Cosey v. Prudential Insurance Co. of America, No. 12-2360

Decided November 12, 2013

The Fourth Circuit vacated the district court’s judgment and remanded for further proceedings. The Court concluded that language in a disability benefit plan provided by an employer was ambiguous and, therefore, does not clearly confer discretionary decision-making authority on the plan administrator, requiring de novo judicial review of the administrator’s denial of the plaintiff’s benefits claims under those plans.

Beth A. Cosey (“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 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 issued by Prudential. Near the end of May 2007, Cosey did not report for work and submitted a claim for benefits. Prudential provided benefits for about three weeks, after which time BioMerieux terminated Cosey’s employment. BioMerieux then re-hired Cosey, allowing her to work from home and, seven months later, Cosey filed another claim. Prudential paid STD benefits for about seven weeks. Cosey’s consultations with various physicians produced varying medical opinions with regard to her condition and, therefore, her ability to return to work. While Cosey’s primary care physician opined that she could not sustain any occupation, four medical reviewers hired by Prudential concluded that Cosey suffered no impairment. 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.  When Cosey filed an administrative appeal of Prudential’s termination of her STD benefits, the plan administrator upheld the earlier decision and also declared Cosey ineligible for LTD benefits.

On appeal, the Fourth Circuit examined whether the district court employed the appropriate standard of review in examining the plan administrator’s denial of LTD and STD disability benefits. The LTD benefits plan was subject to the Employee Retirement Income Security Act of 1974, where courts must 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. A grant of discretionary authority must be clear. Here, the LTD plan states that benefits only will be paid to a claimant who “submits proof of a continuing disability satisfactory to Prudential.” In Gallagher, the Fourth Circuit observed that plan language requiring a claimant to “submit satisfactory proof of total disability 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.” Therefore, the Fourth Circuit held that the plan language did not clearly convey that the plan administrator had discretionary decision-making authority in deciding benefits claims. Here, the Fourth Circuit joined five sister circuits in holding that this language does not unambiguously confer such discretionary authority. The Court identified three major themes that pervaded the opinions of those courts: (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.

The STD plan, however, was not governed by the ERISA. The Fourth Circuit had to ascertain the appropriate standard for judicial review of a plan administrator’s benefits determination under the present STD plan. The Court held that the STD plan did not confer discretionary 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. The Court agreed with Cosey that the “satisfactory proof” language in the STD plan is the functional equivalent of the language held ambiguous in Gallagher.

Therefore, the Fourth Circuit agreed with Cosey 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. Neither the LTD nor the STD plans provided that a claimant’s submission of proof were required to contain an “objective component.” Therefore, the Fourth Circuit held 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.

Full Opinion

– Sarah Bishop

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