Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-22-2002

Russell v. Paul Revere Life Ins
Precedential or Non-Precedential:

Docket 1-2824




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Recommended Citation
"Russell v. Paul Revere Life Ins" (2002). 2002 Decisions. Paper 198.
http://digitalcommons.law.villanova.edu/thirdcircuit_2002/198


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                                              NOT PRECEDENTIAL

            IN THE UNITED STATES COURT OF APPEALS
                    FOR THE THIRD CIRCUIT
                         ____________

                            No. 01-2824
                            ____________

              WILLIAM R. RUSSELL, III,
                                 Appellant

                               v.

              PAUL REVERE LIFE INSURANCE COMPANY
                         ____________

          Appeal from the United States District Court
                  For the District of Delaware
                     D.C. No.: 96-cv-00474
           District Judge: Honorable Gregory M. Sleet
                          ____________

                     Argued: March 5, 2002

Before: SCIRICA, ROSENN, Circuit Judges, and WARD, District Judge.

                     (Filed March 22, 2002)

John M. Stull (Argued)
1300 North Market Street
P.O. Box 1947
Wilmington, DE 

. Johnson
The Bayard Firm
222 Delaware Avenue
P.O. Box 25130, 9th Floor
Wilmington, DE 19899

     Counsel for Appellant


Mark E. Schmidtke (Argued)
Hoeppner, Wagner & Evans
103 East Lincolnway
Valparaiso, IN 46383

Gerald E. Burns
Klett, Rooney, Lieber & Schorling
18th & Arch Streets
Two Logan Square, 12th Floor
Philadelphia, PA 19103
     Counsel for Appellee
                            ____________

                      OPINION OF THE COURT
                          ____________

ROSENN, Circuit Judge.
     William R. Russell, III, claims that he sustained total disability
while employed
by Corporate Property Investors, Inc. (CPI), as a real estate asset
manager. At the time,
he was covered by both an individual policy for management employees and a
group
policy as an employee benefit plan. Both policies included a disability
benefit, each
covering 40% of the employee's salary and each issued by the Paul Revere
Life
Insurance Company (the Insurer or Company). As a result of an alleged
disability,
Russell ceased active employment and applied for disability status under
both policies.

     The insurer initially approved the benefits but about a year later it
discontinued
them on the ground that Russell no longer met the total disability
definition of both
policies. Following denial of his claims and his appeals pursuant to the
plans, Russell
sued the insurer in the United States District Court for the District of
Delaware pursuant
to the Employment Retirement Income Security Act of 1974 (ERISA), 29
U.S.C.
   1001-1461 seeking review of the insurer's denial of his claim for long-
term disability
benefits. The defendant insurance Company moved for summary judgment and
the
District Court granted the motion. The plaintiff, Russell, timely
appealed. We affirm.

                               I.
     Russell alleged in his complaint that he was employed by CPI in March
1990 as a
Vice President and within the next two years became a participant in the
Company's
Individual Limited Plan and in its Group Limited Plan. He further alleged
that the
defendant Company is a fiduciary of both plans with discretionary
authority to determine
eligibility for benefits. As Vice President - Asset Manager, his duties
included, inter alia,
"overseeing a portfolio of commercial real estate properties located in
the states of New
Jersey, California, and Washington." This, he claims, required him to
travel from his
office in New York approximately 25% of his time. In his Statement for
Disability
Benefits to the Company, Russell stated that he applied approximately 25%
of his 40
hour week to coordinating the activities of various persons involved in
the leasing and
management of each property, and reviewing budgets, marketing plans and
property
appraisals for each property, including frequent travel to each property
site. He also
indicated that he spent 10 to 15 hours per week coordinating the work of
in-house and
outside personnel associated with this effort. Finally, he represented
that about 5 to 10
hours per week were allocated to financial analysis, mortgage financing,
selling, or
purchasing additional interests. His claim designated his occupation as
sedentary, which
was defined as involving sitting, walking, or standing, and lifting
objects between zero
and 10 pounds. The Company did not dispute Russell's characterization of
his duties.
     In March 1995, at age 37, Russell filed a disability claim with
defendant
requesting total disability benefits under the Group and Individual
Limited plans. Both
policies essentially provide that an eligible employee is entitled to
disability payments if
"(1) because of injury or sickness, you cannot perform the important
duties of your own
occupation; and (2) you are under the regular care of a doctor; and (3)
you do not work at
all." The Company approved benefits under both plans retroactive to April
23, 1995.
However, it ceased payment of the benefits under both policies on January
16, 1996,
concluding that Russell no longer met the definition of total disability
under either of
them.
     In the District Court and in his complaint, Russell claimed that he
suffers from a
complex set of symptoms involving chronic pain in his back, chest, upper
right
abdominal quadrant, muscle and joint pain, as well as digestive symptoms
involving
frequent painful eructation.
     The District Court applied an arbitrary and capricious standard of
review with a
high level of deference to the Administrator but modified to the extent
that the deference
was not absolute.    It therefore limited that review to the record before
the Administrator.
Mitchell v. Eastman Kodak Co., 

, 440 (3d Cir. 1997). The
Court also noted
that because the Company was the Plan Administrator, it had a conflict of
interest. The
Court, therefore, accorded the Administrator's decision "somewhat less
deference."
     Russell's claims to the Administrator were supported by written
statements of his
treating physicians, Dr. Frank Petito and Dr. Lucinda Harris. Both opined
that Russell
was "continuously unable to perform in his/her occupation." Dr. Harris,
however, in a
letter dated April 5, 1996, stated that she believed he was "capable of
doing sedentary
office work that does not require any heavy lifting or any extensive
travel." She
reiterated also that he suffers "chronic pain and believes him to be
unable to do the level
of work which he was doing prior to this chronic pain syndrome."
     The language of both policies provides that the Company reserved the
right to
require "additional" or "continuing" proof of loss in order to continue
paying benefits.
The Company conducted a periodic review of the disability evidence,
progress reports
and activities check. Based on this review, it ceased payment of benefits
under both
policies on January 16, 1996.
     The January 16, 1996, Company letters terminating benefits advised
Russell that
it was "unable to determine any restrictions and/or limitations that would
prevent [him]
from returning to [his] sedentary occupation." The Company specifically
noted that
Russell's complaints of "chronic abdominal pain, combined with periodic
nausea; as well
as frequent muscle and joint pain . . . and an inability to work long
hours," coupled with
the medical information submitted by his attending physicians and the
activities check,
do not support a finding of total disability. The District Court agreed.
     The District Court specifically found that the vast majority of the
supporting
claim documentation did not support a finding of total disability. The
Court found that
the medical examinations consistently were unable to find a cause of
Russell's symptoms
and that most of the examination results were "negative" or "normal."
Although the
Court found that an objective view of all the medical evidence supported
the conclusion
that Russell suffered chronic pain prior to his resignation from CPI, it
also believed that
Russell's tests and examinations were "persuasively captured" in Dr. Rand
Compton's
letter of March 14, 1994, to Dr. Petito, stating in pertinent part:
          Besides his pain, there are no symptoms or signs that suggest a
disease
     process. All of the laboratory tests done here and elsewhere have
been
     completely normal, and given the chronicity of his problem, it is our
     opinion that there is no significant pathology that can account for
his pain
     symptoms.

Dr. Compton, an independent consultant of the Mayo Clinic, had previously
written a
letter dated March 11, 1994, stating that multiple CT scans, ultrasounds,
and
accompanying laboratory tests failed to reveal any pathology or
significant abnormalities.
Dr. Compton's associate, Dr. Bruce, made a similar assessment in April
1994 in her letter
to Dr. Petito, but stated that Russell was "quite fixed in his belief that
he has a serious
disease."
     The District Court scrutinized the medical evidence presented by both
parties,
carefully analyzing the documentation of the treating physicians.
Recognizing that Dr.
Petito's overall assessment "would appear to support the finding of total
disability," the
Court also noted that Dr. Petito's report specifically referred to
"extended hours" of work
and "extensive travel" as the only important job duties that were
precluded by Russell's
"diminished" capacity. The Court also concluded that Dr. Harris's opinion
suggested a
disabling condition requiring accommodation as opposed to a cessation of
all job related
activities. Specifically noting that the opinion of Russell's attending
physician should be
given significant weight, the Court also considered the extensive body of
medical
documentation (70-plus documents) in support of Russell's claim. The
Court observed
that the vast majority of this documentation provides no diagnosis for
Russell's
symptoms and does not support a finding of total disability. Looking
objectively at the
medical evidence and the policy terms, the Court found it difficult to
conclude that
Russell was totally disabled from performing his duties as Real Estate
Asset Manager.
     In addition, the Court considered Russell's admitted level of
participation in non-
job related activities as inconsistent with a finding of total disability.
Company-
authorized surveillance of Russell's non-job activities revealed to the
Court, as well as
the Plan Administrator, that his hunting activities, although
intermittent, required a level
of exertion greater than that required by his important sedentary
activities. Further,
evidence of his errand running, loading and unloading baggage of various
sizes,
attending computer classes of several hours duration, also raised doubts
of the severity of
Russell's disabling condition.
     Finally, the Court did not find that at any one time Russell was
precluded from
performing all of his important duties as defined under the Individual and
Group
policies. The Court concluded that an arbitrary and capricious standard,
carefully
administered, was not inappropriate and that under that standard summary
judgment
should be granted for the defendant Company.

                              II.
     On appeal, Russell challenges the Court's standard of review of the
policies,
arguing that the "discretionary language in the plan document that
provides only an
inferential discretionary basis to support an application of the use of
deferential, arbitrary
and capricious standard of review" should result in the use of a de novo,
factual, and
procedural analysis of the decision of the Plan Administrator. He also
argues that even
under an arbitrary, capricious and deferential standard, the Plan
Administrator's decision
must be "reasonable," free of procedural errors, and supported by
substantial evidence.
Furthermore, he contends that where the insurer issues policies on which
the disability
determinations are made and the insurer actually makes the decision as to
disability status
and bears the costs thereof, there is a "structural conflict."
     Finally, Russell asserts that there is ambiguity in the policy
language with respect
to disability benefits that mandates the use of the doctrine of contra
preferentem as a rule
of contractual interpretation. This doctrine, he argues, requires the
ambiguous terms of
the policies "be construed most strongly against the drafter of the
insurance policy."
     The District Court acknowledged that, under ERISA, review of the
administrator's denial of benefits is generally de novo review. However,
where the terms
of the plan reserve to its administrator's discretion the determination of
a claimant's
eligibility for benefits, the administrator's decision is subject to
review under the
arbitrary and capricious standard this Court enumerated in 

.
Where the administrator's decision is confronted with a potential conflict
of interest, as it
is in this case, the Court opined that the conflict must be considered in
issuing the degree
of deference to be given to his decision.
     In his exhaustive and carefully crafted opinion, District Court Judge
Sleet first
examined the discretionary language of the plan. He noted that the
Administrator's
discretion to interpret the policy and determine the eligibility of
applicants for benefits
was reasonably inferred from the policy terms. Moreover, Russell conceded
in his
amended complaint that the Company was a fiduciary under both policies
"with
discretionary authority to determine the eligibility of benefits."
     Because of the conflict of interest of the Plan Administrator with
its obligation to
pay the benefits due a claimant under the policies, Russell urged the
District Court to
accord little or no deference to the Administrator's decision. The Court
acknowledged
that a conflict of interest existed in this case and that a modified or
heightened arbitrary
or capricious standard of review was appropriate. Applying this standard
and examining
the policies as a whole, the District Court reasonably looked at the facts
to determine the
appropriate amount of deference. The Court concluded that Russell had to
prove that he
could not perform any of the important duties of his occupation. In
scrutinizing the
policy terms, the District Court noted that among the terms of both
policies were
provisions for residual disability benefits. They applied to insureds who
can perform
some of their occupational duties.
     Taken as a whole, the Court appropriately concluded that these
provisions
disclose an expectation that the insured will continue to work in some
capacity in his
occupation unless the insured cannot perform any of the important duties
of his job. The
Court therefore found, inter alia, that "the policy language places upon
the employee the
initial burden to demonstrate that he or she can not perform any of the
important duties of
his position."
     Although Russell seems to acknowledge that he can perform some of the
important duties of his occupation, he contends that if he is unable to
perform one of
those duties, he is totally disabled and entitled to benefits accordingly.
However, the
policies provide for full benefits upon total disability. As for benefits
on partial
disability, they are not payable unless the insured is working. Russell
had resigned and
was not working. Russell had not provided any basis for the payment of
full benefits in
the face of evidence that he is able to perform some of the important
duties of his
occupation but elected not to work at all and spend his time in non-
occupational tasks.
Turning to the Residual Disability section of the policies, the Court
rationalized that it
provided for an expectation that a partially disabled employee "will
continue to work, in
some capacity, in his or her occupation."
     In support of the Administrator's decision that Russell was, at the
most, only
partially disabled, the Labor Market Report prepared by Pembroke
Associates identified
job opportunities in Russell's occupation in Wilmington, Delaware, that
would relieve
him of the extensive travel that he and his treating physician found
unduly burdensome.
The Plan Administrator had submitted the claimant's file to three
independent consulting
doctors, each of whom opined that Russell was capable of performing some
of his
occupational duties and work, at least on a part time basis.
     The District Court also carefully considered Russell's argument that
the decision
of the Plan Administrator should be reversed because it committed
procedural
irregularities with respect to the surveillance tapes. The District Court
found that the
Company "substantially complied with the requirements of the applicable
regulations,
and performed a 'full and fair review' commensurate with [the policies]."
We agree.

                              III.
     In summary, the District Court gave thorough consideration to
Russell's claims
and arguments, including the conflict of interest on the part of the Plan
Administrator. It
found that the conflict of interest did not unreasonably or improperly
affect the
Administrator's decision and that it complied with all of the applicable
requirements.
The court also limited its review to the evidence before the Plan
Administrator. This was
appropriate. Its failure to allow Russell to view the surveillance video
tapes prior to
filing his claim was insufficient to upset the determination of the
Administrator as to
preclude the award of summary judgment. After reviewing the briefs,
arguments, and
pertinent portions of the record, we perceive no error on the part of the
District Court.
The judgment of the District Court will be affirmed. Costs taxed against
the appellant.
TO THE CLERK:

Please file the foregoing opinion.



                                     /s/ Max Rosenn
                                     Circuit Judge