Lee v. Paul Revere Life Insurance Company

Full title: ROSEMARY LEE, Plaintiff, v. THE PAUL REVERE LIFE INSURANCE COMPANY…

Court: United States District Court, E.D. New York

Date published: Jul 21, 2004

03 CV 3749 (JG) (E.D.N.Y. Jul. 21, 2004)

Opinion

03 CV 3749 (JG).

July 21, 2004

JOSEPH P. ALTMAN, JR., McCormick Dunne Foley, New York, New York, Attorneys for Plaintiff.

CHRISTOPHER G. BROWN, Begos Horman, LLP, Bronxville, New York, Attorneys for Defendant.

MEMORANDUM AND ORDER

JOHN GLEESON, District Judge

Plaintiff Rosemary Lee brought this action to recover long-term disability benefits under an employee benefit plan (the "Plan") established by her former employer, Ozanam Hall of Queens Nursing Home, Inc. ("Ozanam Hall") for the benefit of its employees. The Plan is governed by the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001- 1461 ("ERISA"). Lee and defendant The Paul Revere Life Insurance Company ("Paul Revere")¹ now cross-move for judgment on the pleadings. Though initial briefing focused on whether Lee was "totally disabled" within the meaning of the Plan, that focus changed when it became clear that the core of the dispute was not the extent of Lee's disability, but rather the parties' differing interpretations of the Plan. For the following reasons, Paul Revere's motion is denied. I do not decide Lee's cross-motion.

1 UNUM/Provident Corporation was originally named as the defendant in this action. The parties have stipulated, however, that Paul Revere, not Unum/Provident Corporation, is the correct defendant. The caption has therefore been amended.

BACKGROUND

A. The Plan

I set out only those portions of the Plan relevant to the motions before me. The Plan provides that the "unqualified terms" "disabled or disability" "may mean either total disability or residual disability." (Administrative Record at 599 ("R.").)² The Plan provides benefits for "1. total disability from any occupation; 2. total disability from the employee's own occupation; and 3. residual disability." (Id.) "One ore more [of these terms] may apply to the employee." (Id.)

2 The parties "Bates stamped" the administrative record in reverse order. Furthermore, the pages of the Plan, which do not have their own page numbers, appear in the record out of order. The parties have agreed on the appropriate order of the pages of the relevant portion of the Plan, and I will interpret the Plan using that agreed-upon pagination, not the pagination in the record (though, out of necessity, I will still refer to the pages of the Plan using their Bates stamped numbers). I have prepared another copy — with the pages in the correct order — which I have filed as Court Exhibit A.

Thus, the term "totally disabled" has two meanings under the Plan:

Totally disabled from any occupation, or total disability from any occupation means:

1. because of injury or sickness, the employee is completely prevented from engaging in any occupation for which he is or may become suited by education, training or experience; and

2. the employee is receiving Doctor's Care. . . .

Totally disabled from the employee's own occupation or total disability from the employee's own occupation means:

1. because of injury or sickness, the employee cannot perform the important duties of his own occupation;

2. the employee is receiving Doctor's Care. . . .; and

3. the employee does not work at all.

Totally disabled or total disability may mean either totally disabled from any occupation or totally disabled from the employee's own occupation as shown above. If the employee works other than full time at his own job, he may be considered to be residually disabled.

(Id.) These definitions are followed by a definition of "residually disabled":

Residually disabled or residual disability means, after a continuous period of total disability which lasts at least as long as an employee's elimination period:

1. (A) the employee is prevented, by the same injury or sickness which caused his total disability, from performing one or more of the important duties of his own occupation; or

(B) the employee works at his own or some other occupation on less than a full-time basis; and

2. the employee is receiving Doctor's Care. . . .; and

3. the employee does not earn more than 80% of his prior earnings.

(Id. at 596.)

Later, under the header, "WHAT WE PAY," the Plan reads:

We pay monthly total disability benefits to an employee if he becomes totally disabled while insured due to injury or sickness. . . .

The Total Disability Benefit — Any Occupation

During any continuous period of disability, after completion of the employee's elimination period,³ but before the end of his benefit period, we pay the employee a monthly total disability benefit for each whole month in which he is totally disabled from any occupation.

The Total Disability Benefit — An Employee's Own Occupation

During any of the first 36 months of any continuous period of disability immediately following completion of the employee's elimination period, but before the end of his benefit period, we pay the employee a monthly total disability benefit for each whole month in which he is totally disabled from his own occupation.

If the employee works other than full-time at his own job, he may qualify for monthly residual disability benefits.

3 The "elimination period" is "the length of time that the employee must wait before benefits begin," as set forth in Paul Revere's "Schedule of Benefits." (R. at 594.) The employee must be totally disabled from his or her own occupation during the elimination period. (Id.)

(Id. at 598.) At the bottom of that same page is the header "MAXIMUM BENEFIT PERIOD," which is "the maximum length of time for which [Paul Revere] pays benefits. It applies to all periods of disability, whether from one or more causes. In no case do[es Paul Revere] pay benefits after . . . the date the employee is no longer totally disabled. . . ." (Id.)

When a disabled employee returns to work, the Plan contemplates the possibility of continued benefits — residual disability benefits. For the first year, the employee receives a "Return to Work Adjustment Benefit," and thereafter receives a fraction of his or her total disability benefit. This "Return to Work Adjustment Benefit for Residual Disability" is described as follows:

When an employee returns to work from any continuous period of disability immediately following completion of the employee's Elimination Period, but before the end of his benefit period, we pay the employee a monthly benefit for each whole month following his return to work.

WHAT WE PAY

During the first 12 months that an employee returns to work for any employer during any continuous period of disability and while he continues to meet the applicable definitions pertaining to residual disability.

1. the requirement that the employee's loss of earnings must exceed 20% will not apply; and

2. in lieu of the disability benefit, we will pay a special Return to Work Adjustment Benefit.

The amount of the Return to Work Adjustment Benefit will be the amount of the total disability benefit otherwise payable after reduction for other income sources. The Return to Work Adjustment Benefit will be further reduced to the extent that the sum of the benefit, the employee's Actual Monthly Residual Earnings from any employer and other income sources . . . would exceed 100% of the employee's prior earnings.

(Id. at 589.) Under the header "MAXIMUM BENEFIT PERIOD," the Plan states that "Return to Work Adjustment benefits are not paid beyond . . . the date the employee is no longer disabled." (Id.)

The next page of the Plan is titled "RESIDUAL DISABILITY BENEFIT." (Id. at 588.) "During any continuous period of disability immediately following completion of the employee's elimination period, but before the end of his benefit period, [Paul Revere] pay[s] the employee a monthly residual disability benefit for each whole month in which he is residually disabled." (Id.) The following page is titled "RESIDUAL DISABILITY INCOME BENEFIT" and, under the header "WHAT WE PAY," reads:

We will pay the employee monthly disability benefits while the employee is residually disabled, as defined. During the first 12 months, we will pay a monthly benefit according to the Return to Work Adjustment Benefit provisions. After the first 12 months of residual disability the employee's residual disability benefit is proportionate to his total disability benefit. The proportion depends on the Actual Monthly Residual Earnings the employee earns from work. To determine the monthly residual disability benefit, we use this formula:

Loss of Earnings × The Initial Total = The Employee's Residual Prior Earnings Disability Benefit Disability Benefit

If the Loss of Earnings for any month is 80% or more of Prior Earnings, we will pay the total disability benefit. However, if the Loss of Earnings is less than 20% of Prior Earnings, then no Residual Disability Benefit is payable.

(Id. at 595.) The Plan then lays out the "BENEFIT PERIOD" for the residual disability benefit: "Residual disability benefits are not paid beyond . . . the date the employee is no longer residually disabled." (Id. at 597.)

Finally, the signature page of the Plan contains the following language:

The Paul Revere Life Insurance Company, as claims administrator, has the full, final, binding and exclusive authority to determine eligibility for benefits and to interpret the policy under the plan as may be necessary in order to make claims determinations. The decision of claims administrator shall not be overturned unless arbitrary and capricious or unless there is no rational basis for a decision.

(Id. at 565.)

B. The Facts

Lee was employed as a nurse by Ozanam Hall for twelve years, ending on April 19, 1997. On September 27, 1997, Lee submitted a claim for disability benefits to Paul Revere, claiming that she had become disabled in April 1997 due to a back injury sustained in February 1996 and exacerbated in March 1997. On May 9, 1998, Paul Revere approved Lee's claim for group long-term disability benefits and issued benefits for the period of August 31, 1997 to May 1, 1998. In informing Lee of the approval, Paul Revere advised Lee to continue to update her medical information, and that

[u]nder the terms of this policy for the initial 36 months of the claim an employee must be totally disabled from their [sic] own occupation in order to qualify for Total Disability Benefits. Following this 36-month period the definition of [t]otal disability changes, and an employee must be totally disabled from any occupation in order to continue to receive Total Disability Benefits.

(Id. at 98.)

In June 1998, Lee informed Paul Revere that she had a part-time job supervising school children for four hours a day during the school lunch period. By letter dated July 17, 1998, Paul Revere explained that Lee might still be eligible for residual disability benefits while she was working on a part-time basis. After Lee provided additional information, Paul Revere determined that Lee was indeed eligible for residual benefits and applied the "Return to Work Adjustment Benefit for Residual Disability" ("Return to Work") provisions (see id. at 589) for the first year that residual disability benefits were paid. During this year, on October 9, 1998, Lee obtained a higher-paying job as a classroom paraprofessional, and informed Paul Revere of her new title and wage.

On January 20, 2000, Paul Revere informed Lee that her monthly benefits had again changed, as the twelve-month period during which Lee was eligible for Return to Work benefits had expired. Lee therefore continued to receive benefits under the Plan's "Residual Disability Benefit" provisions (see id. at 597-95, 588). Paul Revere told Lee that her benefits had been calculated on the basis of the residual disability provisions since September 1, 1999, and would "continue to be calculated on this basis." (Id. at 12.)

On April 25, 2002, Paul Revere again explained that after thirty-six months had elapsed, Lee would have to be "totally disabled from engaging in Any Occupation for which" she was, or could become, suited by education, training, or experience. (Id. at 189.) Paul Revere then undertook to investigate the current state of Lee's health. After conducting a "Transferable Skills Analysis" on August 9, 2000, Paul Revere determined that Lee could perform the tasks required by other occupations; occupations such as residence counselor and medical social worker. In April 2001, a nurse and doctor on Paul Revere's medical staff each concluded that Lee could work full-time in another occupation (i.e., other than as a nurse) and was therefore not entitled to benefits. Paul Revere informed Lee of its conclusion and Lee requested a review of her claim through Paul Revere's appeals process. Lee provided additional information as to her medical condition, to assist in this appeal.

After again reviewing Lee's file, Paul Revere informed Lee that it had not changed its decision to deny her benefits: "After benefits have been paid under the [Plan] for 36 months, you must be unable to perform each of the material duties of any gainful occupation for which you are reasonably fitted, based on your training, education and experience in order to continue to qualify for benefits." (Id. at 389.) Despite having come to the same conclusion after a second review of the file, Paul Revere agreed to review Lee's file for a third time. Dr. Robert B. Keller, of Paul Revere's medical department, concluded, inter alia, that

it would appear that this claimant suffers from a degree of age related degenerative disk changes involving the cervical and lumbar spines. In her work in clinical nursing she apparently sustained sprain/strain type injuries of the lumbar spine. There is no documentation of a cervical spine injury. As noted in prior reviews, there is no evidence in this file of significant cervical or lumbar radiculopathy. It does appear that it would be inadvisable for the claimant to return to her prior occupation — normally classified as medium. However, it also appears that she is functioning in a sedentary capacity in her current work of six and one half-hours a day and there is no evidence in the file that she could not perform full-time sedentary work.

(Id. at 442.)

By letter dated January 4, 2002, Paul Revere notified Lee of its conclusion that she could work full-time in an occupation other than her prior occupation as a nurse, and thus was not disabled. The letter continued as follows:

Ms. Lee also does not qualify under her "residual" definition of disability since, based on our review, she has the ability to earn more than 80-percent of her pre-disability earnings in another occupation. In addition, she also does not qualify for a residual benefit because she is working on a full-time basis as she states in her July 27, 2001 letter and is receiving all the benefits of such an employee.

In addition to the above, a comprehensive review of her file appears to indicate that Ms. Lee was never totally or residually disabled under her policy.

(Id. at 474.)⁴

4 I have omitted from this background discussion much of the medical evidence regarding Lee's alleged disability. As my decision is limited to construing the terms of the Plan, the medical evidence is largely irrelevant.

DISCUSSION

A. Standard of Review

As challenged under 29 U.S.C. § 1132(a)(1)(B), a denial of benefits is reviewed "`under a de novo standard unless the benefit plan gives the administrator or fiduciary authority to determine eligibility for benefits or to construe the terms of the plan.'" Muller v. First Unum Life Ins. Co., 341 F.3d 119, 123-24 (2d Cir. 2003) (quoting Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). "`A trustee may be given power to construe disputed or doubtful terms [of a plan], and in such circumstances that trustee's interpretation will not be disturbed if reasonable.'" Sullivan v. LTV Aerospace Def. Co., 82 F.3d 1251, 1254-55 (2d Cir. 1996) (alterations in original) (quotingBruch, 489 U.S. at 111).

Here, Lee concedes, as she must, that the language of the Plan provides discretion to Paul Revere. Therefore, Paul Revere's denial of benefits is "subject to the more deferential arbitrary and capricious standard," Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 249 (2d Cir. 1999), unless Lee can show that Paul Revere had a conflict of interest that affected its choice of a reasonable interpretation of the Plan.Sullivan, 82 F.3d at 1255, 1259. In cases where an administrator is shown to have a conflict of interest, the arbitrary and capricious test is as follows:

Two inquiries are pertinent. First, whether the determination made by the administrator is reasonable, in light of possible competing interpretations of the plan; second, whether the evidence shows that the administrator was in fact influenced by such conduct. If the court finds that the administrator was in fact influenced by the conflict of interest, the deference otherwise accorded the administrator's decision drops away and the court interprets the plan de novo.

Id. at 1255-56.

Lee offers no evidence of a conflict of interest on the part of Paul Revere. Her arguments are little more than speculation as to Paul Revere's motives in challenging this suit. Though Lee does not raise the point, I note that Paul Revere is both the Plan's administrator and insurer. Although that dual role is "a factor to be weighed in determining whether there has been an abuse of discretion," it "is alone insufficient as a matter of law to trigger stricter review." Pulvers v. First Unum Life Ins. Co., 210 F.3d 89, 92 (2d Cir. 2000) (quotation marks omitted); see also Bruch, 489 U.S. at 115 ("Of course, if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a factor in determining whether there is an abuse of discretion." (quotation marks and alteration omitted)). Furthermore, Lee also fails to offer evidence that Paul Revere's alleged conflict of interest affected the reasonableness of its decision. I therefore review Paul Revere's denial of benefits under the deferential arbitrary and capricious standard.

Applying this standard, I may overturn Paul Revere's decision "`only if it was without reason, unsupported by substantial evidence or erroneous as a matter of law.'" Kinstler, 181 F.3d at 249 (quoting Pagan v. NYNEX Pension Plan, 52 F.3d 438, 442 (2d Cir. 1995)); see also Pagan, 52 F.3d at 442 ("This scope of review is narrow, thus we are not free to substitute our own judgment for that of the NYNEX Committee as if we were considering the issue of eligibility anew."). "Where both the plan administrator and a spurned claimant `offer rational, though conflicting, interpretations of plan provisions, the [administrator's] interpretation must be allowed to control.'" Pulvers, 210 F.3d at 92-93 (alteration in original) (quoting O'Shea v. First Manhattan Co. Thrift Plan Trust, 55 F.3d 109, 112 (2d Cir. 1995)); see also Pagan, 52 F.3d at 443 ("Where it is necessary for a reviewing court to choose between two competing yet reasonable interpretations of a pension plan, this Court must accept that offered by the administrators."). However, if Paul Revere "imposes a standard not required by the plan's provisions, or interprets the plan in a manner inconsistent with its plain words, its actions may well be found to be arbitrary and capricious." Pulvers, 210 F.3d at 93 (quotation marks, alterations, and ellipsis omitted).

B. Interpreting the Plan

1. Paul Revere's Interpretation

The parties seem to agree that, under the Plan, for the first thirty-six months of disability, "total disability" is defined, in pertinent part, as the insured being unable, due to injury or sickness, to "perform the important duties of his own occupation." (R. at 599-98 (emphasis added).) The parties disagree as to what happens after that thirty-six month period expires. Paul Revere argues that at the end of the thirty-six month period, Lee must satisfy the other definition of "total disability" — which provides that an insured must be "completely prevented from engaging in any occupation for which he is or may become suited by education, training or experience" (id. at 599 (emphasis added)) — in order to receive any benefits, including residual disability benefits.

In support of its argument, Paul Revere points to the first of two pages of the relevant portion of the Plan, which bear the headings "WHAT WE PAY" and "MAXIMUM BENEFIT PERIOD." (Id. at 598.) These provisions, which are part of the Plan's "LONG TERM DISABILITY BENEFIT" provisions, state what Paul Revere pays ("monthly total disability benefits to an employee if he becomes totally disabled while insured due to injury or sickness") and for how long ("[i]n no case do[es Paul Revere] pay benefits after the earlier of . . . the date the employee is no longer totally disabled"). (Id.) The limitation on the maximum benefit period "applies to all periods of disability, whether from one or more causes." (Id.) Paul Revere argues that this language makes it unnecessary, indeed inappropriate, to reach the definition of "residual disability." Put simply, Paul Revere's argument is that Lee is not entitled to residual disability benefits because she was not "totally disabled" under the Plan at the expiration of the initial thirty-six month period.

2. Applying the Arbitrary and Capricious Standard to Paul Revere's Interpretation

For the reasons set forth below, Paul Revere's interpretation of the Plan is unreasonable, as it ignores the language and structure of the Plan. The pertinent portions of the Plan are set forth at length above, and I will not recount them in full here.

The first piece of language that Paul Revere points to — the sentence stating that Paul Revere pays "total disability benefits to an employee if he becomes totally disabled" (id.) — means exactly what it says, namely that total disability benefits are paid if the employee is totally disabled. It does not support Paul Revere's argument that residual benefits are somehow dependent on a finding of total disability.

The second piece of language Paul Revere cites — the sentence stating that the "maximum benefit period" ends when "the employee is no longer totally disabled" (id.) — lends some superficial support to Paul Revere's position. That support is eviscerated, however, by the fact that the part of the Plan that specifically addresses residual disability benefits has its own separate "WHAT WE PAY" and "BENEFIT PERIOD" provisions. (Id. at 595, 597.) The latter provision states that "[r]esidual disability benefits are not paid beyond . . . the date the employee is no longer residually disabled." (Id. at 597.) This language, which specifically addresses the benefits Lee was receiving, makes no reference to the thirty-six-month limitation Paul Revere seeks to impose on residual disability benefits. See, e.g., County of Suffolk v. Long Island Lighting Co., 266 F.3d 131, 139 (2d Cir. 2001) ("It is axiomatic that courts construing contracts must give specific terms and exact terms greater weight than general language." (quotation marks and ellipsis omitted)).

In short, Paul Revere's arguments are weak because the Plan so clearly distinguishes between benefits based on total disability on the one hand, and benefits based on residual disability on the other. On the first page of definitions, the Plan states that it provides benefits for "1. total disability from an occupation; 2. total disability from the employee's own occupation; and 3. residual disability." (R. at 599.) The plan defines "totally disabled or total disability" as "either totally disabled from any occupation or totally disabled from the employee's own occupation." (Id.) It continues: "If the employee works other than full time at his own job, he may be considered to be residually disabled." (Id.; see also id. at 598 (same).)

Furthermore, the Plan makes clear — in the separate definition of residual disability — that residual disability occurs, if at all, after a period of total disability: "Residually disabled or residual disability means, after a continuous period of total disability . . . the employee is prevented . . . from performing one or more of the important duties of his own occupation; or the employee works at his own or some other occupation on less than a full-time basis. . . ." (Id. at 596 (emphasis added).) The Plan further distinguishes the two concepts — residual and total disability — by making residual disability benefits a proportion of total disability benefits. (Id. at 595.)

Finally, as mentioned above, critically important language appears under the general heading "RESIDUAL DISABILITY INCOME BENEFIT" and the specific headers "WHAT WE PAY" and "BENEFIT PERIOD." There, the Plan states that Paul Revere "will pay the employee monthly disability benefits while the employee is residually disabled, as defined." (Id. (emphasis added).) It does not say, "Paul Revere will pay residual disability benefits while the employee is totally disabled but working part-time at her own or some other occupation."⁵ And the Plan promises such benefits until "the employee is no longer residually disabled." (Id. at 597.) It does not say, "For thirty-six months unless the employee is totally disabled from all jobs."

5 Indeed, such a formulation — which is essentially what Paul Revere argues the Plan means — would be oddly contradictory. Under the ordinary meaning of the phrase, one cannot be totally disabled yet able to work part-time. Paul Revere's reading of the Plan is, in this way, contrary to the plain meaning of "total disability."

Tellingly, Paul Revere's own employees, including at least one consultant, have construed the Plan to mean that an insured need not be totally disabled to recover residual disability benefits. On October 28, 2002, an employee wrote that "[d]ue to contract language," the "any occupation" definition of total disability "does not apply as long as claimant is under residual definition." (Id. at 617.) Similar language appears in another document: "[A]s long as claimant meets the definition of residual, the any occ[upation] definition does not apply." (Id. at 230.) In a third document, an employee wrote that while the "any occupation" period had been triggered, "based on the contract[,] since claimant is working we can only look at residual definition. As long as claim is residual, any occ[upation] definition does not apply." (Id. at 231.)⁶

6 Though I write that Paul Revere's "employees," plural, have so construed the Plan, it is possible that the three documents I cite above were prepared by the same Paul Revere consultant, as the signatures on the documents look similar. In any event, whether one, two, or three employees so construed the Plan has no bearing on my decision.

In light of the clear language of the Plan, I cannot adopt a construction that would terminate Lee's benefits after thirty-six months where, as here, she falls squarely within both the definition of "residually disabled" and the benefits period established by the Plan. This is especially so when the benefit would inure to Paul Revere, which both funds and administers the Plan. See Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) ("Of course, if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a factor in determining whether there is an abuse of discretion." (quotation marks and alteration omitted)); Pulvers v. First Unum Life Ins. Co., 210 F.3d 89, 92 (2d Cir. 2000) ("The fact that UNUM served as both plan administrator and plan insurer . . . [is] a factor to be weighed in determining whether there has been an abuse of discretion." (quotation marks omitted)).

CONCLUSION

For the reasons stated above, Paul Revere's interpretation of the Plan is refuted by the language of Plan. Paul Revere's motion is therefore denied. The case is remanded to Paul Revere for a determination, in accordance with this decision, on whether Lee is entitled to residual disability benefits.

So Ordered.