Viera v. Life Insurance Company of North America, No. 10-2281 (3d Cir. June 10, 2011)
Viera’s husband died three hours after a tragic motorcycle accident. She submitted a claim to LINA under his accidental death and dismemberment policy.
LINA found that her husband’s use of a blood thinner complicated his medical treatment, and therefore it was a contributing cause of his death. It concluded that his accident was excluded under the policy and denied her claim.
Viera administratively appealed by letter to LINA, who affirmed its decision to deny benefits.
Viera then filed an ERISA action in the Court of Common Pleas of Philadelphia County, and LINA removed it to District Court for the Eastern District of Pennsylvania. The district court granted LINA’s motion for summary judgment concluding that LINA did not abuse its discretion by denying Viera’s claim. Viera appealed this decision to the Third Circuit.
Because all of the matters presented to the Third Circuit were questions of law (grant of summary judgment, determination of the proper standard of review of an ERISA plan administrator’s decision, and contract interpretation), it exercised a de novo standard of review over each issue.
The district court had applied an abuse of discretion standard of review to LINA’s decision because of the following language in the policy:
Written or authorized electronic proof of loss satisfactory to Us must be given to Us at Our office, within 90 days of the loss for which claim is made.
Looking to the circuit courts that specifically addressed “satisfactory to us” language, the Third Circuit found that the First, Eighth, and Tenth Circuits have held that this language in a policy is sufficient to insulate a plan administrator’s decision from a de novo standard of review. In a footnote, the Court noted that it “appeared” as though the Fourth, Sixth, and Eleventh Circuits also leaned toward an abuse of discretion standard.
But, the Court was persuaded by the Second, Seventh, and Ninth Circuits which apply a de novo standard. Agreeing with these circuits and citing a Seventh Circuit case, the Third Circuit stated that for an abuse of discretion standard of review to apply, a plan must “communicate the idea that the administrator not only has broad-ranging authority to assess compliance with pre-existing criteria, but also has the power to interpret the rules, to implement the rules, and even to change them entirely,” and a single phrase like “satisfactory to us” is generally not enough for an insured to distinguish between plans that do and do not confer discretion on an administrator.
Turning to LINA’s policy, the Court said that its language does not clearly alert insureds that LINA has discretionary power and specifically does not indicate whether “satisfactory to Us” means “electronic proof of loss [in a form] satisfactory to Us” or “electronic proof of loss [substantively and subjectively] satisfactory to Us.” The Court resolved this ambiguity against LINA.
The Court pointed out that “magic words” are not required to reserve discretion, but quoting another Seventh Circuit case, the Third Circuit offered this solution to plan administrators:
If an administrator wishes to insulate its decision to deny benefits from de novo review, we suggest that it adopt the following “safe harbor” language: “Benefits under this plan will be paid only if the plan administrator decides in [its] discretion that the applicant is entitled to them.”
Finally, the Court addressed LINA’s Medical Condition Exclusion provision which states:
[B]enefits will not be paid for any Covered Injury or Covered Loss which, directly or indirectly, in whole or in part, is caused by or results from . . . [s]ickness, disease, bodily or mental infirmity, bacterial or viral infection or medical or surgical treatment thereof, except for any bacterial infection resulting from an accidental external cut or wound or accidental ingestion of contaminated food.
Viera argued that the comma after the word “infirmity” allows coverage for those under medical treatment for bodily infirmities (use of blood thinner for atrial fibrillation).
Finding that sufficient indicia of contrary meaning existed to overcome Viera’s reading, which was based on the last antecedent rule, the Court concluded that Viera’s interpretation was unreasonable.
The Court remanded the case for the district court to determine if LINA properly denied Viera’s claim.