WOOD, Circuit Judge.
This case involves Hugo Diaz's pursuit of long-term benefits under his company's group insurance disability plan. Prudential Insurance Company of America, the plan's underwriter, denied Diaz's application, both initially and through several rounds of appeal. Diaz turned to the courts, but the district court concluded that the plan gave the administrator discretionary authority to determine participant eligibility. It therefore reviewed Prudential's decision under the deferential "arbitrary and capricious" standard and concluded that Prudential was entitled to summary judgment. We conclude that deferential review was not appropriate given the language of this plan and thus remand for further proceedings.
Diaz began working in 1998 as a computer programmer analyst at Bank One in Chicago. As a Bank One employee, he participated in a group disability insurance
In 2000, Diaz began experiencing persistent lower back pain and was diagnosed with degenerative disc disease and radiculopathy. For about two years, he underwent a series of non-operative medical treatments that included lumbar epidural steroid injections, physical therapy, and pain medication. Because his condition was not improving and he was in considerable pain, he stopped working on January 31, 2002. On February 4, on the recommendation of his physician, Diaz underwent a lumbar fusion procedure with hardware implantation to correct an annular tear at the lumbosacral joint, or L5-S1. Although postoperative examinations showed that the hardware alignment was satisfactory and there were no neurological deficits in his lower extremities, Diaz continued to report varying levels of pain in his back and legs. At times, Diaz reported that he felt hardware movement in his back, but each time he had this checked out, X-rays revealed that no movement had occurred and that the fusion was consolidating satisfactorily. After months of ineffective physical therapy and pain medication, he decided that he could not return to work.
Diaz submitted a claim for benefits under the LTD Plan on July 22, 2002, alleging that the back pain had rendered him disabled as of February 4, 2002. He supported his application with several doctors' notes expressing the opinion that Diaz's condition prevented him from sitting for more than fifteen to twenty minutes. Prudential denied the claim on August 27, for the stated reason that Diaz's reported inability to perform his job (which it considered a sedentary one) was not consistent with the medical evidence. Diaz sought reconsideration of the rejection on October 22 and submitted additional medical evidence in support of his claim, but Prudential upheld its negative decision on January 22, 2003. Diaz then filed a second appeal on February 4. This time, Prudential submitted Diaz's medical documentation to its medical consultant, Dr. Gale Brown, for review. Although Dr. Brown did not personally examine Diaz, he opined based on Diaz's medical records that the clinical and diagnostic evidence relating to Diaz's lumbar spine condition did not support Diaz's reports of persistent pain. He concluded that Diaz's condition did not prevent him from performing his job on a full-time basis. Dr. Brown noted, however, that there were non-physical factors that were having an adverse impact on Diaz's ability to engage in gainful employment, including his anxiety over losing his job, depression, and opioid dependency, but Diaz was not seeking benefits on any of those bases. On April 16, 2003, Prudential again upheld its decision denying Diaz benefits.
Diaz filed this action in district court on April 22, 2003, under § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B), seeking an award of benefits under the LTD Plan. On May 12, 2004, the district court granted summary judgment in favor of Prudential, finding that Prudential's denial of benefits was not arbitrary or capricious. On appeal, Diaz contends that the court should have reviewed Prudential's decision de novo. In the alternative, he asserts that Prudential's decision is unsupportable even under the deferential standard of review and urges this court to award benefits.
The Supreme Court has held that "a denial of benefits challenged under
Herzberger holds that the critical question is notice: participants must be able to tell from the plan's language whether the plan is one that reserves discretion for the administrator. We concluded that:
Herzberger, 205 F.3d at 332. The reason for this rule is a practical one. All plans require an administrator first to determine whether a participant is entitled to benefits before paying them; the alternative would be to hand money out every time someone knocked on the door, which is obviously out of the question. By itself, therefore, the fact that an administrator is deciding on a case-by-case basis who is entitled to benefits does not reveal whether a plan does or does not reserve "discretion" to the administrator. Similarly, a plan's requirement that an applicant submit "satisfactory proof of entitlement" does not necessarily mean that a plan administrator has discretion, because every plan requires submission of documentary proof, and the administrator is entitled to insist on something like a doctor's note rather than one's latest telephone bill. See id.; see also Perugini-Christen v. Homestead Mortgage Co., 287 F.3d 624, 626-27 (7th Cir.2002).
Instead, plan documents must go further. If a plan wishes to insulate its decision to deny benefits from plenary review, the surest way to do so (at least in this Circuit) is by including language that either mimics or is functionally equivalent to the "safe harbor" language we have suggested: "Benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them." Herzberger, 205 F.3d at 331 (internal quotation marks omitted). While we have strongly recommended that plans adopt this language, its absence does not compel the conclusion that the administrator does not have discretion. Id. ("[T]here are no `magic words' determining the scope of judicial review of decisions to deny benefits," thus "we forbear to make our `safe harbor' language mandatory.").
In the final analysis, a plan must indicate "with the requisite if minimum clarity
Prudential argues that its plan is functionally identical to the ones in Donato and Bali. Agreeing with it, the district court found that two sections of the LTD Plan, taken together, support a finding of discretion. The first appears in a section entitled "How does Prudential Define Disability?", which says "You are disabled when Prudential determines that: you are unable to perform the material and substantial duties of your regular occupation due to your sickness or injury; and you have 20% or more loss in your indexed monthly earnings due to that sickness or injury." (Emphasis added.) The second is in the section addressing "Long Term Disability Coverage — Claim Information," which states "[w]e may request that you send proof of continuing disability, satisfactory to Prudential, indicating that you are under the regular care of a doctor." (Emphasis added.) The district court thought, not unreasonably, that the phrase "satisfactory to Prudential" was legally equivalent to the "satisfactory to us" language in Bali and Donato, and thus that the same outcome followed: review under Bruch's deferential standard.
The problem with the district court's analysis is not something for which that court bears full responsibility. The court correctly recognized that Donato and Bali point in the direction it took. Indeed, it might have added that a number of other circuits also appear to seize on the phrase "satisfactory to us" as a way of making the cut that Bruch demands. See, e.g., Brigham v. Sun Life of Canada, 317 F.3d 72, 81 (1st Cir.2003) ("Circuits that have considered similar language view the `to us' after `satisfactory' as an indicator of subjective, discretionary authority on the part of the administrator, distinguishing such phrasing from policies that simply require `satisfactory proof' of disability without specifying who must be satisfied"); Ferrari v. Teachers Ins. and Annuity Ass'n, 278 F.3d 801, 806 (8th Cir.2002) (finding a plan to confer sufficient discretion because it "specifies that the employee must provide written proof of continued total disability" and "that such proof must be satisfactory to [the plan administrator]"); Nance v. Sun Life Assur. Co., 294 F.3d 1263, 1267-68 (10th Cir.2002) ("`Satisfactory to Sun Life' . . . adequately conveys to the Plan participants and beneficiaries that the evidence of disability must be persuasive to Sun Life.").
Donato and Bali are not, however, the last word on the subject from this court. As we have already noted, Herzberger took
No single phrase such as "satisfactory to us" is likely to convey enough information to permit the employee to distinguish between plans that do and plans that do not confer discretion on the administrator. And this is a matter that may well be of interest to employees considering where to work: some may prefer the certainty of plans that do not confer discretion on administrators, while others may think that the lower costs that are likely to attend plans with reserved discretion are worth it. We must therefore ask what must be satisfactory to the plan's administrator: did the evidence comply with prescribed standards (i.e., no discretion), or did the evidence comply with the plan administrator's subjective notions of eligibility, disability, or other terms in the plan (i.e., discretion). Prudential's LTD Plan requires "proof of continuing disability, satisfactory to Prudential, indicating that [the claimant is] under the regular care of a doctor." This language does not alert the plan participant to the possibility that Prudential has the power to re-define the entire concept of disability, or regularity of physician care, on a case-by-case basis. Fairly read, it suggests only that the plan participant must submit reliable proof of two things: continuing disability and treatment by a doctor. In short, under Prudential's Plan, the only discretion reserved is the inevitable prerogative to determine what forms of proof must be submitted with a claim — something that an administrator in even the most tightly restricted plan would have to do.
In keeping with Herzberger, we conclude that the critical question is whether the plan gives the employee adequate notice
The judgment of the district court is REVERSED and this case is REMANDED for further proceedings consistent with this opinion.