Opinion
Case No. 5:99-CV-94.
April 5, 2000.
MEMORANDUM OPINION
This case originally came before the Court on plaintiff's motion to remand, following removal to this Court by defendant. In denying plaintiff's motion to remand, the Court determined that the policy in question qualifies as an employee welfare benefit plan within the meaning of the Employee Retirement and Income Security Act of 1974, ("ERISA") 29 U.S.C. § 1001 et seq., and accordingly this Court had subject matter jurisdiction.
In a motion filed December 20, 1999, defendant now moves the Court for partial summary judgment on the question of whether the disability income policy issued by defendant to plaintiff ("Policy") vests Provident with discretionary authority to determine eligibility for benefits or to construe the terms of the plan, triggering the "arbitrary and capricious" standard of review under Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) and Perez v. Aetna Life Ins. Co., 150 F.3d 550, 555 (6th Cir. 1998) (en banc).
I. BACKGROUND
This case presents a dispute over payment of disability benefits between an insured and his insurer. In 1984, plaintiff Messing, an attorney, and one of his two law partners purchased occupational disability insurance policies from defendant. Plaintiff maintained his policy through 1997, when he was hospitalized for clinical depression. After his discharge, plaintiff's psychiatrist recommended he seek a less stressful occupation, and plaintiff proceeded to apply to defendant for disability benefits.
Under the terms of the Policy, were plaintiff to become disabled, he would receive some $36,000 annually. In response to plaintiff's claim, defendant initially began to pay benefits, but nevertheless required plaintiff to submit to an medical examination by a psychologist and psychiatrist that it had retained. Following these examinations, defendant's mental health professionals concluded that while plaintiff had indeed been depressed and that his depression was related to the stresses of his occupation, he was nevertheless capable of holding gainful employment in the legal field. Defendant then notified plaintiff of the findings of its mental health professionals and discontinued payments under the policy. Thereafter, Plaintiff's filed this suit claiming a wrongful denial of benefits pursuant to 29 U.S.C. § 1132(a)(1)(B).
II. LAW AND ANALYSIS
The Court reviews an ERISA plan administrator's decision to deny benefits de novo unless the plan clearly gives the administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan, in which case an "arbitrary and capricious" standard applies. See Perez v. Aetna Life Ins. Co., 150 F.3d 550, 555 (6th Cir. 1998) (en banc).
A plan need not contain the word "discretion" or any other "magic word" to vest discretionary authority in the plan administrator.See Johnson v. Eaton Corp., 970 F.2d 1569, 1572 n. 2 (6th Cir. 1992). Merely subjecting a claim to a requirement of proof, however, is insufficient to bestow discretionary authority. See Tiemeyer v. Community Mutual Ins. Co., 8 F.3d 1094, 1099 (6th Cir. 1993) (finding that the right to make coverage determinations does not equate to discretionary authority). And, to the extent that a plan's language is susceptible to more than one interpretation, the Court applies the "`rule of contra proferentum'" and construes all ambiguities against the drafting party, in this case, the Plan. University Hospitals v. Emerson Electric Co., et al., 202 F.3d 839, 846-847 (6th Cir. 2000).
Defendant initially observes the Policy requires "proper written proof" of a claim before certain monthly benefits are payable. Defendant further notes that elsewhere the Policy plaintiff is required to submit proper written proof" or "satisfactory evidence" for plaintiff to be entitled to a premium waiver or be presumptively found disabled. Aggregating these usages, defendant reasons the Policy vests discretion to make benefits determinations generally, implicating the "arbitrary and capricious" standard of review.
Plaintiff disagrees, contending the Policy vests discretion in Provident only in two specific provisions granting plaintiff extraordinary privileges, namely the premium waiver provision and the presumptive total disability provision. (Policy at 5). Any discretion vested in these provisions, plaintiff asserts, is irrelevant to his claim brought under § 1132(a)(1)(B) for denial of benefits.
Plaintiff argues in the alternative that Provident has a conflict of interest requiring the Court to view its interpretations skeptically in the event that the Court decides the "arbitrary and capricious" standard is proper on this record.See Emerson Electric Co., 202 F.3d at 846-847. Because the Court determined the de novo standard of review applies to this action, however, it is not necessary to address these other arguments.
A. "Satisfactory Proof of Your Loss"
Two sections of the policy lie at heart of the parties' dispute. First, the section entitled Benefits" sets forth the conditions under which the Policy will compensate plaintiff for claims of total disability or presumptive total disability:TOTAL DISABILITY
We will pay the Monthly Benefit for Total Disability as follows:
1. Benefits are payable for Total Disability due to Injuries or Sickness.
2. Benefits start on the day shown on Page 3. They do not accrue before that day.
3. Benefits are payable while a period of Total Disability continues.
But, in no event are benefits payable beyond the applicable Maximum Benefit Period shown on Page 3 during a period of disability.
PRESUMPTIVE TOTAL DISABILITY — LOSS OF SPEECH, HEARING, SIGHT OR THE USE OF TWO LIMBS
You will be presumed totally disabled if Injuries or Sickness results in:
1. the entire and irrecoverable loss of speech or hearing;
2. the entire and irrecoverable loss of sight of both eyes; or
3. the entire and irrecoverable loss of the use of both hands, both feet or one hand and one foot.
You must present satisfactory proof of your loss. Your ability to engage in any occupation will not matter . . .
(Policy at 5).
Defendant contends the statement "You must present satisfactory proof of your loss," is sufficient for the Court to find the Policy vests Provident with discretion. (Def. Br. at 7). Disagreeing, plaintiff claims that reading the text as written, a reasonable observer would not anticipate that the above language vested discretion in Provident.
Defendant further cites the Policy's Waiver of Premium provision which requires plaintiff to "present satisfactory proof of Total Disability in order for premiums to be waived." (Policy at 5). The discretionary grant, however, relates specifically to the waiver of premiums, and does not address the question of proof of claim for total disability.
The Court finds the central interpretive issue here, however, is not to construe the meaning of the term, "satisfactory proof of your loss," but rather to construe the text's scheme in context: Does the clause requiring "satisfactory proof of your loss" apply merely to the Policy's Presumptive Total Disability section, or does it apply both to the Presumptive Total Disability section and the Total Disability section?
Solely reviewing the four corners of the Policy sheds no light on this issue, because it is reasonable to read the qualifying language requiring "satisfactory proof" as applicable either to both the total disability and presumptive total disability sections or merely the section addressing presumptive total disability. The Court resolves the ambiguity by employing the rule of contra proferentum, the cannon of construction requiring the Court to construe ambiguous text against the drafting party. See Emerson Electric Co., 202 F.3d at 846-847. Accordingly, the Court concludes the language requiring "satisfactory proof of your loss" applies only to the section entitled "Presumptive Total Disability." Because plaintiff claims to have suffered disability rather than relying upon the Presumptive Total Disability provision, any grant of discretion to Provident to determine presumptive total disability is inapplicable to his claim.
B. "Proper Written Proof"
Defendant next turns to the subsection entitled, Time of Payment of Claims." In its entirety, it provides that:
After receiving written proof of loss, we will pay monthly all benefits then due you for disability.
Benefits for any other loss covered by this policy will be paid as soon as we receive proper written proof.
(Policy at 15). From this text, defendant relies upon the second sentence requiring "proper written proof," to fortify his claim that the Policy unambiguously vests discretion in Provident.
Although plaintiff agrees that the above quoted language is crucial to the determination of whether the Policy vests Provident with discretion, he contends that the plain language of the text clearly fails to grant any such discretion to defendant. Highlighting the second sentence of the section, plaintiff maintains defendant lacks discretion to evaluate his claim for disability benefits because the claim does not qualify as a claim for "any other loss" to which the "proper written proof" requirement applies.
Having carefully considered the parties' arguments, the Court concludes the plain language of the Policy's "Time of Payment of Claims" subsection imparts a clear and unambiguous meaning, which accords with plaintiff's interpretation. The first sentence of the section states that benefits for disability will be paid "[a]fter receiving written proof of loss," a requirement that does not invoke any discretion on the part of the benefits administrator upon a reasonable reading. Conversely, a claim for benefits from "any other loss covered by this policy" will be paid upon the receipt of "proper written proof," a standard that does seemingly vest discretion in Provident. (Policy at 14-15).
Here, plaintiff's claim under the policy is for disability resulting from occupational stress. His claim for benefits is therefore governed by the first sentence of the "Time for Payment of Claims" section, which requires only "written proof," rather than the proper written proof" required for a claim for any "other loss" under the second sentence. Hence, while defendant is vested with discretion under a claim for "any other loss," the Policy fails to provide such discretion for a claim of disability.
The Court's conclusion is buttressed by the general provisions of the Policy's Claims" section, where to show "Proofs of Loss" for a continuing loss, plaintiff is only required to provide "written proof of loss within 90 days after the end of each period for which we are liable," as opposed to "proper written proof," or "satisfactory proof." (Policy at 14).
III. CONCLUSION
Although it is well-settled law that phrases such as "proper written proof" and "satisfactory proof of loss" vest discretion in a plan administrator's determination of whether to pay benefits, and although the Policy employs such language in the Policy, the Court concludes those key terms do not appear in the provisions relevant to plaintiff's disability claim. Initially, applying the cannon of construction of contra proferentum, the Court construes the ambiguous scheme of the Benefits section against defendant Provident to require "satisfactory proof of loss" only in the case of Presumptive Total Disability. Second, the Court concludes that the plain language of the "Time of Payment of Claims" section requires plaintiff to submit only "written proof," language which does not implicate discretion on the part of the administrator. Accordingly, defendant's motion for partial summary judgment will be denied, and the Court will review Provident's denial of benefits to plaintiff under the de novo standard of review.
ORDER
In accordance with the Court's Memorandum Opinion of even date,
IT IS HEREBY ORDERED that defendant's motion for partial summary judgment is DENIED, and that the Court will review the claims presented in plaintiff's complaint pursuant to 29 U.S.C. § 1132(a)(1)(B) de novo.