Robert R. Stanford v. Continental Casualty Company

In this ERISA case, appellant Robert Stanford asks us to reverse
appellee Continental Casualty Company's denial of long term disability
benefits because, he argues, Continental's determination was
unreasonable. The district court affirmed Continental's determination,
finding that the matter fell within the discretion of the plan administrator
and rejecting Stanford's argument that the determination was
procedurally improper. For the reasons that follow, Continental's
denial of benefits is affirmed.

I.

Appellant Stanford is a trained nurse anesthetist, a health care professional
responsible for administering anesthesia to patients undergoing
surgical and obstetric procedures. Stanford was employed in this
capacity at the Beaufort Memorial Hospital in Beaufort, South Carolina
beginning in April, 2002. Among the drugs Stanford administered
was Fentanyl, a powerful painkiller and narcotic. Stanford
began self-administering Fentanyl, and by September 2003 he was
addicted to the drug.

Stanford left his position at Beaufort and entered an addiction treatment
and rehabilitation program in October 2003. After completing
the program, but before returning to work, Stanford relapsed and
entered a second treatment program in November, 2003, where he
remained for three months. Stanford was discharged in late February,
2004, and was approved to return to work on March 8, 2004.
While attending this second treatment program, Stanford applied to
appellee Continental for long term disability benefits. Continental,
which both insured and administered Beaufort's employee benefit
plan, approved Stanford's application.

Stanford returned to work on March 12, 2004, but quickly began
taking Fentanyl again. He left work for a second time on May 19,
2004 and again sought treatment for his drug use. While undergoing
treatment in Georgia, Stanford again applied to Continental for long
term disability benefits. Continental approved this second application
for the duration of Stanford's inpatient treatment in Georgia, but notified
him that his claim remained under review.

In December, 2004, a registered nurse consultant with Continental
spoke to Stanford's treating physician, who indicated that Stanford no
longer suffered any impairment that would prevent him from performing
the duties of his occupation as a nurse anesthetist. Based on
this representation, Continental terminated Stanford's long term disability
benefits in January, 2005.

Stanford requested administrative review of the termination decision,
providing letters from his treating physician indicating that Stanford
remained at risk for relapse if exposed to Fentanyl, as well as an
article from a medical treatise discussing the risk of relapse among
anesthesiologists. Stanford also indicated that the South Carolina
Board of Nursing had restricted his license, prohibiting him from having
access to narcotics or working as a Certified Registered Nurse
Anesthetist.

Continental, acting pursuant to its discretionary authority as plan
administrator,1 denied Stanford's appeal on February 21, 2005, writing
that "the policy does not cover potential risk," and that Stanford
was therefore not entitled to further long term disability benefits.
Having exhausted his administrative remedies, Stanford filed the
present lawsuit seeking to reverse Continental's denial of benefits.

The district court granted Continental's Motion for Summary Judgment
on August 7, 2006, and Stanford appeals.

II.

Our analysis must begin with a statement of the appropriate standard
of review. This court has developed a "well-settled framework
for review of the denial of benefits under ERISA plans." Ellis v. Metropolitan
Life Ins. Co., 126 F.3d 228, 232 (4th Cir. 1997). Where a
plaintiff appeals a grant of summary judgment, we review the denial
of benefits de novo. Id. And when the plan at issue grants the administrator
discretionary authority to determine eligibility or to construe
the terms of the plan, the denial decision must be reviewed for abuse
of discretion. Id. Generally, this abuse of discretion standard means
that an administrator's decision will not be disturbed if it is reasonable,
even if the reviewing court would have come to a different conclusion.
Id. Yet, we have often recognized that a conflict of interest
exists when a benefit plan is administered and funded by the same
party, as is the benefit plan at issue here. The reviewing court must
consider this conflict of interest in determining whether the administrator
has abused its discretion; in other words, "the fiduciary decision
will be entitled to some deference, but this deference will be lessened
to the degree necessary to neutralize any untoward influence resulting
from the conflict." Doe v. Group Hospitalization & Medical Services,
3 F.3d 80, 87 (4th Cir. 1993). Nevertheless, precedent in this circuit
makes clear that "in no case does the court deviate from the abuse of
discretion standard," Ellis, 126 F.3d at 233. In other words, the
reduced deference standard does not require the reviewing court to
construe every contract ambiguity in favor of the claimant. To hold
otherwise would effectively erase the plan provision granting the
administrator discretion to construe plan terms. Instead, where, as
here, the plan is administered and funded by the same party, the court
applies a sliding scale according to which the plan administrator's
decision must be more objectively reasonable and supported by more
substantial evidence as the incentive for abuse of discretion is shown
to increase. Id. at 228.

Importantly, the mere existence of a conflict of interest is insufficient
to demonstrate an abuse of discretion. If it were sufficient, a
conflicted plan administrator would never be able to make an adverse
benefit determination, for a benefit applicant would always be able to
have the adverse ruling reversed on appeal. Instead, a plaintiff must
produce some evidence indicating that the adverse decision was motivated by the conflict. Such evidence might be intrinsic, such as an
internal communication directing the adverse ruling, or it might be
extrinsic, such as the fact that other administrators not operating
under a conflict of interest had interpreted substantially identical plan
provisions in favor of the applicant. Absent such evidence, courts are
unable to review benefit decisions effectively while adhering to the
clearly established abuse of discretion standard.

Additionally, the existence of a conflict of interest is only one factor
to be considered in reviewing a denial of benefits for abuse of discretion.
The reviewing court must also consider, to the extent
relevant, (1) the scope of discretion conferred; (2) the purpose of the
plan provision in which discretion is granted; (3) any external standard
relevant to the exercise of that discretion; and (4) the administrator's
motives. Haley v. Paul Revere Life Ins. Co., 77 F.3d 84, 89 (4th
Cir. 1996).

Stanford and Continental agree that the plan grants Continental, as
plan administrator, discretionary authority to determine eligibility and
to construe the terms of the plan. The parties also agree that Continental
both administers and funds the plan. Accordingly, we review Continental's
decision denying Stanford long term disability benefits
under the modified abuse of discretion standard, reducing our deference
only to the degree necessary to neutralize any untoward influence
resulting from Continental's conflict of interest, as shown in the
record.

III.

Stanford argues that Continental abused its discretion in two
respects when it denied him long term disability benefits in January,
2005. First, he argues that Continental applied an unreasonably
restrictive interpretation of the benefit plan when it concluded that the
plan did not apply to the potential risk of relapse. Second, he argues
that Continental violated ERISA regulations by issuing its denial of
benefits without consulting a health care professional. We address
each argument in turn.

A.

Stanford first argues that Continental's interpretation of the terms
of the benefit plan was unreasonably restrictive. To qualify for long
term disability benefits under Beaufort's benefit plan, a claimant must
establish a "disability," which for the purposes of the plan means "injury
or sickness caus[ing] physical or mental impairment to such a
degree of severity that you are . . . continuously unable to perform the
material and substantial duties of your regular occupation." Although
Continental did not contest Stanford's characterization of his addiction
as a sickness, it concluded that since Stanford no longer suffered
from physical or mental impairments as a result of his drug use or his
recovery, the fact that he remained an addict did not render him "unable
to perform the material and substantial duties of [his] regular
occupation."

Stanford argued in his administrative appeal that his addiction did
render him unable to perform his duties because of the high risk that
he would relapse into drug use if exposed to Fentanyl in the workplace.
Continental rejected this argument, concluding that "[t]he policy
does not cover potential risk" of relapse. We cannot say that
Continental's conclusion is unreasonable, even in light of Continental's
conflict of interest as insurer and administrator of the benefit
plan, and we must accordingly affirm.2

Stanford cites a number of cases in support of his argument that
risk of relapse is a form of disability under ERISA-governed benefit
plans. Many of these cases involve the risk of recurrence of a physical
condition such as a heart attack.3 But the risk of a heart attack is different
from the risk of relapse into drug use. A doctor with a heart
condition who enters a high-stress environment like an operating
room "risks relapse" in the sense that the performance of his job
duties may cause a heart attack. But an anesthetist with a drug addiction
who enters an environment where drugs are readily available
"risks relapse" only in the sense that the ready availability of drugs
increases his temptation to resume his drug use. Whether he succumbs
to that temptation remains his choice; the heart-attack prone
doctor has no such choice.4

More apposite are those cases cited by Stanford in which courts
have found the risk of relapse to satisfy definitions of disability similar
to the language of the benefit plan here.5 But these cases do not
settle the matter, both because they are not authoritative and because
there exist directly contradictory cases.6 This disagreement among the
courts demonstrates that reasonable minds can, and do, differ as to
whether the risk of relapse renders an addict unable to perform the
material and substantial duties of his work. Given this widespread,
thoughtful, and reasonable disagreement, Continental's decision cannot
plausibly be termed unreasonable.7

Finally, Stanford has not shown that Continental's conflict of interest affected its decision in any way. As noted above, the modified
abuse of discretion standard diminishes our deference to the plan
administrator's decision, but only to the degree necessary to offset
any conflict of interest.8 Stanford has not shown that the conflict had
any effect on Continental's decision, and to overturn that decision
simply because Continental was conflicted would eliminate deference
entirely. Accordingly, even under a modified abuse of discretion standard,
we must defer to Continental's determination that the benefit
plan did not cover risk of relapse.

We are not unsympathetic to Stanford's argument that Continental's
policy would require him to return to work and in fact suffer a
relapse in order to qualify for long term disability benefits. We recognize
that this creates a somewhat troubling - some might say perverse
- incentive structure: an addict who continues to abuse drugs will be
entitled to long-term benefits, but upon achieving sobriety will lose
those benefits unless he again begins to abuse drugs. Although this
argument is not without force, it operates on a false assumption,
namely that disability benefits are a sort of reward for sobriety. In
fact, sobriety's reward is the creation of innumerable opportunities
that were closed to Stanford as long as he continued to use drugs.

These newfound opportunities do not include a return to his former
job as a nurse anesthetist, but this is the result of a license limitation
and the prudence of employers, not any physical disability or mental
impairment. No prudent employer would hire Stanford into a job in
which he administered the drug to which he is addicted, just as no
prudent employer would hire a recovering alcoholic as a bartender.

More importantly, no prudent addict would place himself in such a
position. Such prudence is a part of recovery, and it can have significant
costs - but these costs are greatly outweighed by the opportunities
sobriety provides. It is important to remember that Stanford is not
physically disabled or mentally impaired; though prudence and his
license dictate that he cannot return to his old job administering Fentanyl,
he is physically and mentally capable of performing that job -
and countless other jobs. It would be truly perverse if Stanford were
to go on to great success in another occupation but was still able to
collect insurance checks on the basis of "disability."

In sum, we cannot say that Continental abused its discretion when
it concluded that the risk of relapse into addiction did not constitute
a "disability" under the terms of the benefit plan. Continental's determination
is therefore entitled to our deference, and we affirm the
denial of benefits on this ground.9

B.

Stanford also argues that Continental's denial of benefits was
unreasonable because Continental violated ERISA's procedural
requirements. Specifically, Stanford claims that Continental failed to
consult a health care professional in determining that his risk of
relapse did not constitute a disability, and he alleges that Continental
failed to consider the materials he submitted in support of his initial
appeal.

Stanford first points to a Department of Labor regulation that provides:
[I]n deciding an appeal of any adverse benefit determination
that is based in whole or in part on a medical judgment
. . . the appropriate named fiduciary shall consult with a
health care professional who has appropriate training and
experience in the field of medicine involved in the medical
judgment.

29 C.F.R. § 2560.503-1(h)(3)(iii). Although Continental concedes that
it did not consult a health care professional, it maintains that its decision
was not based on any medical judgment. Continental is correct,
and its failure to consult a health care professional is not a ground for
reversal.

Stanford argues that Continental's denial of benefits necessarily
implicated matters of medical judgment. This is not true. Continental
did not dispute the medical judgment of Stanford's treating physician
that Stanford suffered no physical impediment to the performance of
his work but remained at risk of relapse if he returned to an environment
where he was required to administer Fentanyl. Continental's
denial of benefits was based solely on its determination that such a
risk of relapse did not fall within the benefit plan's definition of "disability."
This determination was contractual, not medical. Put differently,
consultation with a health care professional would not have
yielded any information touching on the appropriate interpretation of
the term "disability" in the benefit plan. The benefit plan explicitly
grants Continental sole discretionary authority to interpret its terms
and provisions, and accordingly Continental was under no obligation
to consult a health care professional in exercising this discretionary
function.

Stanford also suggests that Continental abused its discretion by
failing to consider the materials he submitted in support of his appeal
of the denial of benefits. See 29 C.F.R. §§ 2560.503-1(h)(2)(iv) and
(4) (2002). But Stanford has introduced no evidence to support an
inference that Continental failed to consider his submitted materials
prior to the issuance of its decision. The fact that Continental was not
persuaded by Stanford's submission does not mean that it did not consider
it. Accordingly, Stanford has not shown that Continental violated
ERISA's procedures in denying his application for long term
disability benefits.

In sum, Continental did not abuse its discretion in denying Stanford's
application for long term disability benefits, and the denial
must therefore be affirmed. Continental's determination that risk of
relapse was not a form of disability under the benefit plan was reasonable,
even if strong arguments exist to the contrary; its failure to consult
with a health care professional in making that determination was
not improper since the decision was contractual rather than medical;
and the fact that it was not persuaded by Stanford's submissions does
not support an inference that Continental improperly disregarded
those submissions. The district court was correct to grant summary
judgment, and we affirm.

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http://pacer.ca4.uscourts.gov/opinion.pdf/062006.P.pdf