Opinion
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY ADJUDICATION; DENYING DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION; VACATING HEARING
MAXINE CHESNEY, District Judge.
Before the Court are cross-motions for summary adjudication of the appropriate standard of review, each filed August 27, 2004 and noticed for hearing September 17, 2004. Pursuant to stipulation, no oppositions or replies have been filed. Having reviewed the papers filed in support of the parties' motions, the Court finds the matters appropriate for decision without oral argument, see Civil L.R. 7-1(b), and hereby VACATES the September 17, 2004 hearing on the motions. For the reasons set forth below, plaintiff Marcia Flores' ("Flores") motion for summary adjudication is GRANTED and defendant The Prudential Insurance Company of America's ("Prudential") motion for summary adjudication is DENIED.
BACKGROUND
In this action, Flores seeks to recover benefits and to enforce rights under a long term disability ("LTD") insurance policy ("policy") issued by Prudential to Flores' former employer, Exchange Bank. Flores alleges that she was forced to leave her employment on August 7, 2002 because of "extreme pain, nausea and discomfort due to a severe medical condition" and that she "continues to suffer from her condition to the degree that she is unable to resume her occupation or take other meaningful employment." (See First Amended Complaint ("FAC") ¶ 10.) Flores further alleges that Prudential initially determined she was eligible for LTD benefits under the policy but thereafter improperly terminated those benefits. (See id. ¶¶ 16, 21.) The parties dispute whether Flores has received the benefits to which she is entitled under the policy.
The precise details of that dispute are not relevant to the Court's determination of the instant motion.
On October 30, 2003, Flores filed a complaint against Prudential in state court, which was removed to federal court on December 12, 2003. The operative complaint is the First Amended Complaint, filed June 29, 2004. Flores asserts a single cause of action against Prudential for disability benefits due under the LTD policy, pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B).
At the case management conference, held June 18, 2004, the parties agreed to file simultaneous cross-motions for summary adjudication no later than August 27, 2004, to be heard September 17, 2004. The parties further agreed that no oppositions or replies were necessary and, accordingly, were not to be filed. The Court thereupon issued an order consistent with the parties' agreement. When the motions were filed on August 27, 2004, however, a dispute immediately arose as to whether the scope of plaintiff's motion exceeded that contemplated by the parties and the Court. By order filed August 31, 2004, the Court resolved the dispute as to scope, ruling that it would consider, at this time, only the parties' arguments on the question of whether the policy language grants Prudential discretionary authority to determine eligibility for benefits or to construe the terms of the plan.
LEGAL STANDARD
Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment as to "all or any part" of a claim "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Fed.R.Civ.P. 56(b), (c). Material facts are those that may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986). A dispute as to a material fact is "genuine" if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. See id. The Court may not weigh the evidence. See id. at 255. Rather, the nonmoving party's evidence must be believed and "all justifiable inferences must be drawn in [the nonmovant's] favor." See United Steelworkers of Am. v. Phelps Dodge Corp. , 865 F.2d 1539, 1542 (9th Cir. 1989) (en banc) (citing Liberty Lobby , 477 U.S. at 255).
DISCUSSION
Under ERISA, a plan participant or beneficiary may bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan[.]" See 29 U.S.C. § 1132(a)(1)(B). The Supreme Court has held that a "denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard 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 Tire & Rubber Co. v. Bruch , 489 U.S. 101, 115 (1989). A plan administrator has such discretion only "where discretion [is] unambiguously retained' by the administrator." See Kearney v. Standard Ins. Co. , 175 F.3d 1084, 1090 (9th Cir. 1999) (en banc) (quoting Bogue v. Ampex Corp. , 976 F.2d 1319, 1325 (9th Cir. 1992)). The plan administrator bears the burden of proving that the plan language unambiguously grants the plan administrator such discretionary authority. See Kearney , 175 F.3d at 1089 (noting "the default is that the administrator has no discretion, and the administrator has to show that the plan gives it discretionary authority in order to get any judicial deference to its decision"); see also Thomas v. Oregon Fruit Products Co. , 228 F.3d 991, 994 (9th Cir. 2000) (noting plan administrator "carries the burden of showing that the Policy is unambiguous" in granting discretionary authority to the plan administrator).
As discussed, although other issues were included in Flores' motion for summary adjudication, the only issue the Court will address at this time is whether the policy language unambiguously grants Prudential "discretionary authority to determine eligibility for benefits or to construe the terms of the plan." See Firestone , 489 U.S. at 115.
Prudential argues that the following language from the LTD policy it issued to Exchange Bank grants Prudential such discretionary authority. With respect to the determination of disability, the policy states:
You are disabled when Prudential determines that:
• you are unable to perform the material and substantial duties of your regular occupation due to your sickness or injury;
• you have a 20% or more loss in your indexed monthly earnings due to that sickness or injury; and
• you are under the regular care of a doctor.
* * *
Prudential, at our expense, shall have the right and opportunity to examine you when and as often as we may reasonably require during the pendency of a claim.
(See Memorandum of Points and Authorities in Support Plaintiff's Notice of Motion and Motion for Summary Adjudication on Standard of Review or, in the Alternative Seeking Discovery, Ex. A at 10 (emphases omitted).) The policy further provides:
Disabilities due to a sickness or injury which, as determined by Prudential, are primarily based on self-reported symptoms have a limited pay period during your lifetime.
Disabilities which, as determined by Prudential, are due in whole or in part to mental illness also have a limited pay period during your lifetime.
(See id. at 17-18 (emphases omitted).)
As to the termination of benefits, the policy provides:
We will stop sending you payments and your claim will end on the earliest of the following:
1. When you are able to work in your regular occupation on a part-time basis but you choose not to.
2. The end of the maximum period of payment.
3. The date you are no longer disabled under the terms of the plan.
4. The date you fail to submit proof of continuing disability satisfactory to Prudential.
5. The date your disability earnings exceed the amount allowable under the plan.
6. The date you die.
(See id. at 17 (emphasis omitted).)
Lastly, and particularly relevant to the instant issue, the policy states: "We may request that you send proof of continuing disability, satisfactory to Prudential, indicating that you are under the regular care of a doctor." (See id. at 23.)
Flores argues that the instant case is indistinguishable from Kearney. In Kearney, the following policy language was at issue: "STANDARD will pay the LTD BENEFIT... upon receipt of satisfactory written proof that you have become DISABLED while insured under the GROUP POLICY." See Kearney , 175 F.3d at 1089. The Ninth Circuit found this language to be ambiguous because it could be read in at least three ways. See id. First, it reasonably could be construed as "confer[ring] discretion on the insurance company to decide whether the quantum of proof is sufficient, as opposed to whether the loss is covered." See id. Second, it could be construed to mean "proof that would be satisfactory to a reasonable person that you have become disabled." See id. Third, it reasonably could be construed to mean that "if the administrator is not satisfied (and has not abused its discretion in so deciding), then it does not have to pay." See id. The Ninth Circuit held that because the plan did not unambiguously grant discretion to the plan administrator to determine eligibility for benefits or to construe the terms of the plan, the district court properly applied de novo review. See id. at 1090.
Contrary to Flores' arguments, however, the instant policy language is distinguishable from that at issue in Kearney, as the instant policy provides for termination of benefits whenever the insured fails to submit "proof of continuing disability satisfactory to Prudential, " (see Policy at 17, 23 (emphasis added)), not merely submission of "satisfactory written proof." As Kearney does not fully resolve the issue presented herein, the Court turns to other Ninth Circuit authority for additional guidance.
Subsequent to its decision in Kearney, the Ninth Circuit has, on a number of occasions, found policy language sufficient to grant discretionary authority to the plan administrator; in each such instance, however, the policy language was more explicit in granting discretion than that at issue here. See e.g., Jordan v. Northrop Grumman Corporation Welfare Benefit Plan , 370 F.3d 869, 875 (9th Cir. 2004) ("Travelers has the discretion to construe and interpret the terms of the Plan and the authority and responsibility to make factual determinations"); Friedrich v. Intel Corp. , 181 F.3d 1105, 1110 n.5 (9th Cir. 1999) (finding language providing Intel "shall have the sole discretion to interpret the terms of the Plan and to determine eligibility for benefits" sufficient to retain discretion).
On the other hand, in those cases in which the Ninth Circuit has applied de novo review, the language at issue has been either similar to that at issue in Kearney, or substantially different than that at issue herein. See Ingram v. Martin Marietta Long Term Disability Income Plan for Salaried Employees of Transferred GE Operations , 244 F.3d 1109, 1111 (9th Cir. 2001); Simkins v. NevadaCare, Inc. , 229 F.3d 729, 733-34 (9th Cir. 2000). In Ingram, the Ninth Circuit found the following policy language did not unambiguously grant discretion to the plan administrator:
See Sandy v. Reliance Standard Life Insurance Co. , 222 F.3d 1202, 1206 (9th Cir. 2000) (holding policy language requiring insured to "submit satisfactory proof of total disability" to plan administrator not sufficient to grant discretion to the plan administrator); Thomas , 228 F.3d at 994 (holding policy language requiring submission of "satisfactory proof of Total Disability to us" ambiguous); Newcomb v. Standard Ins. Co. , 187 F.3d 1004, 1006 (9th Cir. 1999) (holding policy language requiring "satisfactory proof of loss" and providing that claimant must submit "written authorization for [administrator] to obtain the records and information needed to determine [the claimant's] eligibility" for benefits not an unambiguous grant of discretion to plan administrator).
The insurer in Simkins relied on two definitions in the policy language and the policy's description of a grievance procedure in arguing for abuse of discretion review. See Simkins , 229 F.3d at 733-34. The term "medically necessary" was defined as "[t]he use of services and/or supplies... which are required to identify or treat Your illness or injury and which are... consistent with medical policy and procedure as defined by the NevadaCare Quality Management Program." See id. at 733-34. In the definition of the term "prior/pre-authorization" the policy stated: "[A] Participating Provider or Physician must receive approval from an authorized staff member of NevadaCare, such as the Medical Director or his designee, before You receive certain health care services." See id. at 734. The policy's grievance procedure provided for the filing of grievances with NevadaCare. See id. The Ninth Circuit found a "stark contrast" between these statements and the statements in plans it had previously found to have granted discretion unambiguously to plan administrators and concluded that "the Plan's language in the present case does not unambiguously grant NevadaCare discretion to interpret the terms of the Plan." See id.
The carrier solely is responsible for providing the benefits under the Plan.... The carrier will make all decisions on claims and has reserved the right to examine medically an individual for whom claim is made at any time during the period of disability. Accordingly, the management and control of the operation and administration of claims procedures under the Plan, including the review and payment or denial of claims and the provision of full and fair review of claim denial pursuant to Section 503 of the Act, shall be vested in the carrier.
See Ingram , 244 F.3d at 1111. The court found this language merely "makes clear that [the carrier], rather than the employer or some other party, makes all administrative decisions to grant or deny claims." See id. at 1112. As the court observed, "[a]n allocation of decisionmaking authority to [the carrier] is not, without more, a grant of discretionary authority in making those decisions." Id. at 1112-1113. The court concluded:
We think it appropriate to insist, as we did in Kearney, that the text of a plan be unambiguous. If an insurance company seeking to sell and administer an ERISA plan wants to have discretion in making claims decisions, it should say so. It is not difficult to write, "The plan administrator has discretionary authority to grant or deny benefits under this plan." When the language of a plan is unambiguous, a company purchasing the plan, and employees evaluating what their employer has purchased on their behalf, can clearly understand the scope of the authority the administrator has reserved for itself. As we wrote in Sandy, it is "easy enough" to confer discretion unambiguously "if plan sponsors, administrators, or fiduciaries want benefits decisions to be reviewed for abuse of discretion." 222 F.3d at 1206. Where they fail to do so, "in this circuit at least, they should expect de novo review."
Id. at 1113-1114 (quoting Sandy , 222 F.3d at 1206).
In Sandy, the Ninth Circuit stated: "Although different circuits approach the standard of review somewhat differently, we see great value in clarity (no matter what the rule is)." See Sandy , 222 F.3d at 1206-07. The court observed that "there is little point in litigating the standard of review in every ERISA case where benefits have been denied" as "to do so is expensive, time-consuming, and draining for the parties as well as for the courts." See id. at 1207. As the court further noted: "Neither the parties nor the courts should have to divine whether discretion is conferred. It either is, in so many words, or it isn't." Id.
The policy language at issue here does not expressly state "Prudential has discretionary authority to grant or deny benefits under this Plan, " see Ingram , 244 F.3d at 1113-1114, nor does it expressly state "Prudential has discretionary authority to construe the terms of the Plan." Although the Ninth Circuit has recognized "there is no magic to the words discretion' or authority, '" see Sandy , 222 F.3d at 1207, "unless plan documents unambiguously say in sum or substance that the Plan Administrator or fiduciary has authority, power, or discretion to determine eligibility or to construe the terms of the Plan, the standard of review will be de novo." See id.
As noted, the instant policy language provides for termination of benefits if the claimant fails to "submit proof of continuing disability satisfactory to Prudential." (See Policy at 17, 23.) The Ninth Circuit has suggested, without reaching the issue, that policy language stating benefits will be paid upon proof of disability "satisfactory to the plan administrator" may be sufficient to provide for discretionary review. See Thomas , 228 F.3d at 994. The language at issue in the instant case is distinguishable from the hypothetical policy language in Thomas, however, and, as discussed below, presents additional problems.
As noted, the actual policy language at issue in Thomas provided that benefits would be paid only upon the claimant's submission of "satisfactory proof of Total Disability to us, " which the Ninth Circuit found to be ambiguous. See id. at 994. The court stated that if one were to interpret the actual policy language to mean "the submitted proof must be satisfactory to us, '" i.e., to the plan administrator, such language "arguably" would be sufficient to confer discretion. See id.
First, in the instant policy, there is no language at all that could be construed as granting discretion to Prudential with respect to the initial decision whether or not to pay benefits. The policy provides: "You will begin to receive payments when we approve your claim." (See Policy at 12.) A claimant is considered to be disabled under the policy "when Prudential determines that... you are unable to perform the material and substantial duties of your regular occupation due to your sickness or injury;... you have a 20% or more loss in your indexed monthly earnings due to that sickness or injury; and... you are under the regular care of a doctor." (See id. at 10.) Such language does not suffice to grant discretionary authority to Prudential. See, e.g., Ingram , 244 F.3d at 1112-1113 (holding policy language stating that "carrier will make all decisions on claims" merely "makes clear that [the carrier], rather than the employer or some other party, makes all administrative decisions to grant or deny claims, " and that such "allocation of decisionmaking authority to [the carrier] is not, without more, a grant of discretionary authority in making those decisions").
Second, the only language arguably granting discretion to Prudential appears in sections of the policy addressing the termination of benefits. As noted, the policy provides that benefits will terminate if the claimant fails "to submit proof of continuing disability satisfactory to Prudential." (See Policy at 17.) Such proof is required, however, only where Prudential specifically requests it. (See Policy at 23 (stating "[w]e may request that you send proof of continuing disability, satisfactory to Prudential, indicating that you are under the regular care of a doctor" and that such proof "must be received within 90 days of a request by us")). If Prudential does not request such proof, benefits terminate on the occurrence of a number of other specified events, including "[t]he date [the claimant is] no longer disabled under the terms of the plan." (See id. at 17.) There is no language even arguably granting Prudential discretion to determine that an insured is no longer disabled under the policy where Prudential has not requested proof of continuing disability. The policy provides:
We will stop sending you payments and your claim will end on the earliest of the following:
* * *
3. The date you are no longer disabled under the terms of the plan.
4. The date you fail to submit proof of continuing disability satisfactory to Prudential.
(See Policy at 17 (emphasis added).) By distinguishing between the date a claimant "is no longer disabled under the terms of the plan" and the date the claimant fails to "submit proof" of disability, the policy can be interpreted as stating there are two different determinations to be made, one respecting the merits of the claim for continuing benefits under the plan, and one respecting the quantum of proof submitted as to such disability.
Finally, were the Court to construe "satisfactory to Prudential, " in the context it appears in the policy at issue, as granting discretionary authority, the result of such construction would be that Prudential lacks discretion to grant or deny benefits in the first instance, but has discretionary authority to terminate benefits, and then only under limited circumstances. Such a construction would have the perverse effect of encouraging the plan administrator to pay benefits for a brief period of time, and then to terminate payment based on the claimant's "unsatisfactory" response to a request for proof of continuing disability, in order to have its decision to deny benefits reviewed under an abuse of discretion standard.
Even if the language in the instant policy appeared in the same context as addressed in Thomas, the Ninth Circuit has stated only that such language "arguably" grants discretion. See Thomas , 228 F.3d at 994 (emphasis in original). Although other circuits have expressly found such language adequate to confer discretion, see, e.g., Donato v. Metropolitan Life Ins. Co. , 19 F.3d 375, 379-80 (7th Cir. 1994) (finding policy language stating "proof must be satisfactory to us" sufficient to grant discretion to plan administrator); see also Bounds v. Bell Atlantic Enterprises Flexible Long-Term Disability Plan , 32 F.3d 337, 339 (8th Cir. 1994) (describing policy language at issue in Donato as "explicit discretion-granting language"), the Second Circuit has noted no legally significant difference between policy language requiring submission of "satisfactory proof" and language requiring submission of "proof satisfactory to the decision maker." See Kinstler v. First Reliance Standard Life Insurance Co. , 181 F.3d 243, 252 (2nd Cir. 1999). As the Second Circuit explained:
The Court is aware that two district courts in the Northern District of Illinois, relying on Donato, have held some of the policy language at issue here confers discretionary authority on Prudential. See Diaz v. Prudential Insurance Co. of America , 2004 WL 1094441 at *6-7 (N.D. Ill. May 13, 2004); DiPietro v. Prudential Insurance Co. of America, 2003 WL 22159467 at *1-2 (N.D. Ill. Sept. 17, 2003). Neither, however, discusses the context in which that language appears in the policy as a whole, and there is no indication that the policies are in other respects identical to the instant policy.
[T]he word "satisfactory, " whether in the phrase "satisfactory proof" or the phrase "proof satisfactory to [the decision-maker]" is an inadequate way to convey the idea that a plan administrator has discretion. Every plan that is administered requires submission of proof that will "satisfy" the administrator. No plan provides benefits when the administrator thinks that benefits should not be paid! Thus, saying that proof must be satisfactory "to the administrator" merely states the obvious point that the administrator is the decision-maker, at least in the first instance.
See id.
In light of the ambiguities created by the manner in which "satisfactory to Prudential" is used in the specific policy at issue, as well as the Ninth Circuit's strong admonition to insurance companies to, in effect, make any retention of discretion patently clear or, "in this circuit at least, expect de novo review, " see Sandy , 222 F.3d at 1206, the Court finds Prudential has failed to meet its burden of demonstrating its entitlement to discretionary review.
CONCLUSION
For the reasons set forth above, Flores' motion for summary adjudication is GRANTED and Prudential's motion for summary adjudication is DENIED. The Court will review Prudential's decisions under a de novo standard.
This order closes Docket Nos. 22 and 28.
IT IS SO ORDERED.