Sorel v. CIGNA CV-94-098-JD 06/15/95 P UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Constance Sorel

v. Civil No. 94-098-JD

CIGNA, et al.

O R D E R

The plaintiff, Constance Sorel, filed a petition in

Hillsborough County Superior Court seeking a declaratory judgment

against defendants CIGNA, Administrator for the Eguitable Life

Assurance Society of the United States, by Eguicor, Inc.,

("CIGNA"), and Lockheed Sanders, Inc., seeking coverage under an

employee benefit plan issued by Eguitable Life. CIGNA

subseguently removed the action to federal court on the ground

that the plan is governed by the Employee Retirement Income

Security Act of 1974 ("ERISA"),

et sea.

Currently before the court is the defendant's "Motion for Summary

Judgment" (document no. 20) .

Background

In 1977, Sorel, who was employed by Sanders Associates,

Inc.1, sustained a non-occupational injury that left her unable

1Sanders Associates is now Lockheed Sanders. to perform work-related duties. That same year, Sorel made a

claim for long-term disability benefits from the Sanders

Associates, Inc., Long Term Disability Plan ("the Sanders Plan").

At all relevant times, the Sanders Plan was funded by a group

insurance policy issued by Eguitable Life (policy no. 19367LT).

Sorel received payments from 1977 until 1993, at which time

CIGNA terminated her benefits. In response, Sorel filed her

declaratory judgment action. A bench trial is scheduled to begin

July 11, 1995.

The defendants have filed a motion for summary judgment.

The defendants do not seek summary judgment as to the ultimate

issue of liability but reguest a ruling from this court regarding

the standard of review to be applied to Sorel's claim. The

defendants contend that the termination of Sorel's benefits

should be reviewed under an arbitrary and capricious standard.

Sorel responds that the court should review the termination de

novo.

Discussion

The policy under which Sorel seeks benefits is part of an

employee welfare benefit plan, see document no. 16, regulated by

ERISA. CIGNA's denial of disability insurance coverage under the

policy constitutes denial of a welfare benefit under an ERISA

2 regulated plan. When a fiduciary's denial of plan benefits is

challenged under

(a)(1)(B), the denial "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." Firestone Tire & Rubber Co. v. Bruch,

(1989). If the plan does give discretion to an administrator

or fiduciary to determine eligibility for benefits, the court

must employ a more deferential, "abuse of discretion," standard

in reviewing a denial.

. A benefit plan must clearly

grant discretionary authority to the administrator before

decisions will be accorded the "deferential, arbitrary and

capricious, standard of review." Rodriquez-Abreu v. Chase

Manhattan Bank, N.A.,

(1st Cir. 1993).

The defendants assert that the following provision of the

Sanders Plan grants CIGNA discretionary authority to determine

benefit eligibility:

WHEN BENEFITS BEGIN After you have fulfilled the following three reguirements with proof satisfactory to the Insurance Company

(1) that while insured you have become totally disabled as a result of accidental bodily injury or sickness and have been continuously so disabled during the Qualifying Disability Period specified below, and (2) that your employer and you have certified as to any Other Income Benefits available to you, and

(3) that you have made application when eligible for all Other Income Benefits available to you and have furnished all required proofs for such Other Income Benefits,

then your Long Term Disability Income Benefit will commence.

Sanders Associates, Inc., Long Term Disability Plan, Exhibit A at

2. The defendants argue specifically that the language "proof

satisfactory to the Insurance company" is sufficient to invoke

the higher standard of review. They note that similar language

has been held to confer discretionary authority. See, e.g..

Miller v. Metropolitan Life Ins. Co.,

(6th Cir.

1991); Bali v. Blue Cross and Blue Shield Ass'n,

(7th Cir. 1989).

Several courts have held that plans confer discretionary

authority where the provision outlining the definition of

disability for purposes of the plan states that disability is

determined on the basis of evidence satisfactory to the insurer.

See id. at 984; see also Bali,

(requirement of

satisfactory proof contained in provision of plan stating

definition of disability); cf. Kilev v. Travelers Indem. Co.,

(D. Mass. 1994) (plan must contain explicit

language giving administrator discretionary authority to

4 determine whether employee is occupationally disabled).2 The

discretionary language contained in the Sanders plan, however, is

not contained in the portion of the plan where the definition of

disability is presented. Instead, the language is found in a

section entitled "When Benefits Begin."

The heading "When Benefits Begin" implies a temporal

restriction to the grant of discretionary authority. The

information contained in this section relates to the start of

benefits. Pursuant to this section CIGNA had discretionary

authority to deny Sorel benefits at the time she made her initial

application. However, Sorel was granted benefits when she first

applied in 1977 and continued to receive them until 1993. Sorel

2For example, in Miller, the court found a grant of dis­ cretion in a provision of the plan that permitted the insurance company to decide whether an applicant is "disabled" on the basis of "medical evidence satisfactory to the company."

. The plan under consideration stated that

[a]n Employee shall be deemed to be totally disabled only if that Employee is not engaged in regular employment or occupation for renumeration or for profit, and, on the basis of medical evidence satisfactory to the insurance Company, the Employee is found to be wholly prevented, as a result of bodily injury or disease, either occupational or non- occupational in cause, from engaging in regular employment or occupation, for renumeration or profit, with the Employer at the location where the employer last worked.

5 does not allege an improper denial of benefits, but rather a

wrongful termination of benefits.

The court interprets the plan as limiting CIGNA's discretion

to determining when benefits begin. Had the drafters of the plan

intended to provide continuing discretion, that intent could have

been conveyed by a different heading. For example, if the

section were entitled "How to Receive Benefits," then,

implicitly, the section would impose continuing obligations on

the part of the claimant and grant continuing discretion to the

administrator. However, the drafters entitled the section "When

Benefits Begin" and included the following language: "[a]fter

you have fulfilled the following three reguirements with proof

satisfactory to the Insurance Company . . . then your Long Term

Disability Income Benefit will commence." Exhibit A at 2.

Together with the heading, this language uneguivocally limits the

scope of the section and the nature of the administrator's

discretion.

Further support for interpreting the "When Benefits Begin"

section as providing only for limited discretion is found

throughout the Sanders Plan. First, the definition of disability

for purposes of the plan is contained in a section entitled

"Total Disability and Basic Monthly Salary as Defined in

Connection with Long Term Disability Income Benefits." This

6 section explicitly sets forth when an applicant will be

considered totally disabled:

You will be considered totally disabled during the first 29 months of disability if you are unable, because of disease or injury, to perform your assignment and you are not engaged in any occupation for wage or profit.

Thereafter, during the same period of disability, you will be considered totally disabled only if you are unable, because of disease or injury, to be employed at any reasonable occupation.

A "reasonable occupation" means any gainful activity for which you are, or may become, fitted by education, training or salary.

Exhibit A at 4. Absent from this provision in the plan is

textual reference to any discretionary function by the insurer.

Second, the termination provision states:

The insurance terminates on the earliest of the following:

(1) When your employment terminates, when you are no longer eligible, or when the group policy terminates, or except as referred to under Premium Waiver", or

(2) on the first day of the month following the attainment if the age 64 years and 30 weeks, except that if upon such date you are totally disabled, your insurance shall continue while you are so disabled, but not after the first day of the month following age 65.

Exhibit A at 6. Again, nothing in this section grants the

administrator discretion to determine when eligibility for

benefits terminates.

7 Third, the termination provision states that "benefits

terminate when the [claimant] is no longer eligible." The court

cannot construe the term eligible as relating back to "When

Benefits Begin." The Sanders Plan table of contents lists a

section entitled "Eligibility." This section only explains the

reguirements for enrolling in the plan. See Exhibit A at Table

of Contents, 1. It is proper to interpret the eligibility

language of the termination provision as referring to these

reguirements.

When read in its entirety, the Sanders Plan fails to make

clear the extent of the grant of discretion to the plan

administrator. The most natural reading of the Sanders Plan

allows the administrator discretion to determine when benefits

begin but not when benefits end. This circuit has joined others

in interpreting Firestone Tire as reguiring a plan to clearly

grant discretionary authority to determine eligibility for

benefits before a court will accord deferential review.

Rodriquez-Abreu,

(citing Brown v. Ampco-

Pittsburqh Corp.,

(6th Cir. 1989)). As one

district court recently noted, " [The defendants have] the

opportunity and obligation to make such important provisions of

its benefit plan clearly understandable." Yeager v. Reliance Standard Life Ins. Co.,

(W.D. Ky. 1994). The

provisions as drafted fail to do that.

It would be unfair and improper for the [defendants] to take advantage of the ambiguity which [they] created, particularly when it would have been so easy to draft clear and appropriate language if that was [their] intent.

The motion for summary judgment is denied.

Conclusion

The defendants' motion for summary judgment (document no.

20) is denied.

SO ORDERED.

Joseph A. DiClerico, Jr, Chief Judge June 15, 1995

cc: Paul D. Parnass, Esguire Eleanor H. MacLellan, Esguire