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Horn v. Provident Life & Accident Insurance Co.

December 13, 2004


The opinion of the court was delivered by: Patel, J.


Plaintiff Lawrence Horn filed this action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., seeking review of defendants' calculation of his disability benefits. Now before the court are the parties' cross-motions for summary adjudication as to the issue of what standard of review this court should apply in its evaluation of defendants' decision denying plaintiff's request for additional disability benefits. Having considered the arguments presented and for the reasons stated below, the court enters the following memorandum and order.


Plaintiff has participated in an employee welfare benefit plan sponsored by defendant California Teachers Association Group Salary Protection Insurance Plan ("the Plan") since April 1999. Kawasaki Decl., Exh. B at U/A 2-3. Throughout this period, defendants UnumProvident Corp. and its subsidiary, Provident Life & Accident Insurance Co., (collectively "Provident")*fn1 have provided Plan members with coverage under a group disability insurance policy issued to the California Teachers Association ("CTA"). See generally id., Exh. A. On September 13, 2000, plaintiff filed with the Plan a claim for short-term disability benefits. Id., Exh. B at U/A 472. Provident approved his claim, and plaintiff began receiving benefits on September 26, 2000. Id. at U/A 473-74. At that time, plaintiff had already applied for disability pension benefits available through the California State Teachers Retirement System ("STRS") and was receiving monthly payments from STRS in the amount of $2,308.04. Id. at U/A 441. Plaintiff subsequently applied for long-term disability benefits from the Plan and has received such benefits in the amount of $500 per month since September 2002. Id. at U/A 1, 116-17.

On February 23, 2003, plaintiff wrote to the Plan and asserted that his long-term disability benefits had been improperly calculated. Id. at U/A 79. Provident responded by contacting plaintiff via telephone to discuss how it arrived at the $500 per month figure. Id. at U/A 90-92. In addition, Provident provided plaintiff with a "Disability Benefit Calculation" dated January 28, 2003. Id. at U/A 87-89. The calculation was derived from section I of the CTA's group disability insurance policy, which provides that the amount of a beneficiary's monthly long-term disability benefit is equal to "50% of Regular Monthly Contract Salary (reduced by Other Income) with a Minimum Benefit of $500 per calender month." Id., Exh. A at CTA-EBT 41. Section III of the policy further defines "Other Income" to include, inter alia, "the total amount of income benefits which [the beneficiary receives] ... under any government plan, including ... the California State Teachers Retirement System." Id. at CTA-EBT 51. Relying on sections I and III of the policy, Provident calculated plaintiff's long-term disability benefit by subtracting "Other Income"--that is, plaintiff's STRS disability pension benefit--from an amount equal to fifty percent of plaintiff's monthly contract salary. Id., Exh. B at U/A 89. Based on plaintiffs' salary of $5,221.74 per month and his disability benefits payments of $2,308.04 per month, Provident's calculation yielded a monthly benefit in the amount of $302.83, which Provident increased to $500 per month based on the policy's "Minimum Benefit" provision. Id.

On July 28, 2003, Provident notified plaintiff that "[a] determination was made that you are totally disabled in accordance with the provisions of [Provident's] policy and your monthly long term disability benefit [in the amount of $500] will continue." Id. at U/A 66. On August 25, 2003, plaintiff's counsel wrote to Provident to demand that it recalculate the amount of plaintiff's disability benefit. Id., Exh. B at U/A 36-39. In his letter, plaintiff's counsel argued that rather than subtracting plaintiff's "Other Income" from his long-term disability benefit after applying the fifty percent factor to plaintiff's monthly contract salary, Provident should have subtracted "Other Income" from his salary before multiplying by fifty percent. Id. at U/A 37. This method would have yielded a long-term disability benefit of $1,456.85 per month. Id. The letter also raised similar objections to the methodology that Provident used to calculate plaintiff's short-term disability benefits during the period from September 2000 to September 2002. Id. at U/A 38.*fn2

Provident set forth its response to this request in a letter dated September 24, 2003. Id. at U/A 29-30. The response summarized the contents of the aforementioned Disability Benefit Calculation and concluded that Provident's calculation of plaintiff's short- and long-term disability benefits "are in accordance with the policy wording." Id. at U/A 30. The letter closed by requesting that plaintiff submit for further review any additional information that he might have to support his position. Id.

On November 21, 2003, plaintiff's counsel again wrote to Provident and requested that it recalculate plaintiff's benefits. Id. at U/A 5-6. Plaintiff's request included an opinion letter prepared by Geoffrey Nunberg, a Stanford University linguist, which supported plaintiff's interpretation of the "Other Income" provision of Provident's policy. Id. at U/A 7-14. Provident acknowledged receipt of the November 21 letter on December 2, 2003.

Feinberg Decl., Exh. 12 at H0116. On January 21, 2004, Provident again contacted plaintiff's counsel by mail and informed him that its "evaluation of the information that you submitted for Mr. Horn's disability claim is continuing." Id. at H0117. On February 11, 2004, plaintiff filed this action seeking review of Provident's calculation of his disability benefits. It was not until after this action was filed, on April 20, 2004, that Provident sent plaintiff a letter denying his November 2003 request for reconsideration and reaffirming its original interpretation of the policy's "Other Income" provision. Id., Exh. 15 at H0118-19.

Plaintiff's complaint seeks a declaration that Provident incorrectly interpreted the "Other Income" provision of the CTA's group disability policy, as well as disgorgement of all profits from the improper interpretation of the Plan and unspecified equitable relief under section 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3). On October 12, 2004, the parties filed cross-motions for summary adjudication on the issue of the standard of review that this court should apply in evaluating Provident's calculation. While plaintiff argues that Provident's interpretation of the "Other Income" provision of its policy is subject to de novo review under ERISA, defendants contend that the court must review Provident's decision under an abuse of discretion standard. The court considers the parties' arguments below.


I. Summary Judgment

Summary judgment is proper when the pleadings, discovery, and affidavits show that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Material facts are those which may affect the outcome of the proceedings. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The party moving for summary judgment bears the burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.

Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.; see also Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir.1994). The court may not make credibility determinations, Anderson, 477 U.S. at 249, and inferences drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Masson v. New Yorker Magazine, 501 U.S. 496, 520, 111 S.Ct. 2419, 115 L.Ed.2d 447 (1991). Nonetheless, even if summary adjudication of an entire claim is not warranted, Federal Rule of Civil Procedure 56(d) allows a court to grant partial summary judgment, thereby reducing the number of facts at issue in a trial. Fed. R. Civ. Pro. 56(d); State Farm Fire & Cas. Co. v. Geary, 699 F.Supp. 756, 759 (N.D.Cal.1987) (Patel, J.).

II. Judicial Review of Benefits Determinations Under ERISA

The disability insurance plan at issue in this action is a defined benefit plan subject to the provisions of ERISA. A denial of ERISA benefits is reviewed de novo 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, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). Under Firestone, the default presumption is that the administrator has no discretion and must show that the plan confers discretionary authority. Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089 (9th Cir.) (en banc), cert. denied, 528 U.S. 964, 120 S.Ct. 398, 145 L.Ed.2d 310 (1999). If the benefit plan confers discretion on the administrator, a reviewing court must apply an abuse of discretion standard. Bendixen v. Standard Ins. Co., 185 F.3d 939, 942 (9th Cir.1999); McClure v. Life Ins. Co. of N. Am., 84 F.3d 1129, 1132 (9th Cir.1996) (per curiam).

Under the abuse of discretion standard, the court's review is limited to the administrative record, and the decision of an administrator will not be disturbed unless the court determines that the decision was arbitrary or capricious. McKenzie v. General Tel. Co. of Cal., 41 F.3d 1310, 1316 (9th Cir.1994), cert. denied, 514 U.S. 1066, 115 S.Ct. 1697, 131 L.Ed.2d 560 (1995); Clark v. Washington Teamsters Welfare Trust, 8 F.3d 1429, 1431 (9th Cir.1993). "The touchstone of 'arbitrary and capricious' conduct is unreasonableness." Clark, 8 F.3d at 1432. In contrast, under the de novo standard of review, the normal summary judgment standard applies, and the ...

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