera, 642 F.3d at 417 (“In other
words, it is not clear whether ‘satisfactory to Us’ means
‘. . . proof of loss [in a form] satisfactory to Us’ or
‘. . . proof of loss [substantively and subjectively]
satisfactory to Us.’”) (brackets in original); Gross, 2013 WL
4305006, at *11 (explaining that “satisfactory to us” wording
“reasonably may be understood to state [an administrator’s]
right to insist on certain forms of proof rather than confer[]
discretionary authority over benefits claims”). Similarly, the
phrase could mean that the plan administrator is entitled to
require that the quantum of proof meets some objective standard
that the administrator ultimately has no power to change. Cf.
Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089 (9th Cir.
1999).
Another possible reading, of course, is that the evidence
must “comply with the plan administrator’s subjective notions of
eligibility, disability, or other terms in the plan.” Diaz, 424
12
F.3d at 639. From this perspective, the administrator would be
vested not only with the power to insist on proof in a certain
form or quantum, but also with the discretion “to interpret the
rules, to implement the rules, and even to change them
entirely.” Id.
In view of the ambiguity of this plan language, a decision
here in favor of Prudential would violate our requirement of
clear plan language that “expressly creates discretionary
authority.” Feder v. Paul Revere Life Ins. Co., 228 F.3d 518,
522 (4th Cir. 2000); cf. Gross, 2013 WL 4305006, at *11
(requiring an administrator to “offer more than subtle
inferences drawn from such unrevealing language” to support the
administrator’s claim of discretionary authority). Thus, we
cannot accord Prudential such an expansive inference regarding
its plan administrator’s decision-making authority.
The second reason for our conclusion that the phrase “proof
satisfactory to us” does not confer discretion on an
administrator involves the notice function of plan language. We
identified this notice function as an important consideration in
Gallagher, in which we held in part that a plan did not clearly
confer discretion because such a construction of the plan’s
language would not be an insured employee’s “most likely”
interpretation of that language. 305 F.3d at 270.
13
We are concerned that insured employees who read
Prudential’s ambiguous plan language are not given sufficient
notice whether their plan administrator has “broad, unchanneled
discretion to deny claims.” Diaz, 424 F.3d at 637 (citation and
internal quotation marks omitted). It is critical that
employees understand the broad range of a plan administrator’s
authority because of the impact that this information can have
on employees’ own decisions. For instance, as the Seventh
Circuit has noted, employees may choose a particular employer
based on their understanding of the insurance benefits provided
by that employer, including whether any award of benefits is
subject to a plan administrator’s discretionary decision-making
authority. See id. at 639 (“[S]ome may prefer the certainty of
plans that do not confer discretion on administrators, while
others may think that the lower costs that are likely to attend
plans with reserved discretion are worth it.”).
Additionally, without clear language notifying employees
that an administrator’s denial of benefits is insulated from
plenary judicial review, employees who file claims for benefits
may not be fully aware of the gravity of administrative
proceedings or the necessity of developing as complete a record
as possible early in the claims process. Even a claimant’s
decision whether to be represented by counsel in administrative
proceedings can be affected if the claimant is aware that once
14
administrative avenues of appeal are exhausted, federal courts
will review the administrator’s determinations under a highly
deferential legal standard. 2
The third basis for our conclusion that the phrase “proof
satisfactory to us” is insufficient to confer discretion on a
plan administrator is the well-settled principle that
ambiguities in an ERISA plan must be construed against the
administrator responsible for drafting the plan. See Gallagher,
305 F.3d at 269. As the First Circuit recently observed, “it is
not difficult to craft clear language” granting discretion to a
plan administrator. Gross, 2013 WL 4305006, at *12; see also
Feibusch, 463 F.3d at 883-84 (same); Kinstler, 181 F.3d at 252
(counseling courts to “decline to search in semantic swamps for
arguable grants of discretion” given the ease in drafting clear
language).
We acknowledge that no magic words are required to ensure
discretionary, rather than de novo, judicial review of a plan
administrator’s decision. Gallagher, 305 F.3d at 268. However,
we also agree with the First Circuit’s observation that drafters
of ERISA plans have had every opportunity to avoid adverse
2
We note that Cosey appears to have corresponded with
Prudential on her own during the processing of her STD claim and
her initial administrative appeal of Prudential’s termination of
STD benefits. She hired counsel to assist her in further
administrative proceedings and in civil litigation.
15
rulings on this issue, especially in light of the gradual but
unmistakable change in the precedential landscape of federal
appellate decisions. See Gross, 2013 WL 4305006, at *12.
Indeed, the group insurance contract in the record is dated May
1, 2007, well after the Second, Seventh, and Ninth Circuits
already had rejected as inadequate the “proof satisfactory to
us” formulation that we consider here.
For these reasons, we now join the circuits that decline to
impose an abuse-of-discretion standard of review based solely on
a plan’s requirement that claimants submit
“proof . . . satisfactory to [the plan administrator].” 3 This
conclusion complements our holding in Gallagher, by requiring
clear plan language expressly conferring decision-making
discretion on a plan administrator before permitting judicial
review of that administrator’s decision under an abuse-of-
discretion standard. Accordingly, we hold that the district
court erred in reviewing the plan administrator’s denial of
3
We therefore disagree with the minority of circuits that
have concluded that language similar to the language before us
confers discretionary decision-making authority on a plan
administrator. See Tippitt v. Reliance Standard Life Ins. Co.,
457 F.3d 1227, 1233-34 (11th Cir. 2006); Nance v. Sun Life
Assurance Co. of Can., 294 F.3d 1263, 1267-68 (10th Cir. 2002);
Ferrari v. Teachers Ins. & Annuity Ass’n, 278 F.3d 801, 806 (8th
Cir. 2002).
16
Cosey’s claim for LTD benefits under an abuse-of-discretion
standard. 4
B.
We next address the plan detailing Cosey’s STD benefits.
The parties have stipulated, and we agree, that the STD plan is
not governed by ERISA. 5 Therefore, we must ascertain the
appropriate standard for judicial review of a plan
administrator’s benefits determination under the present STD
plan. 6 We hold that the STD plan did not confer discretionary
4
We are not persuaded to the contrary by Prudential’s
citation to the summary plan description for the LTD plan, which
provides, in relevant part, that the administrator has “sole
discretion to interpret the terms of the Group Contract, to make
factual findings, and to determine eligibility for benefits.”
We think this argument is foreclosed by the Supreme Court’s
decision in CIGNA Corporation v. Amara, 131 S. Ct. 1866, 1878
(2011), in which the Court concluded that “the summary
documents, important as they are, provide communication with
beneficiaries about the plan, but that their statements do not
themselves constitute the terms of the plan” (emphasis in
original). Moreover, because we have determined that the
language of the LTD plan is ambiguous and have construed that
ambiguity against Prudential, we find no basis for crediting a
conflicting grant of authority contained in a non-plan document.
5
As the district court noted, the basis for the parties’
stipulation is an exemption from ERISA for agreements whereby an
employer pays an employee’s normal compensation out of the
employer’s general assets during a period in which the employee
is physically or mentally unable to perform her duties. See 29
C.F.R. § 2510.3-1(b)(2).
6
Some circuits have reached different conclusions on the
separate issue whether abuse-of-discretion review may be applied
with respect to certain ERISA-exempt plans. Compare Comrie v.
IPSCO, Inc., 636 F.3d 839, 842 (7th Cir. 2011) (applying
(Continued)
17
decision-making authority on the plan administrator, and that,
therefore, the district court erred in reviewing the plan
administrator’s denial of Cosey’s STD benefits claim under an
abuse-of-discretion standard.
We begin our analysis by consulting familiar principles of
North Carolina contract law, which we apply to the benefits plan
before us. 7 In North Carolina, when a court interprets a
contract, the court’s primary function is to ascertain the
parties’ intention as expressed in their written instrument.
See Lane v. Scarborough, 200 S.E.2d 622, 624 (N.C. 1973). If
deferential review and noting that it should be “easier, not
harder” to effectuate a grant of discretion in a standard
contract than in a highly regulated ERISA plan), with Goldstein
v. Johnson & Johnson, 251 F.3d 433, 442-44 (3d Cir. 2001)
(applying de novo review to an ERISA-exempt, “top hat” deferred
compensation plan even when the plan conferred discretionary
authority on a plan administrator not acting as an ERISA
fiduciary), and Craig v. Pillsbury Non-Qualified Pension Plan,
458 F.3d 748, 752 (8th Cir. 2006) (adopting an intermediate
standard). However, we need not reach this issue in the present
case because we conclude that the contractual terms of the STD
plan did not confer discretion on the plan administrator.
7
Although the group insurance contract states that “[t]he
Group Contract is delivered in and is governed by the laws of
the Governing Jurisdiction,” which is defined as the “State of
Missouri,” the parties in this case asked the district court to
interpret the STD plan under North Carolina law. On appeal,
both parties likewise have argued the case based on the trial
court’s application of North Carolina law. Accordingly, we
apply North Carolina law in our analysis. Cf. Am. Fuel Corp. v.
Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997) (“[W]here
the parties have agreed to the application of the forum law,
their consent concludes the choice of law inquiry.”).
18
the plain language of a contract is clear, the intention of the
parties is inferred from the words of the contract considered as
a whole. See State v. Philip Morris USA Inc., 685 S.E.2d 85, 90
(N.C. 2009) (citations omitted).
Only when terms of a contract are ambiguous are courts
authorized to apply rules of construction. See Jones v.
Casstevens, 23 S.E.2d 303, 305 (N.C. 1942). Any such
ambiguities in contract language must be construed against the
party responsible for drafting the uncertain language. See
Novacare Orthotics & Prosthetics E., Inc. v. Speelman, 528
S.E.2d 918, 921 (N.C. Ct. App. 2000). And, in the context of
insurance contracts, North Carolina courts long have held that
ambiguities must be construed in favor of the insured. See,
e.g., Kirkley v. Merrimack Mut. Fire Ins. Co., 59 S.E.2d 629,
631 (N.C. 1950); McCain v. Hartford Live Stock Ins. Co., 130
S.E. 186, 187 (N.C. 1925).
Prudential argues that the STD plan requirement that
claimants “submit satisfactory proof of continuing disability”
is a grant of discretionary decision-making authority. In
response, Cosey submits that this phrase in the STD plan is
indistinguishable from the very similar language that we held
ambiguous in Gallagher. See 305 F.3d at 269.
We agree with Cosey that the “satisfactory proof” language
in the STD plan is the functional equivalent of the language we
19
held ambiguous in Gallagher. As we discussed in Gallagher, a
requirement that a claimant submit “satisfactory proof” could be
interpreted as mandating proof that is “objectively
satisfactory,” or proof that is “subjectively satisfactory” to
the plan administrator. Id. Because we are unable to determine
the parties’ intention from the language of the contract,
ordinary principles of contract construction compel us to
construe this ambiguous phrase in favor of Cosey, the insured
employee, and conclude that the STD plan fails to confer
discretionary decision-making authority on the plan
administrator.
Our conclusion is not altered by Prudential’s contention
that any ambiguity in the STD plan should be resolved against
Cosey because of the clear grant of discretion to the plan
administrator in a separate Administrative Services Agreement
(ASA), which Prudential asserts we must view as an integral part
of the STD plan. 8 The unsigned ASA in the record purports to
have been negotiated between BioMerieux and Prudential more than
eight months after the commencement of Cosey’s coverage under
8
Because we apply state law to decide whether the ASA is a
part of the ERISA-exempt STD plan at issue in this case, we do
not reach the question whether an ASA can confer discretion
absent a discretionary grant in an ERISA plan. Therefore, the
ERISA cases cited by the parties are inapposite. We note,
however, that in the ERISA context, the Supreme Court’s decision
in Amara has cast serious doubt on whether non-plan documents
can be used to interpret a plan’s language. See supra note 4.
20
the STD and LTD plans. Among other things, the ASA states that
“Prudential will have discretionary authority to determine
eligibility for benefits” and “to interpret and construe the
terms of the Plan.”
Prudential’s reliance on the ASA is misplaced. The STD
plan does not incorporate or even refer to the ASA. Cf. Booker
v. Everhart, 240 S.E.2d 360, 363 (N.C. 1978) (“To incorporate a
separate document by reference is to declare that the former
document shall be taken as part of the document in which the
declaration is made, as much as if it were set out at length
therein.”). Absent any terms in the contract elaborating the
parties’ intention to confer discretion on the plan
administrator, we decline to hold that the ASA’s grant of
discretion constitutes a part of the STD plan, particularly when
doing so would conflict with our duty under North Carolina law
to construe ambiguous contract terms against the drafter and in
favor of the insured. 9 Therefore, we conclude that the STD plan
does not confer decision-making discretion on the plan
administrator, and that the district court erred in applying
abuse-of-discretion review to the plan administrator’s denial of
Cosey’s STD benefits claim.
9
In view of our holding that the language of the STD plan
is ambiguous and must be construed in Cosey’s favor, we need not
discuss the fact that the version of the ASA in the record is
unsigned.
21
III.
Generally, we review a district court’s award of summary
judgment de novo, applying the same standards as those governing
the district court’s review of the record. Cf. Felty v. Graves-
Humphreys Co., 818 F.2d 1126, 1127-28 (4th Cir. 1987). As we
have discussed above, the district court was required to review
de novo the decisions of the plan administrator with respect to
Cosey’s LTD and STD claims. After the district court reviewed
the plan administrator’s decision for abuse of discretion, the
court alternatively opined that “even under a de novo review,
the court would still find that Cosey failed to meet the
definition of disability in the STD and LTD benefits plans.”
Cosey argues that the district court’s use of an incorrect
standard of review, and the court’s erroneous view that both
benefits plans required Cosey to present objective evidence of
her disability, mandates reversal of the summary judgment award.
In response, Prudential asserts that the court’s de novo review
of the plan administrator’s decision permits us to conduct our
own de novo review of that alternative holding, and that the
district court did not err in holding that Cosey was required to
present objective evidence that she was disabled.
We disagree with Prudential’s argument. Although the
district court’s alternative holding referenced the correct
standard of review, we presently are unable to consider that
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holding because it was based in part on the court’s ruling that
Cosey was required to present objective evidence of her
disability. The district court articulated its requirement of
objective proof, stating:
Both the STD and LTD benefits plans state that the
claimant is required to submit “proof” of disability
to receive benefits. The use of the word “proof”
communicates that there must be some objective basis
to the claimant’s complaints, or plan administrators
would have to accept all subjective claims of the
participant without question. It is hardly
unreasonable for the administrator to require an
objective component to proof of disability (citations,
internal quotation marks, and brackets omitted).
We express no opinion whether a company lawfully could
draft a benefits plan requiring that a claimant produce
objective proof of disability. However, no such requirement
appears in either the LTD or the STD plans before us. Neither
plan provides that a claimant’s submission of proof must contain
an “objective component.” See DuPerry v. Life Ins. Co. of N.
Am., 632 F.3d 860, 869 (4th Cir. 2011) (holding that under a
plan “contain[ing] no provision precluding [a claimant] from
relying on her subjective complaints as part of her evidence of
disability,” a claim cannot be denied based on such reliance).
Therefore, we hold that the district court erred in concluding
that Prudential could deny Cosey’s STD and LTD claims on the
basis that her proof lacked such objective evidence. Further,
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because this improper consideration was part of the district
court’s ultimate award of summary judgment in Prudential’s
favor, we must vacate the award and remand for the court to
review Cosey’s evidence de novo under the actual requirements of
the LTD and STD plans.
IV.
In summary, we conclude that the language of both the STD
and the LTD plans is inherently ambiguous and fails to confer
discretionary decision-making authority on Prudential, requiring
de novo judicial review of the administrator’s denial of Cosey’s
benefits claims under those plans. We therefore hold that the
district court erred in reviewing Prudential’s decisions for an
abuse of discretion. We further hold that the district court
erred in requiring objective evidence of Cosey’s claimed
disability when neither the LTD nor the STD benefits plans
contain such a requirement. Accordingly, we vacate the district
court’s award of summary judgment and remand with instructions
that the court apply de novo review to the plan administrator’s
denial of Cosey’s LTD and STD benefits claims.
VACATED AND REMANDED
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