GARWOOD, Circuit Judge:
Bringing this action under ERISA, 29 U.S.C. § 1001, et seq., plaintiff-appellant Edward E. Lynd (Lynd) alleged in his complaint that the benefits he had been receiving pursuant to a long-term disability plan were wrongfully terminated. In his appeal of the district court's rulings on the parties' cross motions for summary judgment, Lynd presently contends that the district court reviewed the plan administrator's decision to terminate these benefits under an inappropriate standard of review, and that the grant of summary judgment dismissing his suit was erroneous.
Facts and Proceedings Below
Lynd was employed by defendant-appellee Ford, Bacon & Davis, Inc. (FBD) on December 18, 1989. In September of 1990, Lynd became unable to work and began receiving short-term disability benefits under FBD's Employee Welfare Benefit Plan (the plan). After six months, Lynd applied for and began receiving long-term disability benefits. The group policy associated with this long-term disability plan was issued by defendant-appellee Reliance Standard Life Insurance Company (Reliance).
Long-term disability payments were made to Lynd for twenty-four consecutive months. At the close of this two-year period, on March 9, 1993, the plan administrator terminated these payments to Lynd. The administrator made this decision to terminate benefits based on a limitation provision found in both the master policy and the certificate of insurance which stated that, "Monthly Benefits for Total Disability due to mental or nervous disorders will not be payable beyond twenty-four (24) months unless you are in a Hospital or Institution at the end of the twenty-four (24) month period."
Following the termination of these benefits, Lynd filed a petition in the Fourth Judicial District Court of Louisiana alleging that his disability did not result from a "mental or nervous disorder," and that his benefits under the plan were therefore wrongly terminated by defendants-appellees. The action was removed to federal district court pursuant to 28 U.S.C. § 1331, and the parties thereafter filed cross motions for summary judgment. The district court denied Lynd's motion and, in granting appellees' motion, held that the plan administrator had not abused its discretion in deciding to terminate benefits.
On appeal, Lynd contends that the district court erred by reviewing the plan administrator's decision under an abuse of discretion standard. Lynd argues that the district court should have reviewed the plan administrator's decision de novo. Furthermore, Lynd maintains that, regardless of the standard of review employed, his long-term disability benefits were wrongfully terminated.
Whether the district court employed the appropriate standard in reviewing an eligibility
In Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 113-17, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989), the Supreme Court established that a denial of ERISA benefits by a plan administrator should be reviewed de novo by the courts unless the plan gives the administrator "discretionary authority to determine eligibility for benefits or to construe the terms of the plan." However, it remains unclear precisely what language must be employed in the plan to confer such discretionary authority upon the plan administrator. In Duhon v. Texaco, Inc., 15 F.3d 1302 (5th Cir.1994), this Court applied the analysis from Bruch to the language of an ERISA plan and held that de novo review was inappropriate because:
Additionally, we have observed that the requisite grant of discretionary authority cannot be inferred from the language of an ERISA plan. In Chevron Chemical Co., supra, in the course of holding abuse of discretion was the proper standard of review, we stated that:
In the present case, however, we pretermit the issue regarding which standard of review the district court should have employed in reviewing the plan administrator's eligibility determination. We do so because, regardless of whether the district court reviewed the administrator's eligibility determination for abuse of discretion or de novo, the nature of Lynd's disability compelled the district court to conclude that Lynd's long-term benefits under the plan were properly terminated.
Section 8.0 of the instant plan includes the limitation that "Monthly Benefits for Total Disability due to mental or nervous disorders will not be payable beyond twenty-four (24) months unless you are in a Hospital or Institution at the end of the twenty-four (24) month period." The parties do not dispute that Lynd remains disabled. Neither, however, is there any suggestion that Lynd was hospitalized or institutionalized on March 9, 1993, at the end of the two-year period during which he received long-term disability benefits. Therefore, this dispute turns on the proper characterization of Lynd's disability; specifically, it must be determined whether or not his disability constituted a "mental or nervous disorder" within
The undisputed evidence before the district court was that Lynd was diagnosed on September 19, 1990, as suffering from "major depressive disorder." This diagnosis, documented on Lynd's benefits claims form, has remained static since that time.
However, Lynd contends that this general diagnosis of his disability — as a "major depressive disorder" — comports with his claim that his condition is physical in nature. In support of this position, Lynd presented to the district court the deposition (taken well after benefits were denied) of his treating physician, psychiatrist Dr. Dumont, in which Dr. Dumont asserted his belief that depression is a "physical" disorder:
Dr. Dumont further testified that:
and that in his opinion "every major depressive disorder implicate[s] inefficiency of neurotransmitters in the central nervous system."
Dr. Dumont testified regarding the symptoms experienced by Lynd as a consequence of his "major depressive disorder":
Dr. Dumont expressed the view that "resolution of Mr. Lynd's major depressive disorder would remove his disability."
Dr. Dumont described himself as "a physician who specializes in the practice of psychiatry." He saw Lynd on referral from Lynd's regular physician, but received from the referring physician no "documentation" or "medical reports." When asked if his records reflected "whether Mr. Lynd had any physical disorder or diseases," Dr. Dumont responded, "not of any consequences that would have been connected with this, no." Dr. Dumont treated Lynd with psychoreactive medication and psychotherapy.
This Court has not previously addressed the interpretive issues raised by the allegation that the "physical" aspects of "mental" illnesses necessarily impact the construction of such qualifying phrases as "mental or nervous disorders" used in ERISA plans. However, we find the Eighth Circuit's approach to be instructive:
In its DIAGNOSTIC AND STATISTICAL MANUAL OF MENTAL DISORDERS, the American Psychiatric Association (APA) acknowledges that there is no bright-line distinction between "mental" disorders and "physical" disorders. Nevertheless, the APA also recognizes that, while "there is much `physical' in `mental' disorders," the phrase "mental disorder" persists "because we have not found an appropriate substitute." American Psychiatric Association, DIAGNOSTIC AND STATISTICAL MANUAL OF MENTAL DISORDERS xxi (Fourth Edition, 1994). Accordingly, the APA has not wavered from its classification of Lynd's disability — "major depressive disorder" — as a "mental disorder." Id. at 339. Thus, it is not just the lay population that holds to the view that certain disorders are properly and necessarily characterized as "mental disorders," even though what is thus referred to may have a "physical" aspect and/or origin, as well.
The approach taken by the Ninth Circuit in Patterson v. Hughes Aircraft Co., 11 F.3d 948 (9th Cir.1993), is also instructive. In Patterson, the court confronted an ERISA plan pursuant to which benefits resulting from "mental, nervous or emotional disorders of any type" would be limited to two years. Id. at 949. The court observed that the plan did not define "mental disorder," and held that ambiguities in the plan were to be resolved in favor of the plan participant. Id. at 950. In reaching its conclusion that the term "mental disorder" was ambiguous in this context, the court asserted its view that, when a disability was caused by "depression," then that disability would be properly characterized
The court ultimately remanded the case to the district court, concluding that, "[I]f Patterson's headaches contributed to his total disability, or they are either a cause or symptom of his depression, then Patterson's disability does not fall within the `mental disorder' limitation interpreted in his favor." Id. at 951 (emphasis added). The court reached this conclusion because the cause of Patterson's disability had not been determined. Id.
Lynd suffers from "major depressive disorder". There has been no suggestion that Lynd's major depression is in some relevant aspect unusual, nor that his disability is caused by anything other than this disorder. As noted, Dr. Dumont testified that "resolution of Mr. Lynd's major depressive disorder would resolve his disability." Instead, Lynd maintains that his condition falls outside the phrase "mental or nervous disorder" simply because "every major depressive disorder," according to Lynd's psychiatrist, has "physical" origins and symptoms. Based on this evidence, the district court was compelled to affirm the plan administrator's eligibility determination, regardless of the standard of review employed by the district court in reviewing this determination.
Accordingly, the judgment of the district court is
DENNIS, Circuit Judge, dissenting.
This court is required to review de novo the district court's decision to grant summary judgment to the insurance company and the employer, applying the same criteria employed by the court in the first instance. Harper v. Harris County, Texas, 21 F.3d 597 (5th Cir.1994). Thus, this panel should reverse unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show
A denial of benefits under an ERISA plan must be 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, 956-57, 103 L.Ed.2d 80 (1989). The Group Long Term Disability Insurance policy issued by Reliance to Ford, Bacon and Davis does not contain any language conferring discretionary authority upon Reliance to determine eligibility for benefits or to construe the terms of the plan. The policy insuring clause states: "We will pay a Monthly Benefit if an insured: (1) is Totally Disabled as the result of a Sickness or Injury covered by this Policy: (2) is under the regular care of a Physician; (3) has completed the Elimination Period; and (4) submits satisfactory proof of Total Disability to us." At most, if at all, this provision vests in Reliance some discretion in determining whether the "proof of the Total Disability" was "satisfactory." But the fact that Lynd is totally disabled has been conceded by defendants for purposes of the motion for summary judgment. The only question that has been placed at issue is whether the benefits to which Lynd is entitled are restricted due to the cause of his total disability under a limitation clause which provides: "Monthly Benefits for Total Disability due to mental or nervous disorders will not be payable beyond twenty-four (24) months unless the insured is in a Hospital or Institution at the end of the twenty-four (24) month period." There is no evidence under the limitations provision or any other part of the policy that Reliance has the power to exercise discretion to make determinations whether a total disability is due to mental or nervous disorders to which the courts must pay deference. Furthermore, there is simply no support for importing the deferential or arbitrary and capricious standard into ERISA on a wholesale basis. Firestone Tire & Rubber Co., 489 U.S. at 109-114, 109 S.Ct. at 953-56. Accordingly, Reliance's denial of benefits challenged by Lynd is to be reviewed under a de novo standard.
The group long term disability insurance policy (non-participating) that covers Lynd is an "employee welfare benefit plan" as defined by ERISA, rather than state contract law. Therefore, federal law governs his claim.
It is well settled in this Circuit and a majority of the federal courts that, in construing the language of ERISA plans, federal law must follow the rule of contra proferentem, which directs that when plan terms
In fact, according to the law of every state and the District of Columbia, ambiguities in insurance contracts must be construed against the insurer. Kunin v. Benefit Trust Life Ins., 910 F.2d 534 (9th Cir.1990). "The words, `the contract is to be construed against the insurer' comprise the most familiar expression in the reports of insurance cases." 2 Couch on Insurance § 22:14 at 22-31 (3d ed.).
Although provisos, exceptions, or exemptions, and words of limitation in the nature of an exception, may be freely contracted for by the insurer, state courts are virtually unanimous in holding that such terms are strictly construed against the insurer where they are of uncertain import or reasonably susceptible of a double construction, or negate coverage provided elsewhere in the policy. See 2 Couch on Insurance § 22:31 at 22-66 & 22-67 (3d ed.), and voluminous citations there collected. We may use state common law as a basis for federal common law to the extent that state law is not inconsistent with congressional policy concerns. Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1451 (5th Cir.1995); Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 647 (7th Cir.1993); see also Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1257 n. 8 (3rd Cir.1993); Jamail, Inc. v. Carpenters District Council of Houston Pension & Welfare Trusts, 954 F.2d 299, 304 (5th Cir.1992). Because the rule that exceptions, exemptions, exclusions, provisions and limitations affecting coverage are construed strictly against the insurer is inherent within the rule of contra proferentem and consistent with congressional policy concerns, it should be recognized as part of the federal common law of rights and obligations under ERISA regulated plans.
What is an ambiguity? An ambiguity exists if reasonable persons can find different meanings in a statute or document, Laskaris v. City of Wisconsin Dells, Inc., 131 Wis.2d 525, 389 N.W.2d 67, 70 (App.1986); when good arguments can be made for either of two contrary positions as to a meaning of a term in a document, Atlas Ready-Mix of Minot, Inc. v. White Properties, Inc., 306 N.W.2d 212, 220 (N.D.1981); when application of pertinent rules of interpretation to an instrument as a whole fails to make certain which one of two or more meanings is conveyed by the words employed by the parties. Wood v. Hatcher, 199 Kan. 238, 428 P.2d 799, 803 (Kan.1967). See also City of Sioux Falls v. Henry Carlson Co., Inc., 258 N.W.2d 676, 679 (S.D.1977); Tastee-Freez Leasing Corp. v. Milwid, 173 Ind.App. 675, 365 N.E.2d 1388, 1390 (1977); Black's Law Dictionary 79-80 (6th ed. 1990). In this circuit, we have held that "[u]nder Texas law, a contract is ambiguous if, after applying established rules of interpretation, the written instrument `remains reasonably susceptible to more than one meaning.'" Clardy Manu. Co. v. Marine Midland Bus. Loans, Inc., 88 F.3d 347, 352 (5th Cir.1996) (quoting R & P Enterprises v. LaGuarta, Gavrel & Kirk, 596 S.W.2d 517, 519 (Tex.1980)).
The term "total disability due to mental or nervous disorders" in the group long-term
Other reasonable persons believe, however, that mental illness or mental disorder insurance limitations apply to any abnormal condition that manifests itself in symptoms that an untutored layperson without benefit of medical advice or diagnosis would call mental disorder or illness. See Brewer v. Lincoln Nat. Life Ins. Co., 921 F.2d 150, 154 (8th Cir.1990), cert. denied, 501 U.S. 1238, 111 S.Ct. 2872, 115 L.Ed.2d 1038 (1991) (applying a mental illness limitation in an ERISA policy to deny benefits, despite expert evidence that participant suffered from affective mood disorder caused genetically or biologically, because "laypersons are inclined to focus on the symptoms of an illness; illnesses whose primary symptoms are depression, mood swings and unusual behavior are commonly characterized as mental illnesses regardless of their cause.... Regardless of the cause of his disorder, it is abundantly clear that he suffered from what laypersons would consider to be a `mental illness'"). Several caveats must be added regarding the Brewer case, however. It is one of the few ERISA cases in which a court has rejected the contra proferentem rule; consequently, the Brewer court did not construe the limitation strictly against the insurer or consider any other viewpoint than that of an ill read layperson having no expert medical advice about the particular patient in question. Also, without further refinement, the Brewer definition of mental illness would apply to, inter alia, an accident victim who exhibits abnormal behavior as the result of a traumatic head injury, a person suffering from brain cancer who develops unusual behavior, an elderly person who has contracted Alzheimer's Disease, and a delirious person suffering from a high fever caused by a staph infection. See Phillips v. Lincoln Nat. Life Ins. Co., 978 F.2d 302, 306 at n. 2. Moreover, the Eight Circuit subsequently partially retrenched from Brewer by applying contra proferentem in the ERISA context when an ambiguity cannot be resolved by interpreting the language as would an average plan participant. Delk v. Durham Life Ins. Co., 959 F.2d 104, 105-106 (8th Cir.1992).
Another somewhat reasonable interpretation of such terms as mental or psychiatric disorder focuses on neither the cause nor symptoms of a psychiatric condition, but on the nature of the treatment involved. See Simons v. Blue Cross & Blue Shield of Greater New York, 144 A.D.2d 28, 536 N.Y.S.2d 431 (N.Y.App.Div.1989) (hospitalization for treatment of malnutrition due to anorexia nervosa was not subject to the limitation of coverage applicable to in-hospital care for psychiatric disorders; regardless of whether anorexia nervosa was a mental illness or psychiatric disorder, the purpose of hospitalization was to treat the physical aspects of malnutrition and hypotension, including naso-gastric feeding and medication — thus the hospitalizations were medical treatment, not psychiatric care).
Nevertheless, regardless of any arguments over their merits, there are at least three reasonable interpretations of insurance coverage limitations upon benefits payable because of disability or treatment due to mental disease, disorder or illness. In particular, the limitation at issue in the present case upon benefits for "Total Disability due to mental or nervous disorders" is susceptible to each of the three reasonable interpretations. The term is not defined in the policy and it remains ambiguous after applying ordinary principles of contract interpretation. Therefore, applying the rule of contra proferentem in accordance with this Circuit's precedents of Todd v. AIG Life Ins. Co., supra; Ramsey v. Colonial Life Ins. Co. of America, supra; and Hansen v. Continental Ins. Co., supra, the term should be construed strictly against the insurer and in the reasonable sense that is most favorable to the insured, viz., that "total disability due to mental or nervous disorders" means a behavioral disturbance with no demonstrable organic or physical basis.
Consequently, summary judgment is not appropriate because the record discloses that there is a genuine issue as to a material fact, i.e., whether Lynd suffers from a total disability due to a behavioral disturbance with no demonstrable organic or physical basis, and that the moving party is not entitled to a judgment as a matter of law. In opposition to Reliance's motion for summary judgment and in support of his own, Lynd filed the deposition of his treating psychiatrist who testified that Lynd was totally disabled due to a major depression that has a physiologic basis every bit as much as diabetes, hypertension, cardiomyopathy or other diseases and is caused by the dysfunction of the neurotransmitters in his brain. See Deposition of Arthur Dumont, III, M.D., at pages 31, 39, 40, 43, 49, 42, 52, 56, 57 (attached to the motions for summary judgment filed by Lynd and Reliance). Clearly, the doctor's testimony provides the basis for a reasonable trier of fact to find or infer that Lynd is totally disabled due to a major depression having an organic or physiologic basis and not due to a behavioral disturbance with no demonstrable organic or physical basis. In conducting summary judgment review a court must keep in mind that summary judgment should be granted when no genuine issue of material fact exists and when the moving party is entitled to judgment as a matter of law. This standard closely resembles that used for entry of a directed verdict, where the district court must direct a verdict if there can be only one reasonable decision made under the governing law. London v. MAC Corp. of America, 44 F.3d 316 (5th Cir.), cert. denied, ___ U.S. ___, 116 S.Ct. 99, 133 L.Ed.2d 53 (1995); Boeing v. Shipman, 411 F.2d 365 (5th Cir.1969).
The District Court did not actually reach the issues discussed here because it failed to appreciate that a de novo review of Reliance's denial of benefits is required by Firestone under the policy and limitation clause at issue. That court fell into error by applying deference in reviewing Reliance's denial
My colleagues in the majority have fallen into error in affirming the trial court's result because they likewise failed to perform a de novo review of the policy and its limitation provision and because they failed to follow the precedents of this Circuit which require the application of the rule of contra preferentem. If they had not lapsed in these respects they surely would have recognized that the limitation clause is ambiguous, construed it strictly against the insurer, realized that under the reasonable interpretation that is most favorable to Lynd there is a genuine dispute as to a material fact and that Reliance is not entitled to judgment as a matter of law, and would have reversed the summary judgment and remanded the case for trial or further proceedings.