First Circuit Applies De Novo Judicial Review Despite Plan's ‘Satisfactory to Us' Language

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By Jacklyn Wille  


Language in a Sun Life Assurance Company of Canada policy requiring proof of disability that is “satisfactory to Sun Life” is not enough to confer sufficient discretionary authority that would justify deferential judicial review of the insurer's decision denying benefits, the U.S. Court of Appeals for the First Circuit ruled Aug. 16 (Gross v. Sun Life Assurance Co. of Canada, 1st Cir., No. 12-1175, 8/16/13).

Citing a change in the “precedential landscape,” the court reconsidered its 2003 decision in Brigham v. Sun Life of Canada, 317 F.3d 72, 29 EBC 2694 (1st Cir. 2003) (19 PBD, 1/30/03; 30 BPR 274, 2/4/03), to find that the “satisfactory to us” language in an Employee Retirement Income Security Act-governed plan was not a sufficiently clear grant of discretionary authority to the plan administrator.

Senior Judge Kermit V. Lipez, writing for the court, vacated and remanded the district court's decision in favor of Sun Life. In so ruling, Lipez explained that the decision was in line with recent rulings of the Third, Seventh, and Ninth circuits.

District Court Affirms Denial Using Deferential Review

Diahann L. Gross worked as an optician and office manager for Pinnacle Eye Care LLC until she was placed on disability leave in August 2006. She applied for long-term disability benefits from a policy Pinnacle obtained from Medical Group Insurance Services Inc. (MGIS) and written by Sun Life.

In April 2007, Sun Life denied Gross's claim, explaining that it found “insufficient objective evidence to substantiate” that she had a disability that prevented her from performing her duties at Pinnacle. After an unsuccessful internal appeal, Gross filed a lawsuit in Massachusetts state court. Sun Life removed the action to federal district court based on ERISA preemption, and the district court in January 2012 affirmed Sun Life's decision using arbitrary-and-capricious judicial review (6 PBD, 1/11/12).

Gross appealed, challenging the district court's conclusion that ERISA governed the plan in question. She also asserted that the district court incorrectly applied a deferential judicial review standard in affirming Sun Life's decision.

ERISA Governs Plan

On appeal, the First Circuit considered Gross's argument that ERISA did not govern her disability plan. The First Circuit agreed with the district court that the disability policy was a component of Pinnacle's unified, ERISA-governed plan, saying that “the record provides ample support for the [district] court's finding that Pinnacle's package of insurance benefits constituted a unitary ERISA program.” The First Circuit observed that Pinnacle treated its various benefit programs “as a unit” by providing unified communications to employees and by receiving unified billing statements from MGIS.

Further, the First Circuit found that the unified benefits program satisfied each of the “constituent elements of an ERISA plan” set forth in Wickman v. Nw. Nat'l Ins. Co., 908 F.2d 1077 (1st Cir. 1990), because it was “established and maintained” by “an employer” to provide “multiple types of insurance benefits” to “employees and, in some cases, their beneficiaries.”

Finally, Gross argued that the plan fell within ERISA's safe harbor provision, which applied to voluntary plans in which the employer makes no contributions, receives no consideration, and has its “sole functions” limited to remitting premiums to the insurer. The First Circuit disagreed, explaining that “[o]ur rejection of Gross's assumption that Pinnacle provided multiple, independent plans is fatal to her safe harbor argument.” Further, the First Circuit said, Pinnacle's “full funding” of its life and accident insurance policies was “sufficient to disqualify” the plan from safe harbor status.

'Satisfactory to Us' Language Insufficient

Gross next argued that the district court erred by applying the arbitrary-and-capricious standard of review to Sun Life's decision. Sun Life maintained that arbitrary-and-capricious review was warranted because the plan contained “sufficiently clear language granting discretionary authority to the insurer.” Sun Life pointed to two policy provisions: one providing that “[p]roof [of claim] must be satisfactory to Sun Life” and one instructing that “[b]enefits are payable when Sun Life receives satisfactory Proof of Claim.”

In considering Sun Life's argument, the First Circuit found occasion to reconsider its 2003 decision in Brigham v. Sun Life of Canada, 317 F.3d 72, 29 EBC 2694 (1st Cir. 2003) (19 PBD, 1/30/03; 30 BPR 274, 2/4/03). In Brigham, the court found similar “satisfactory to us” language in a different Sun Life policy to be “an indicator of subjective, discretionary authority on the part of the administrator.”

In the instant case, the court explained that the “precedential landscape” had changed in the 10 years since Brigham. It said that “[a]lthough the division of opinion remains” among the circuit courts, three circuits--the Third, Seventh, and Ninth--have adopted the Second Circuit's “suggestion that the 'to us' amplification on 'satisfactory' is inadequate in itself to confer discretion.”

After examining the intervening case law, the First Circuit said that it “agree[s] with those courts holding that the 'satisfactory to us' wording, without more, will ordinarily fail to meet the 'requisite if minimum clarity' necessary to shift from de novo to deferential review.” The court emphasized that while “no precise words are required,” plan administrators must still “offer more than subtle inferences drawn from such unrevealing language” to secure the benefit of deferential judicial review. “To conclude otherwise would negate our requirement of a clear grant of discretion,” the court explained.

Under this standard, the court found that the “satisfactory to us” language in the Sun Life policy at issue failed to state “with sufficient clarity” that the plan administrator “is to make a judgment largely insulated from judicial review by reason of being discretionary.” It therefore went on to analyze Sun Life's decision under the less-deferential de novo standard of review.

First Circuit Vacates, Remands

Applying de novo review, the First Circuit said that it had “no difficulty concluding that the medical evidence in the record, if credited, is adequate to prove Gross's entitlement to disability benefits.” The court said her “long history of migraines, extreme fatigue, and widespread muscular pain is well documented” and that “the doctors who examined her viewed her symptoms to be consistent with” a number of illnesses, including fibromyalgia.

On the other hand, the First Circuit found that surveillance evidence relied on by Sun Life was “particularly troubling” to Gross's claim, because it showed her shopping, driving long distances, and walking quickly with no signs of guarded motions. Given this competing evidence and the applicable de novo standard of review, the First Circuit found that “we have no choice but to remand.”

Senior Judge Bruce M. Selya and Judge O. Rogeriee Thompson joined in the decision.

Gross was represented by Michael D. Grabhorn of Grabhorn Law Office, Louisville, Ky., and Jonathan M. Feigenbaum, Boston. Sun Life was represented by Peri K. Agulnek, Joshua Bachrach, and William T. Bogaert of Wilson Elser Moskowitz Edelman & Dicker, Boston and Philadelphia.


The full text of the opinion is at

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