2008 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 11-10-2008 

# Nall y v . Li fe Ins C o N Ame r P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 07-4761

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2008

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2008 D e c i sion s b y an author i z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " Nally v . L i fe In s C o N Ame r " (2008). 2008 D e cisio n s . P ape r 245. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2008/245T h e H o n o ra b le P a u l R . M ich e l, C h ief Ju d g e o f th e U n ited S tate s C o u rt o f A p p e a ls * fort he Feder al C i r cui t , s i tt i ng bydes i gnat i on. NOT P RE CE DE NT I AL

U N I T ED ST A TES CO U R T O F A PPEA LS F O R T H E T H IR D C IR C U IT N o. 07- 4761

V I C K Y N A L L Y , A dm i ni s t r at orof the Est at e of D e n n is N a lly ; V IC K I N A L L Y , in h e r o w n rig h t, A ppel l ant v. LI F E I NSURANCE COM P ANY OF NORT H AM ERI CA

O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e E a ste rn D istric t o f P e n n sy lv a n ia D . C . C i vi l N o. 2: 07- cv- 00707 ( M agi s t r at e J udge: H onor abl e L. Fel i pe R es t r epo) Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

O ct ober28, 2008 Be f o r e : M CK EE, NY GA AR D, a n d M I CH EL, C i r cui tJudges . * ( Fi l ed: N ovember10, 2008) OPI NI ON O F THE COURT2

M IC H E L , C hi ef

C i r cui tJudge . V i ckyN al l yappea l s fr om t he D i s t r i ctC our t ’ s gr antof s um m aryj udgm enti n favor o f t h e Li f e I n s u r a n c e Co mp a n yo f No r t h Ame r i c a ( “ LI NA” ) . W e wi l l a f f i r m. I. B e c a u se w e w rite o n lyf o r th e p a rties , w e w ill o n lyb rie f lysu m m a riz e th e f

a c ts: M s . N al l y ’ s l at e hus band, D enni s N al l y , w as an i ns ul i n- depende ntdi abet i c. O ne morni ng o n h is w a yto w o rk , h e w a s in v o lv e d in a h ig h -s p e e d , s in g le -v e h ic le a u to m o b ile a c c id e n t. W i t nes s es des cr i bed M r . N al l y ’ s dr i vi ng befor e the cr as h as err at i c. T he pol i ce f ound no e v id e n c e o f

m e c h a n ic a l f

a ilu re , p o o r d ri v in g c o n d itio n s , o r d ru g u s e b yM r. N a lly. M r. N al l ysuffered severe t raum at i c i njur i es i n the acci den t . Itt oo k respon se personn el app roxi m at el yforty -fi ve m i nu t es t o ex t ri cat e him from his veh i cl e. H i s gl uco se w as m eas ur ed ar ound t he t i m e he w as extr act ed and f ound t o be 37 mg/ dl . E m er gency m ed ical t ec h n ici an s tr an sp o rt ed M r. N all yto a h o sp it al, w h ere h e d ied s ev era l day s lat er. M s . N al l yfi l ed a c l ai m w i t h L I N A underan ac ci dent al death and di s m ember m ent p o li cyp rov ided to M r. N all ythro u g h h is em p loy er. L IN A d eterm ined that b en ef it s w ere notpay abl e bec aus e the pol i cyexcl uded dea t hs r es ul t i ng i n w hol e ori n par tfr om “s i cknes s ” or“di s eas e” a nd t hatM r . N al l y ’ s acc i dentr es ul t ed fr om hypogl y cemi a. M s. N all yfil ed su itin the E astern D istri ct of P en n sy lvan ia, ch all en g ing L IN A ’sT he d i stri ctcou rt ’s decis i on i s avai l able as N a lly v . L ife In su ra n c e C o rp . o f N o rth 1 A m er i ca , 4 3 E m p l. B e n e f its C a s. (B N A ) 1 7 1 2 , 2 0 0 7 W L 4 3 9 0 4 2 3 , 2 0 0 7 U .S . D ist. L E X IS 9 2 2 1 1 (E . D . P a. 20 0 7 ). 3 d e n ial o f b e n e f its. T h e d istric t co u rt g ra n ted su m m a ryju d g m e n t in f a v o r o f L IN A . T h is

1 appea l fol l ow ed. II. T he di s t r i ctcour thad s ubj ect - m at t erj ur i s di ct i on of thi s ci vi l act i on ar i s i ng under 29 U . S. C . § 1132( a) ( 1) ( B ) pur s uantt o 29 U . S. C . § 1132( f) . W e have j ur i s di ct i on over t hi s appea l fr om t he di s t r i ctcour t ’ s fi nal j udgm entpur s uantt o 28 U . S. C . § 1291. A . St andar d of r evi ew 1. D i s cr et i on undert he pol i cy M s . N al l yar gues atl ength forthe bl anketpr opos i t i on thatcour t s , r atherthan i ns ur ance compani es , ar e entrus t ed w i t h t he r es pons i bi l i t yof i nt erpr et i ng i ns ur ance c o n tr a c ts . [ B l ue B r. at 19- 22] Al t h o u g h M s . Na l l yq u o t e s f r o m F i r es t one Ti r e and R ubberC o. v. B r uch , [B lue B r. at 2 0 ] s he i nexpl i cabl yover l ooks the hol di ng of that ca se: “[ A ] de n ial o f b en ef it s ch all en g ed u n d er § 1 1 3 2 (a)(1)(B ) i s to b e re v iew ed u n d er a de novo stan d ard u n less the b en ef itp lan g ives the a d m inistrator o r fidu ciaryd iscreti o n ary author i t yt o det erm i ne el i gi bi l i t yforbenef i t s ort o cons t rue the t erm s of the pl an. ” 489 U . S . 1 0 1 , 1 1 5 (19 8 9 ). T h e p o l i c y a s i s s u e p r o v i d e s th a t“ t h e I n s u r a n c e C o m p a n y s h a l l h a v e th e a u t h o r i ty, i n i t s di s cr et i on, t o i nt erpr ett he t erm s of the Pl an document s , t o deci de ques t i ons ofM s . N al l y ’ s ar gum entr es t s i n l ar ge partupon heras s ert i on that 2 P e n n s y lv a n ia ’s re a s o n a b le e x p e c ta tio n s d o c tr in e is a p p lic a b le . [B lue B r. at 3 4 -40 ] H o w e v e r, f

e d e ra l co m m o n law

— n o t sta te la w — g o v e rn s th e in terp re tatio n o f a b e n e f it p la n in a n E R IS A s u it. Fe i f e rv . P r u d e n t i a lI

n s . Co . o f A m. , 3 0 6 F . 3 d 1 2 0 2 , 1 2 1 0 (2d C ir . 2002) ; H oo ven v. Exx on Mob i lC orp . , 4 6 5 F . 3 d 5 6 6 , 5 7 2 ( 3 d C i r . 2 0 0 6 ) ( “ G e n e r a l l y, br eac h of contr actpr i nci pl es , appl i ed as a mat t erof fe der al l aw , govern cl ai m s for b en ef it s d u e u n d er a n E R IS A p lan.” (q u o tat ion m ark s o m itted)) . 4 el i gi bi l i t yforcover age orbenef i t s underthe Pl an, and t o m ake a nyr el at ed fi ndi ngs of fac t . ” H er e, t he di s t r i ctcourtdet erm i ned thi s l anguage w as , pur s uantt o F i r es t one , a gr ant o f d is c re tio n to in te rp re t th e p la n . [ s l i p op. at 12] H o w e v e r, th e su m m a ryp lan d e sc rip tio n (“ S P D ” ) sta tes th a t “[ t]h e T y c o B e n e f its R evi ew C om m i t t ee s hal l have the di s cr et i onaryauthor i t yt o det erm i ne el i gi bi l i t yforpl an benef i t s and t o cons t rue the t erm s of the pl an, i ncl udi ng the maki ng of fa ctual det erm i nat i ons . ” M s . N al l yar gues t hatthe di ffe r ence betw een the pol i cyand the SPD as t o w hatent i t yhas author i t yt o i nt erpr etthe pol i cy( t he i ns ur ance companyver s us the Ty co B enef i t s R evi ew C om m i t t ee) m eans thatthe SPD contr ol s and LIN A ther efor e l acks a u t h o r i t y t o c o n s t ru e t h e p o l i c y. 2 “[W ] her e a s um m arypl an des cr i pt i on confl i ct s w i t h t he pl an l anguage , i ti s the s um m arypl an des cr i pt i on t hatw i l l contr ol . ” B urs t ei n v. R et . A ccount P l an f orE m pl oyee s of A l l egheny Heal th E duc. & Res ear ch Found. , 334 F. 3d 365, 378 ( 3d C i r . 2003) . “I f an S P D c o n f

licts w ith a p lan d o c u m e n t, th e n a c o u rt sh o u ld re a d th e ter m s o f th e ‘c o n tra c t’ t o i ncl ude the t erm s of a pl an document , as s uper s eded a nd m odi fi ed byconfl i ct i ng l anguage i n t he SPD . ” Id . a t 3 8 1 .5

T he di s t r i ctcour tdet erm i ned thatbeca us e both t he pol i cyand the SPD cont ai ned a n u n a m b ig u o u s g ra n t o f d isc re tio n to so m e e n tity , the d isc re p a n c yb e tw e e n th e tw o a s to w h ic h e n tity h a d th is d is c re tio n w a s n o t s ig n if ic a n t in th is in s ta n c e . [ Sl i p op. at 12] T he di s t r i ctcour tr eas oned thatt he tw o document s coul d be r ead ha r m oni ous l yas gr ant i ng t he T y co B enef

i t s R evi ew C om m i t t ee di s cr et i on ( as not ed bythe SPD ) w hi ch w as p e rm is s ib ly d e le g a te d to L IN A (a s n o te d b yth e p o lic y ). [I d .] W e agr ee w i t h t he di s t r i ctcour t . I n T ocker v. P hil l i

p Morris C os. , the Second C i r cui tdet erm i ned thata pol i cyves t ed di s cr et i on i n an admi ni s t r at oreven though the SPD gi ven t o t he pl ai nt i ff w as compl et el ys i l enton t he i s s ue. 470 F. 3d 481, 488- 890 (2 0 0 6 ). O th e r c ir c u its h a v e re a c h e d th e s a m e c o n c lu s io n . See Fenton v. John H ancock Mu t . L i f e I n s . Co . , 4 0 0 F . 3 d 8 3 , 9 0 (1st C ir . 2 0 0 5 ); Mar t i n v. B l ue C r os s & Bl ue Shi eld of V a. , 1 1 5 F .3 d 1 2 0 1 , 1 2 0 5 (4 th C ir. 1 9 9 7 ); C agl e v. B r uner , 1 1 2 F .3 d 1 5 1 0 , 1 5 1 7 (1 1 th C ir. 1 9 9 7 ); W

ald v. S. W

. B el lC or

p. C us t om car e Med. P l an , 8 3 F . 3 d 1 0 0 2 , 1 0 0 6 (8th C ir . 1 9 9 6 ); Atwo o d

v . Ne wmo n tGo ld

Co ., 4 5 F .3 d 1 3 1 7 , 1 3 2 1 -2 2 (9 th C ir . 1 9 9 5 ), over r ul ed on othergr ounds by Ab a t i e v . Al ta He a l th & L i f e I n s . Co . , 4 5 8 F . 3 d 9 5 5 , 9 6 6 -67 (9th C ir . 2 0 0 6 ) ( en banc ) . G i ven thes e hol di ngs fr om ot herci r cui t s , i tw oul d be anomal ous forus a llo w th e S P D ’s s tate m e n t th a t th e T y c o B e n e f its R e v iew C o m m itt e e h a d d isc re tio n to i n t e rp r e tt h e p o l i c yt o i n v a l i d a t e t h e p o l i c y ’ s g r a n to f d i s c r e t i o n t o L I NA.6

2 . S lid in g sc a le E v e n if th e p o licya t issu e g ra n ts a n a d m in istra to r d isc re tio n (p re su m p tiv e ly en ti tl ing the a d m inistrator to rev iew u n d er a n arb itraryan d ca p ri ciou s stan d ard ), co u rt s crut i nyof the admi ni s t r at or ’ s deci s i on m aybe hei ght ened i f ce r t ai n s t ructur al or p ro c e d u ra l f

a c to rs a re p re s e n t. Po s tv . Ha r t f o r d I n s . Co . , 5 0 1 F . 3 d 1 5 4 , 1 6 1 (3d C ir . 2007) . “[A ] s t ructur al confl i ctar i s es w hen the admi ni s t r at orhas a non- t r i vi al fi nanci al i ncent i ve t o actagai ns tt he i nt er es t s of the bene fi ci ar i es . ” I d. at 16 2 . P roc ed u ral fac tors w arr ant i ng hei ght ened s crut i nyar e gene r al l yact i ons of the pl an admi ni s t r at ori n r eac hi ng the d ec isi o n at i ssu e tha t give the c o u rtso m e re aso n to d o u b t th e a d m inistrator’s n e u tr a lity. I

d. at165. U ndert hi s s l i di ng- s cal e met hod, cour t s ar e t o “i nt ens i fy [] the degr ee of

s crut i nyt o m at ch the degr ee of the conf l i ct ” bas ed on s t ructur al and pr ocedur al f a c to rs . P i nt o v. R el i ance Standar d Li f e I ns . C o. , 2 1 4 F . 3 d 3 7 7 , 3 7 9 (3d C ir . 2 0 0 0 ). B efor e the di s t r i ctcour t , t he part i es agr eed thatL I N A ’ s both fundi ng and admi ni s t er i ng t he pol i cycons t i tut ed a s t ructur al confl i ctw arr ant i ng s om e i ncr eas ed sc ru tin y . M s. N a llyd o e s n o t ar g u e th a t ad d iti o n a l stru c tu ra l f a c to rs a re p re se n t in th is cas e; s he does , how ever , cl ai m t hatpr ocedur al fac t or s i n t he admi ni s t r at or ’ s deci s i on w a rr a n t h e ig h te n e d re v ie w . [ B l ue B r. 50] . T h e d is tr ic t c o u rt re je c te d th e s e a rg u m e n ts . [ s l i p op. 14- 15] . M s . N al l ydoes notexpl ai n how the di s t r i ctcour terr ed on thi s poi nt ; s he m e re ly re p e a ts h e r a rg u m e n ts to th e d is tr ic t c o u rt , o f te n v e rb a tim . [ B l ue B r. 50] .7

M s . N al l y ’ s m ai n pr ocedur al ar gum enti s thatL I N A det erm i ned fr om the out s et that itw o u ld d en yh er c lai m . H er o n lyev iden ce in su p p o rto f th is co n tention is a sh o rt entr yi n L I N A ’ s i nt ernal l ogs , w hi ch r eads

0 1 /0 9 /2 0 0 6 c laim f

o r A D & D re c e iv e d in F C O . D e a th cert i fi cat e s t at es t hatD enni s N al y[s i c] di edfr om [s i c] m ul t i pl e tr aumat i c i nj ur i es as the r es ul tof an a ut o acc i denton D e c e m b e r 8 , 2 0 0 5 . P o licysta tes th a t b e n e f its w ill n o t b e p a id f o r lo ss w h ich re su lts d ire c tlyo r in d ire c tly , in w h o le o r in par t , i s [s i c] caus ed byorr es ul t s s i cknes s [s i c] , di s eas e or b o d i l y i o r[ s i c ] m e n t a l i n f i r m i t y. [ D 0036] M s . N al l ycont ends t hatt hi s entr yi ndi cat es thatL I N A deci ded atthe begi nni ng of the cl ai m r evi ew pr oces s t o det erm i ne thatM r . N al l y ’ s acc i dentw as a r es ul tof a m e d ic a l c o n d itio n a n d th u s e x c lu d e d u n d e r t h e p o lic y . T h e d is tr ic t c o u rt c o rr e c tly re je c te d th is a rg u m e n t. [ Sl i p op. at 14] M s . N al l yl acks anycorr obor at i ng evi dence , and the pas s age s he r el i es upon i s har dl ys t r ong s uppor tfor h e rt h e o r y. M s. N all yalso asse rt s tha t L IN A ’s i n teracti o n s w ith a m ed ical co n su lt an t, D r. M at ra Terl ecki, i s another pr oced ural i rr egu l ari t yw arr anti ng height ened revi ew . M s. N al l yas s er t s t hatL I N A at t empt ed t o coverup T er l ecki ’ s i nvol vementboth befor e and dur i ng t hi s l aw s ui t , as ked herl eadi ng ques t i ons , and i gnor ed unfa vor abl e fi ndi ngs by T e rl e c k i. T h e d i s t r i c tc o u r tr e

j e c t e d t h i s g r o u p o f

a r g u me n t s . I tf

o u n d th a t , a l t h o u g h L I NA di d notdi s cl os e Ter l ecki ’ s name, L I N A m ent i oned “a n i ndepende ntm edi cal r evi ew ” i n aL I N A al s o poi nt s outt hatT er l ecki ’ s r epor tw as pr oduced a l ong w i t h t he r es tof the 3 a d m in is tr a tiv e re c o rd in th e re g u la r c o u rs e o f d is c o v e ry. 8 F e b ru a r y2 8 , 2 0 0 7 l e t t e rt o M s . Na l l y , a n d th a tth i s r e f e r r e d t o T e r l e c k i ’ s r e v i e w. 3 L I N A ’ s ques t i ons t o T er l ecki ( s uch as “W hatevent s coul d r es ul ti n a r eadi ng of ‘ 34’ and h o w lon g w o u ld ittake fo r a p erso n ’s l ev els t o d rop to tha t l ev el? P lease ex p lai n . ”) a re notl eadi ng. A nd w hi l e Ter l ecki s t at ed thatbeca us e of the t i m e l aps e betw een the acc i dentand M r . N al l y ’ s fi r s tgl ucos e t es ts he coul d notdet erm i ne w hetherhe w as hypogl y cemi c att he t i m e of hi s acc i dent , s he al s o not ed thata bl ood gl ucos e l evel of 37 m g/ dl w as i ncons i s t entw i t h “s afe l yoper at i ng a mot orvehi cl e” a nd w oul d pr oduce

“ c o g n itiv e im p a ir m e n t.” T he di s t r i ctcour tcorr ect l yfound thatno pr ocedur al fac t or s w arr ant ed i ncr eas i ng its sc ru tin yo f

L IN A ’s d e c isio n to d e n yM s. N a lly ’s c laim , an d w a s th e re f o re c o rre c t to a p p ly o n ly a m o d e ra te ly-h e ig h te n e d s ta n d a rd o f re v ie w . See P ost , 501 F. 3d at164. 3. E vi dence M s . N al l ycompl ai ns t hati n r eac hi ng i t s deci s i on L I N A i m perm i s s i bl yr el i ed on evi dence t hatw oul d notbe admi s s i bl e underei therthe Feder al R ul es of Evi dence ( s uch as p o li ce rep o rt s rep ea ti n g stat em en ts byM s. N all yan d p eo p le w h o w itn esse d M r. N all y ’s ac cide n t) o r D a u b e rt v . Me rr e ll D o w P h a rm a c e u tica ls , 509 U . S. 579 ( 1993) , ( s uch as T er l ecki ’ s r epor t ) . I ti s w el l - es t abl i s hed that“[g] ener al l y , onl yevi dence i n t he admi ni s t r at i ve r ecor d i s admi s s i bl e forthe purpos e of de t erm i ni ng w hetherthe pl an9

admi ni s t r at or ’ s deci s i on w as arbi t r aryand ca pr i ci ous . ” P ost , 5 0 1 F .3 d a t 1 6 8 . M s. N a lly pr es ent s no l egal s uppor tforhercont ent i on thata pl an admi ni s t r at orm ayonl ycons i der evi dence t hatw oul d be admi s s i bl e i n or i gi nal di s t r i ctcour tpr ocee di ngs . Such a r equi r ementw oul d run count ert o t he pol i cybehi nd arbi t r aryand capr i ci ous r evi ew of adm i nis t rat or deci si on s. B . L IN A ’s d e n ial o f b e n e f its A fter co rrectl yd eterm ining the a p p li ca b le st an d ard o f re v iew , the d istri ct co u rt co rrectl yap p li ed itto rev iew L IN A ’s rejecti o n o f M s. N all y ’s claim . A s the d istri ct co u rt found, t her e w as evi dence cons i s t entw i t h t he pr opos i t i on thatM r . N al l yw as h yp o g lyce m ic a t th e tim e o f h is a c c id e n t a n d th a t h is h yp o g lyce m ia c a u s e d th e a c c id e n t. T hati tm aybe i m pos s i bl e t o pr ove thatM r . N al l yw as i ndeed hypogl y cemi c atthe m o m e n t o f

h is a c c id e n t d o e s n o t m e a n th a t L IN A ’s d e c isio n d o e s n o t su rv iv e m o d e ra tely h e ig h ten e d a rb itrar ya n d c a p ric io u s re v iew . It w a s n o t u n re a so n a b le f o r L IN A to c o n c lu d e o n th e re c o rd b e f o re it th a t M r. N a lly ’s a c c id e n t w a s a re su lt o f h is hypogl y cemi a and thus notcover ed bythi s pol i cy . T he di s t r i ctcour tw as corr ectt o gr ant o f s u mm a r yj u d g me n ti n f a v o ro f L I NA. III . M s . N al l yar gued thatt he di s t r i ctcour tabus ed i t s di s cr et i on bynotaw ar di ng her at t or ney ’ s fee s pur s uantt o 29 U . S. C . § 1132( g) ( 1) . B eca us e w e have aff i r m ed the di s tr i ct10

c o u rt’s g ra n t o f

su m m a ryju d g m e n t in f a v o r o f L IN A , the d istric t co u rt a c ted w ith in its dis cret i on i n d eny i ng M s. N al l y ’s requestfor fees. I V. F o r th e f o re g o in g re a so n s, w e w ill a f f irm th e ju d g m e n t o f

th e d istric t co u rt.