Opinion
Case No. 05:06CV0141, (Resolving Doc. Nos. 18 19).
November 7, 2006
MEMORANDUM OPINION
I. INTRODUCTION
Before the Court, in this administrative track case, are cross motions for judgment on the pleadings. Plaintiff James Linnen ("Plaintiff") was determined by the predecessor in interest of Defendant Hartford Life and Accident Insurance Company ("Defendant" or "Hartford") to be totally disabled. In 2000, he began to receive short term disability insurance benefits and in 2001 he began to receive long term disability insurance benefits pursuant to the policy maintained as part of his former employment with the Goodyear Tire and Rubber Company ("Goodyear"). In November 2004, Defendant Hartford became both the insurer and policy administrator of Plaintiff's long term disability plan and commenced a reexamination of Plaintiff's disability status. As a result of this reexamination, Plaintiff's long term disability benefits were terminated in April 2005. Plaintiff filed an appeal of that decision with the Plan Administrator, and the decision to terminate long term disability benefits was upheld.
This action was filed pursuant to ERISA, 29 U.S.C. Section 1001 et seq. as an appeal from the Plan Administrator's final decision. On May 10, 2006, the Court conducted a Case Management Conference, assigned this matter to the Administrative Track and published a briefing schedule for the filing of briefs on the merits. (Doc. No. 17).
The parties have filed what are in effect cross motions for Judgment on the Pleadings, with Plaintiff's Motion found at Doc. 18, to which Defendant has filed a response at Doc. No. 21. Defendant's Motion for Judgment on the Pleadings is found at Doc. No. 19, to which Plaintiff has filed a response at Doc. No. 20.
For the reasons that follow, Plaintiff's Motion for Judgment on the Pleadings, (Doc. No. 18) is granted and Defendant's Motion for Judgment on the Pleadings (Doc. No. 19) is denied.
II. FACTUAL BACKGROUND
The Administrative Record has been filed in this matter under seal at Doc. No. 16. The following facts are in that record. Plaintiff James Linnen, age 58, worked as a Powerhouse Operator for 22 years at Goodyear's Lawton, Oklahoma plant until January 2000. According to the Powerhouse Operator job description, Plaintiff's job duties required him to work with and maintain the boilers, water treatment systems and related equipment providing utilities to the plant. The majority of Plaintiff's time was to be spent "lifting, pushing/pulling, standing, bending, overhead reaching, sitting, twisting, walking, squatting, climbing, kneeling." Doc. No. 16, R. 477. He was paid approximately $43,000 annually. See Doc. No. 16, R. 95.
Goodyear provided its employees with short and long term disability insurance benefits through a policy of insurance written and administered by Continental Casualty Company, a division of CNA ("CNA"). The relevant policy appears in the record at Doc. No. 16, R. 56-74. The Court addresses in the Discussion section of this Memorandum Opinion the terms of the policy, including what constitutes a long term disability according to the policy. If a claimant was found to be long term disabled under the policy, a benefit of 60% of the claimant's former wage would be paid, subject to cost of living adjustments and offsets for receipt of other benefits.
Plaintiff resigned from his position in January 2000 and filed an application for short term disability benefits due to his inability to perform his work. It is undisputed that at the time Plaintiff sought and was awarded short term disability benefits in January 2000 and long term disability benefits in January 2001, he suffered from problems associated primarily with narcolepsy and cataplexy, although there are references in the record to other conditions including chronic obstructive pulmonary disorder ("COPD"), ischemic heart disease, obstructive sleep apnea, and hearing loss. At the time the disability determination was made, it appears that Plaintiff was having seizures related to his medical conditions while climbing or working near heavy equipment. The record also reflects that Plaintiff received treatment for these conditions for an extended period of time. See Doc. No. 16, R. 3, 340 and 514.
According to the record, cataplexy is the "sudden and bilateral loss of postural muscle tone usually caused by intense emotional stimulus." Doc. No. 16, R. 91.
Plaintiff was also found by the Social Security Administration in 2002 to be totally disabled and his social security benefits of approximately $1500 monthly constitute an offset to his monthly award of disability insurance benefits. See Doc. No. 16, R. 99. At the time the appeal was filed, Plaintiff was receiving $1567 in social security disability benefits and $1024 in benefits pursuant to Defendant's policy for a total benefit of approximately $2600 monthly. Doc. No. 16, R. 115.
In late 2001, Plaintiff moved from Oklahoma to Bolivar, Ohio. Through his new doctors, Plaintiff submitted annual disability claim forms in November of 2002, 2003 and 2004. On each of these applications, Plaintiff's doctors referred to the course of treatment Plaintiff was receiving, including the medications prescribed for his narcolepsy and cataplexy. In 2002 and 2003, Plaintiff's doctors opined that Plaintiff was totally disabled from both his former employment and totally disabled from working at any employment.
In the November 2004 report, Dr. Jonathon Suddarth, Plaintiff's primary physician, indicated that Plaintiff was totally disabled and that he could not perform his former employment. As with the reports from 2002 and 2003, the report states the belief that Plaintiff's disability could not be rehabilitated sufficiently to permit him to engage in alternative employment. However, when asked if Plaintiff was totally disabled from engaging in "[a]ny other work?", Dr. Suddarth marked "No." Doc. No. 16, R. 345. Dr. Suddarth's office notes from the November 2004 visit also states in part as follows:
James is a 56 year old Caucasian male here today for his repeat disability forms. He is doing fairly well over all, he doe[s] [sic] not operate any heavy machinery. He does drive but does not due [sic] any other high risk activities, such are [sic] power tools. As long as he is on medication he is [sic] not had any problems with cataplexia attacks when driving as they occur mostly with extremes of emotion, such as laughing or anger. He is hard of hearing and wears a right sided hearing aid. He also admits to shortness of breath from smoking.
Doc. No. 16, R.325.
By late 2004, the former insurer, CNA, had been purchased by Defendant Hartford. In January 2005, Defendant commenced a further review of Plaintiff's file to determine if Plaintiff continued to be totally disabled and whether his long term disability benefits should continue. On March 23, 2005, Defendant sought Dr. Suddarth's opinion concerning Plaintiff's ability to work at "light work" or "sedentary work." On March 28, 2005 by way of response, Dr. Suddarth answered "yes" to both questions. Doc. No. 16, R. 302-303.
On April 29, 2005 Defendant issued its decision denying Plaintiff continued benefits because it had been determined that, upon further review, Plaintiff did not qualify for long term disability benefits. Doc. No. 16, R. 110. The decision confirms that Plaintiff is still unable to return to his former occupation as powerhouse operator. However, the decision concludes that "the medical and vocational documentation in your file does not support that you remain disabled from any occupation at this time." The decision refers to the opinion of Dr. Suddarth concerning Plaintiff's ability to perform light and sedentary work and lists possible alternative occupations that Plaintiff could perform within his range of restrictions as "Cage Boss, Dispatcher, Order Parts Clerk and Cage Supervisor."
In June 2005, Plaintiff filed an appeal from the decision. In addition to the appeal, Plaintiff also submitted for consideration additional information to support his claim of total disability. Doc. No. 16, R. 222-223. Dr. Suddarth also wrote in support of the appeal, objecting to the characterization of his finding that Plaintiff was improved when in fact Dr. Suddarth had written that he was "stable," meaning that his condition had not become worse. Doc. 16, R. 289-291. Defendant had two different medical records reviews conducted of Plaintiff's file with the conclusion resulting therefrom that based on the evidence in the file, Plaintiff had not established that he currently suffers from a long term disability. On appeal, the decision to deny the continuation of benefits was upheld. Doc. No. 16, R. 124-129.
III. STANDARD OF REVIEW
The Court finds, and there is no dispute by Plaintiff, that based on the language in the policy, the Plan Administrator has reserved discretionary authority to itself such that the Court reviews the Plan Administrator's finding that Plaintiff no longer qualifies for long term disability benefits by an arbitrary and capricious standard of review. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101 (1989); Perez v. Aetna Life Ins. Co., 150 F.3d 550 (6th Cir. 1998) (en banc). See Doc. No. 16, R. 73 (Defendant may discontinue claimant's benefits if he did "not provide satisfactory proof of the continuance of your disability.").However, as the Supreme Court in Firestone observed, when, as in this case, a plan administrator is also the payor of benefits, there is an inherent conflict of interest that "must be weighed as a `factor in determining whether there is an abuse of discretion.'" Firestone, 489 U.S. 101, 115 (1989). When the plan administrator is also the payor of benefits, "there is an actual, readily apparent conflict here, not a mere potential for one. The question is simply whether [the plan administrator]'s actions . . . were improperly influenced by its conflict."Killian v. Healthsource Provident Administrators, 152 F.3d 514 (6th Cir. 1998), citing Firestone, 489 U.S. at 109. Accord:Gismondi v. United Technologies Corp., 408 F.3d 295, 299 (6th Cir. 2005).
Courts are required to weigh this conflict of interest for the obvious reason that the plan "incurs a direct expense as a result of the allowance of benefits, and it benefits directly from the denial or discontinuance of benefits." Killian, 152 F.3d at 521. Defendant argues that there is no evidence that Defendant was motivated by self-interest to reexamine Plaintiff's claim. The Court disagrees. Defendant Hartford bought the former insurer CNA at some point in 2004. Defendant's Motion for Judgment on the Pleadings, Doc. No. 19 at 7-8. The file reexamination coming so close on the heels of the purchase leads to an inference that finances may have motivated Defendant Hartford to reexamine long term disability claims that it was paying. If there had been no change in Plaintiff's reported condition and all that had changed was the ownership of the insurer, the Court would be more inclined to find that self-interest played a role in the decision to terminate benefits.
However, the Court's ultimate finding to reverse the Plan Administrator's decision is not based at all on this consideration of self-interest. The Court concludes that Dr. Suddarth's opinion changed between the 2003 and 2004 report concerning Plaintiff's functional abilities to perform light or sedentary work. This provided Defendant with a reasonable basis to reexamine the file. However, as the Court explains below, that application of the policy to the facts determined by Defendant led to an arbitrary and capricious decision by the Plan Administrator requiring a reversal.
IV. DISCUSSION
In both the initial decision to deny benefits and the decision on appeal, Defendant cites the definition of total disability that appears in the policy under Definitions section. Based on that definition, Defendant argues, its decision was not arbitrary and capricious. According to that section of the policy:
"Total disability means that, during the Elimination Period and thereafter, the Insured Employee, because of Injury or Sickness, is:
(1) continuously unable to engage in any occupation for which the Insured Employee is or becomes qualified by education, training or experience; and
(2) [remains] under the [care of an appropriate treating physician]. . . ."
Doc. No. 16, R. 60.
However, in another section of the policy provided to Plaintiff under the heading "HIGHLIGHTS OF DISABILITY INCOME BENEFITS," the policy states:
Disability payments are intended to assist you with income replacement while you are "Totally Disabled". Total disability means that you, because of injury or illness, are:
* Continuously unable to perform all the substantial and material duties of your own occupation due to an injury or illness. The total disability must begin while you are covered for disability benefits.
* Under the regular and continuing care of a licensed physician and following the physician's prescribed course of treatment; and
*Not gainfully employed in any occupation that you are or become qualified, by education, training or experience.
Doc. No. 16, R. 66.
Plaintiff's appeal is, practically, a very narrow one. He contends that Defendant evaluated his ability asking whether Plaintiff could "engage in any occupation," rather than what Plaintiff calls the other evaluation test from the policy, whether Plaintiff could perform the duties of his former employment as Powerhouse Operator. It is undisputed that Plaintiff is not capable of performing his former work and therefore if the Court concludes that his ability to return to work is measured by that standard, then Plaintiff wins this appeal.
However, if the Court determines that there is a contractual right to disability benefits by asking only whether Plaintiff could work at "any occupation," then in the Court's view, Plaintiff's appeal should be denied. The Court would make this finding because there are sufficient facts in the record to support the manner in which Defendant's conclusion was reached. Defendant states that it relied upon Plaintiff's own treating physicians for the proposition that Plaintiff could engage in light and sedentary work, See Doc. No. 16, R. 303, and that even with his disability, such positions as a dispatcher or order parts clerk would be available in any community to offer him work.
It is undisputed that both standards appear in the policy. However, a third standard also appears. Under the heading "Eligibility," the policy states:
You must have one year of continuous service before you can enroll for LTD coverage. In order to receive LTD benefits you must be unable, solely because of injury or illness, to engage in any substantially gainful occupation for you which you are or may reasonably become qualified by education, training, or experience, and be under the care of a licensed physician.
Doc. No. 16, R. 70 (emphasis added).
The same standard related to long term disability benefits appears under the heading "When and How Benefits Are Paid:"
If you meet the eligibility requirements, and your application is approved by the carrier, LTD benefits become payable following the exhaustion of your eligibility for STD benefits. In addition, you must be unable — solely because of your illness or injury — to engage in any substantially gainful occupation for which you are, or may reasonably become, qualified by your education, training or experience.
Doc. No. 16, R. 72 (emphasis added).
The term "substantially gainful occupation" is not defined in the policy. It only appears in the two locations cited above. The Court considers this evaluative test for long term disability different than both the "any occupation" test and the "own occupation" test.
Because of the ambiguities resulting from the varying expressions of what constitutes long term disability, the Court is required to interpret the policy which was written by Defendant's predecessor in interest. When interpreting an insurance contract, it is incumbent upon the court to "look to the plain and ordinary meaning of the language used in the policy unless another meaning is clearly apparent from the contents of the policy." Westfield Ins. Co. v. Galatis, 100 Ohio St. 3d 216, 219 (2003). See also Regents of Univ. of Mich. v. Agency Rent-A-Car, 122 F.3d 336, 339 (6th Cir. 1997).
Further, to the extent that the policy's language is susceptible of more than one interpretation, the Court will apply "the rule of contra proferentum" and construe the ambiguities against the drafting party, in this case, Defendant Hartford.University Hospitals of Cleveland v. Emerson Elec., 202 F.3d 839, 847 (6th Cir. 2000) citing Perez v. Aetna Life Ins. Co., 150 F.3d 550, 557 n. 7 (6th Cir. 1998).
One possible reading advanced by Plaintiff is that the Highlights section standing alone requires Defendant to only consider whether Plaintiff is able to perform the former duties of his own occupation. The argument makes sense from a reliance position, that by placing the language in the policy Plaintiff is entitled to rely on its statement, even though there are other definitions of long term disability. Construing ambiguities against the drafter of the policy, in this case Defendant's predecessor in interest, would fairly lead to this conclusion.
However, the Court finds that when reading the policy as a whole the better interpretation of the policy is that Plaintiff will be considered as long term disabled if he is able to demonstrate that (1) he is unable to perform the former duties of his own occupation or (2) he is not able to engage in a substantially gainful occupation or employment. What constitutes a "substantially gainful occupation" is a matter of some dispute.
Historically, the phrase first appears in statutes related to disability benefits for veterans, see 38 U.S.C. Section 5102. Although not defined in the statute, the expression "substantially gainful occupation" has come to mean "when that occupation provides annual income that exceeds the poverty threshold for one person." Bowling v. Principi, 15 Vet. App. 1, 7 (2001).
In Doyle v. Nationwide Ins. Companies Affiliates, 240 F.2d 328 (E.D. Pa 2003), the phrase "substantial gainful employment" was defined in the policy to be employment that would result in earnings of 50% or more of the employee's former base salary excluding benefits and bonuses. The court referred to the definition of "substantial gainful employment" as the "linchpin" for the definition of what it means to be long term disabled.Doyle, 240 F.2d at 346. The district court found the plan administrator's decision to deny long term disability benefits to be arbitrary and capricious because there were no findings in the administrative record on appeal that would support the determination that, in fact, the claimant's alternative employment would yield 50% or more of his prior earnings. Id. at 348.
In Wade v. Life Insurance Co. of North America, 271 F. Supp.2d 307 (D. Me. 2003), the long term disability policy at issue that case defined "substantially gainful occupation" as "one which provides the income required to support the standard of living reasonably approximating the standard maintained prior to the disability." Wade, 271 F.Supp. 2d at 310.
See also Mullinax v. Aetna Life Ins. Co., 718 F.2d 1009 (11th Cir. 1983), which held that a jury could determine on its own what is meant by the phrase "substantially gainful occupation."
Contrary to what Defendant argues, from the context of the agreement, the Court concludes that "substantially gainful" means more than Plaintiff's ability to work at any occupation or to be able to find any gainful employment. The modifier "substantially" when placed in front of the word "gainful" demonstrates a promise by the writer of the policy that one will not lose long term disability benefits simply because a long term disabled individual could work at any employment. Such a result could lead to insecurity and financial hardship for the insured. The income gap between the long term disability benefits paid as a percentage of income from former factory type employment and the wages that may be paid from any employment, including minimum wage work, could be significant. A fair reading of the policy does not lead to the conclusion that a person found to have a long term disability could lose those benefits simply because he was later found to be able to engage in any employment.
However, if other employment becomes available that provides approximately or substantially the same wages and benefits, or in other words not simply gainful employment but substantially gainful employment, and Plaintiff is found capable by competent medical analysis of working at that substantially gainful employment notwithstanding his disability, then Plaintiff may be found to be no longer disabled for purposes of receiving long term benefits.
According to this interpretation of the policy, Defendant's decision that Plaintiff was no longer entitled to long term disability benefits was arbitrary and capricious. There is no showing in the record that Defendant considered whether or not substantially gainful employment existed for Plaintiff in the relevant market. In fact, Defendant states that its decision was made without any consideration of what jobs may be available for Plaintiff in the relevant market:
Even assuming Hartford used the incorrect geographical location in identifying available jobs Plaintiff could perform, jobs common in any community such as a dispatcher or an order parts clerk, this error does not compel a conclusion that Hartford's decision that he was no longer totally disabled arbitrary and capricious.
Plaintiff ignores the fact that Hartford's conclusion that he was no longer totally disabled was not based on a determination of jobs that were available in the local community. The decision was based on a review of the administrative record and Dr. Suddarth's opinion that Plaintiff was capable of engaging in light or sedentary work. Based on this review, and in light of the fact that the Policy mandates that an individual is not eligible for benefits if the evidence fails to establish an inability to perform any occupation, Hartford determined that Plaintiff was no longer entitled to receive long term disability benefits.
Defendant's Response to Plaintiff's Motion for Judgment on the Pleadings, Doc. No. 21 at 7-8.
The Court concludes that Defendant used the incorrect standard to review whether or not Plaintiff would be entitled to continue to receive disability benefits. The Court further finds that it is undisputed that Plaintiff continues to be unable to return to his former employment by reason of his disability. Defendant has failed to provide any evidence in the record, as required by the policy, that Plaintiff was capable of performing work in any substantially gainful occupation in the relevant market for which he is or may reasonably become qualified by education, training or experience. Accordingly, Defendant's decision to terminate Plaintiff's long term disability benefits was arbitrary and capricious and the Plan Administrator's decision is reversed.
V. CONCLUSION
For the reasons stated, Plaintiff's Motion for Judgment as a Matter of Law (Doc. No. 18) is GRANTED. Defendant's Motion for Judgment on the Pleading (Doc. No. 19) is DENIED. However, this Memorandum Opinion is not a final appealable order. Two issues remain for resolution.
(1) The Court will order reinstatement of Plaintiff's benefits, and directs the parties to confer to see if they may file a stipulation by November 22, 2006 that states an agreed upon amount of damages to be paid, including the appropriate amount of backpay to bring the benefit payments current and the future monthly amount to be paid pursuant to the terms of the policy. If the parties are not able to submit a stipulation as to damages, then the Court directs Plaintiff to file its request for damages by December 1, 2006. Defendant is granted leave to file its statement concerning damages by December 8, 2006 and Plaintiff has leave to file a reply in support of its motion for damages by December 15, 2006.
The Court also seeks to make clear that Defendant Hartford remains free in the future to initiate further review of Plaintiff's continuing eligibility for long term disability benefits consistent with the terms of this Opinion.
(2) The Court will consider an award to Plaintiff of attorney's fees and costs, commencing with the filing of the complaint in this matter. The Court has discretion to consider an award of attorney's fees for appeals governed by ERISA. See 29 U.S.C. 1132(g)(1). See also Moon v. Unum Provident Corp., 461 F.3d 639 (6th Cir. 2006). Plaintiff is granted leave until December 1, 2006 to file its petition for attorney's fees and costs. Defendant is granted leave to respond until December 8, 2006 and Plaintiff may file a reply brief in support of its petition for attorney's fee until December 15, 2006.
IT IS SO ORDERED.