1

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

DANA M. GARDNER :

Plaintiff, No. 4:04-CV-02474

v. :

LIFE INSURANCE COMPANY : (Judge McClure)

OF NORTH AMERICA

Defendant :

M E M O R A N D U M

April 26, 2005

BACKGROUND:

On November 16, 2004, plaintiff Dana M. Gardner filed a complaint against

defendant Life Insurance Company of North America. Plaintiff’s action arises

under the Employee Retirement Income Security Act of 1974 (“ERISA”). This

court has jurisdiction pursuant to 29 U.S.C. § 1132(e). Plaintiff seeks to recover

long-term disability benefits, and the court’s clarification of her entitlement to future

benefits under her plan. See 29 U.S.C. § 1132(a)(1)(B). Plaintiff also seeks

recovery of her attorney’s fees, interest, and court costs. See 29 U.S.C. § 1132(g).

In 2001, and up until January 7, 2002, plaintiff was employed as a wire

drawer for Osram Sylvania in Towanda, Pennsylvania. At that time, defendant was

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 Defendant’s answer denies that defendant was the plan administrator, and

states that defendant was the claims administrator in connection with Osram

Sylvania’s group policies. (Rec. Doc. No. 5, at 1-2, ¶ 5.)

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insurer and plan administrator of both a group short-term and long-term disability

plan for Osram Sylvania. Plaintiff participated in the group disability plans. On

January 7, 2002, plaintiff ceased working at Osram Sylvania due to a medical

condition. On January 14, 2002, plaintiff was approved for short-term disability

benefits under the plan. On July 19, 2002, defendant approved plaintiff for longterm disability benefits under the plan. On May 15, 2003, defendant determined

that plaintiff was not totally disabled, as defined by the plan, and terminated her

long-term disability benefits effective May 20, 2003. Plaintiff’s internal appeal of

the May 2003 decision was denied by defendant on June 16, 2003.

Plaintiff avers that defendant’s decision to terminate plaintiff’s long-term

disability benefits was arbitrary and capricious and constituted an abuse of

discretion. (Rec. Doc. No. 1, at 2, ¶ 15.) Plaintiff also asserts, among other

things, that defendant had a conflict of interest because it was both the insurer and

administrator of the plan. (Rec. Doc. No. 1, at 3, ¶ 15(a).)1

On January 6, 2005, a joint proposed case management plan was submitted

by the parties. In that plan, a principal legal dispute between the parties was the

scope of the court’s review, and whether our review should be limited to the

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 In that same management plan the parties agreed that the arbitrary and

capricious standard of review is applicable to review defendant’s decision. (Id., at

5, ¶ 1.41.) This agreement is inconsistent with plaintiff’s current argument because

the record available to a court conducting an arbitrary and capricious review is the

record made before the plan administrator, which cannot be supplemented during

litigation. See Kosiba v. Merck & Co., 384 F.3d 58, 67 n.5 (3d Cir. 2004) (citing

Mitchell, 113 F.3d at 440). Plaintiff has since retracted that statement and now

asserts that the de novo standard of review applies to this case. (Rec. Doc. No.

11, at 2.) 

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administrative record before the plan administrator, or whether the court could

plenarily consider evidence outside of the record. (Rec. Doc. No. 6, at 4, ¶ 1.32.)2

On January 9, 2005, defendant filed an answer along with forty (40)

affirmative defenses. On January 12, 2005, we directed defendant to file a motion

in limine to support their contention that discovery should be limited to the

administrative record. On February 28, 2005, defendant complied with our order

and filed a motion in limine to establish the arbitrary and capricious standard of

review.

For the following reasons, we will apply the arbitrary and capricious standard

to review the plan/claims administrator’s decision to deny plaintiff’s benefits. We

will postpone our determination of whether to apply, and to what degree, any

heightened scrutiny to the administrator’s decision until we evaluate the parties’

cross-motions for summary judgment. 

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DISCUSSION:

I. Applicable Standard of Review

Under ERISA, a court reviewing an administrator’s decision to deny benefits

is by default reviewed de novo, “unless the benefit plan gives the administrator or

fiduciary discretionary authority to determine the employee’s eligibility or construe

the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115

(1989); Stratton v. E.I. DuPont De Nemours & Co., 363 F.3d 250, 253 (3d Cir.

2004). If a plan provides discretionary authority to the administrator or fiduciary,

then a reviewing court applies a form of arbitrary and capricious review. Firestone

Tire & Rubber Co., 489 U.S. at 111-12, 115; see Mitchell v. Eastman Kodak Co.,

113 F.3d 433, 437 (3d Cir. 1997). Discretionary authority can be provided for by

expressed or implied language in the benefit plan. Luby v. Teamsters Health,

Welfare, & Pension Trust, 944 F.2d 1176, 1180 (3d Cir. 1991). Whether that

arbitrary and capricious review is heightened in any way depends on the presence

of potentially conflicted ERISA fiduciaries and is determined on a sliding scale. 

Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 379 (3d Cir. 2000).

The scope of discovery depends on the standard of review. In the Third

Circuit, “a district court exercising de novo review over an ERISA determination

between beneficiary claimants is not limited to the evidence before the Fund’s

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Administrator.” Luby, 944 F.2d at 1184-85. In sharp contrast, the record available

to a court conducting an arbitrary and capricious review is the record made before

the plan administrator, which cannot be supplemented during litigation. See Kosiba

v. Merck & Co., 384 F.3d 58, 67 n.5 (3d Cir. 2004) (citing Mitchell, 113 F.3d at

440). Nevertheless, when a reviewing court is deciding whether to employ the

arbitrary and capricious standard or a more heightened standard of review, it may

consider evidence of potential biases and conflicts of interest that are not found in

the administrator’s record. Id.

II. Plan Language

In the instant case, in order for the insurer to pay benefits, a disabled

employee must provide “satisfactory proof” to the insurance company “before

benefits will be paid.” (Rec. Doc. No. 10, Ex. 6, at LINA00017.) The plan

language also provides that in order for the benefits to continue the insurance

company will require “continued proof.” (Id.) A cooperation provision also

appears in the plan which requires a claimant to provide “any information or

documents needed to determine whether benefits are payable or the actual benefit

amount due.” (Id. at LINA00024.) The proof of loss provision of the plan

requires “written proof of loss,” “written proof . . . that the loss continues . . . at

intervals required by us,” “written proof of continued Disability and Appropriate

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 5 of 19
3The plan defines Appropriate Care as “the determination of an accurate and

medically supported diagnosis of the Employee’s Disability by a Physician, or a

plan established by a Physician of ongoing medical treatment and care of the

Disability that conforms to generally accepted medical standards, including

frequency of treatment and care.” (Id. at LINA00029.)

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Care by a physician.” (Id.)

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 The plan also provides that the insurance company

has the right to conduct a “physical examination . . . as often as it may reasonably

require” of any person who has a claim pending. (Id. at LINA00025.) The plan

also prohibits a claimant from bringing a claim in law or equity “more than 3 years

after the time satisfactory proof of loss is required to be furnished.” (Id.)

The Third Circuit has long held that “[d]iscretionary powers may be implied

by a plan’s terms even if not expressly granted.” Luby, 944 F.2d at 1180. 

Defendant contends that the LINA policy language implies discretion to the plan

administrator.

Defendant has directed the court to authority that indicates courts often find

that “satisfactory proof” policy language implies discretion to the plan

administrator. Russell v. Paul Revere Life Ins. Co., 148 F.Supp. 2d 392, 400-01

(D.Del. 2001) (citing numerous courts from other circuits), aff’d, 288 F.3d 78 (3d

Cir. 2002). The Third Circuit complimented the Russell court’s “exhaustive and

carefully crafted opinion,” which addressed plan language that is similar to the

policy language in plaintiff’s plan. 288 F.3d at 82. Defendant also noted that the

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Third Circuit in Pinto, 214 F.3d at 379, found a plan with “satisfactory proof”

provided discretion to the plan administrator. Defendant has cited to Schlegel v.

Life Insurance Company of North America, 269 F. Supp. 2d 612, 616-17 (E.D. Pa

2003), where the district court applied an arbitrary and capricious standard of

review of an administrator’s denial of benefits to claimant under a plan that, like the

instant LINA plan, required a claimant to provide “satisfactory proof of disability

before benefits will be paid.” Id. at 616. Finally, defendant has provided a copy of

Koch v. Cigna Group Ins., No. 00-6028 (D.N.J. Nov. 13, 2003) (Rodriguez, J.),

where the district court dealing with similar plan language found that “satisfactory

proof” language made it “evident” that discretion was implied, although the

claimants in that case had not contested the issue. (Rec. Doc. No. 10, Ex. 7, at 8-

9.)

Defendant has also convincingly distinguished the policy language at issue in

this case from the language of the plan in Ernest v. Paul Revere, No. 01-1003 (3d

Cir. Jan 1, 2003) (unpublished opinion). The defendant in Ernest argued that

“proof” was the same as “due proof” or “satisfactory proof.” The plan in Ernest

contained language only of “proof of loss” and not the language of “satisfactory

proof,” which is present in plaintiff’s policy. Furthermore, the Ernest decision is an

unpublished and non-precedential opinion that did not overrule or address the

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published Third Circuit decision in Russell.

We are also concerned with giving Ernest persuasive significance on the

weight afforded to “satisfactory proof” in determining implied discretion, because

in Ernest the Third Circuit noted that in the Pinto case they had “merely noted,

without deciding, that the appropriateness of the application of the arbitrary and

capricious standard of judicial review in that case was undisputed.” Ernest v. Paul

Revere, No. 01-1003, slip. op. at 6 (unpublished opinion). However, in an

unpublished panel opinion from an earlier phase of the Pinto litigation the Third

Circuit explicitly held that “the provision of the Plan requiring that a claimant

provide ‘satisfactory proof’ of disability provides the necessary discretion to

justify arbitrary and capricious review.” Pinto v. Reliance Std. Life Ins. Co., No.

97-5297, slip. op. at 7 (3d Cir. May 28, 1998) (unpublished opinion).

Despite the Third Circuit’s description of the history of Pinto in Ernest, the

1998 Pinto opinion although also unpublished, has been widely cited by courts in

this circuit as persuasive authority to support a finding that policy language

employing “satisfactory proof” provides discretion to the plan administrator. See

Krause v. Modern Group Ltd., 156 F.Supp. 2d 437, 443-44 & n.19 (E.D. Pa.

2000) (finding a grant of implied discretion was created through the “satisfactory

proof” language was consistent with the “great weight of caselaw in our Circuit”);

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 8 of 19
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Laucks v. Provident Co., No. 97-1507, 1999 WL 33320463, *3 & n.4 (M.D. Pa.

Oct. 29, 1999) (Caputo, J.) (unpublished opinion); Landau v. Reliance Std. Life

Ins. Co., No. 98-903, 1999 WL 46585, *3 & n.2 (E.D. Pa. Jan. 13, 1999)

(unpublished opinion); see also Friess v. Reliance Std. Life Ins. Co., 122 F.Supp.

2d 566, 574 & n.20 (E.D. Pa. Nov. 28, 2000) (holding that “satisfactory proof”

implied discretion and citing to the published Pinto opinion along with several other

cases that concluded “satisfactory proof implied discretion”); Murphy v. Met. Life

Ins. Co., No. 01-1351, 2001 WL 1167489, *3 (E.D. Pa. Sept. 14, 2001) (citing to

published Pinto opinion to support that “satisfactory proof” language implies

discretion); cf. McBride v. Continental Casualty Co., No. 97-4625, 1999 WL

301811, *4 & n.2 (E.D. Pa. May 11, 1999) (distinguishing “written proof” from

“satisfactory proof”) (unpublished opinion); Brown v. Continental Casualty Co.,

243 F.Supp. 2d 321, 325-26 & n.4 (E.D. Pa. 2003) (distinguishing “written proof”

requirement from policy language requiring “satisfactory proof” which would be

entitled to arbitrary and capricious review).

Plaintiff cites to other circuits that have found that “satisfactory proof” does

not imply discretion. See Walke v. Group Long Term Disability Ins., 256 F.3d 835

(8th Cir. 2001); Herzberger v. Standard Ins. Co., 205 F.3d 327 (7th Cir. 2000);

Kinstler v. First Reliance Standard Life Ins., Co., 181 F.3d 243 (2d Cir. 1999);

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 9 of 19
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Kearney v. Standard Ins. Co., 175 F.3d 1084 (9th Cir. 1999); Haley v. Paul Revere

Life Ins., Co., 77 F.3d 84 (4th Cir. 1996). But see Perez v. Aetna Life Ins. Co., 150

F.3d 550 (6th Cir. 1998). Courts in published and affirmed opinions within our

circuit have distinguished the decisions in Kinstler, Kearney, and Hertzberger. See

Russell, 148 F. Supp. 2d at 400 n.9 (distinguishing Kinstler and Kearney under

“controlling Third Circuit precedent”), aff’d, 288 F.3d 78 (3d Cir. 2002); Krause,

156 F. Supp. 2d at 444 n.20 (E.D. Pa. 2000) (finding implied discretion and noting

the circuit split by citing Herzberger, Kinstler, Kearney, and Perez). 

Plaintiff elaborates, also through citation to precedent outside our circuit, that

discretion has been implied where a plan includes that the decision is to be made by

proof satisfactory “to the Administrator” or “to us.” See Nance v. Sun Life Assur.

Co., 294 F.3d 1263 (10th Cir. 2002); Donato v. Metro. Life Ins., Co., 19 F.3d 375

(7th Cir. 1994). In Pinto the plan referred to “satisfactory proof” in the following

portion:

The Plan provides that it will pay a monthly benefit if an

insured:

(1) is Totally Disabled as a 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

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 10 of 19
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us.

Pinto v. Reliance Std. Life Ins. Co., No. 97-5297, slip. op. at 2 (3d Cir. May 28,

1998) (emphasis added).

The Pinto plan contained a reference that the satisfactory proof must be submitted

“to us.” In this case the language of the plan states that “[s]atisfactory proof of

disability must be provided to the Insurance Company, at the Employee’s expense

before benefits will be paid.” (Rec. Doc. No. 10, Ex. 6, at LINA00017.) 

“Insurance Company” is defined in the plan as follows: “[T]he Insurance

Company underwriting the Policy is named on the Policy cover page.” We find

“Insurance Company” sufficiently similar to “to us.” Furthermore, the unpublished

1998 Pinto panel only referred to the provision’s “satisfactory proof” language as

sufficient to confer implied discretion.

We find that the “satisfactory proof” language in defendant’s plan is

sufficient to imply discretion to the plan administrator. Therefore, we will apply an

arbitrary and capricious standard of review.

III. Experience Rated Plan Vitiates Need for Heightened Review

Our analysis does not end with the determination that an arbitrary and

capricious standard of review will apply. If a court determines that a heightened

arbitrary and capricious standard of review must apply, then the court must

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intensify “the degree of scrutiny to match the degree of conflict.” Pinto, 214 F.3d

at 379. Pinto requires that when an insurance company both funds and administers

a plan the court “look not only at the result-- whether it is supported by reason--

but at the process by which the result was achieved.” Id. at 393.

Pinto set out factors for the court to consider in deciding the amount of

deference to be afforded to benefit determinations made by insurance companies

that both fund and administer plans. Pinto has provided four factors a court must 

consider in determining the degree of scrutiny to afford the administrator in the

determination to terminate benefits: “(1) the sophistication of the parties; (2) the

information accessible to the parties; (3) the exact financial arrangement between

the insurer and the company; and (4) the status of the fiduciary, as the company's

financial or structural deterioration might negatively impact the ‘presumed desire to

maintain employee satisfaction.’” Stratton, 363 F.3d at 254 (citing Pinto, 214 F.3d

at 392). 

Defendant does not dispute that it acted as both the claims fiduciary and

insurer of the Policy at issue. However, defendant contends that because the

policy is experience-rated, that fact ameliorates, if not eliminates, any potential

conflict of interest. An experience-rated plan allows for an insurance company to

cover its benefit payments by adjusting a policyholder’s future premiums in light of

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 12 of 19
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its claims history. Therefore, defendant contends we should apply the highly

discretionary, unheightened, unadulterated arbitrary and capricious standard of

review to its decision to deny plaintiff’s benefits.

Plaintiff’s reply brief does not address the issue. However, in her complaint

she states that “[d]efendant has a conflict of interest in that it is both the insurer and

administrator of the Plan, giving it an incentive to deny claims.” (Rec. Doc. No. 1,

at 3, ¶ 15(a)).

As we previously noted, whether an arbitrary and capricious review in the

Third Circuit is heightened in any way depends on the presence of potentially

conflicted ERISA fiduciaries and is determined on a sliding scale. Pinto, 214 F.3d

at 379. Pinto did not adopt a per se rule that an arrangement that an insurance

company acting both as claims fiduciary and insurer creates a conflict of interest. 

Id. at 383 (stating that such a dual role arrangement “generally presents a conflict

and thus invites a heightened standard of review”). The Pinto court noted in a

footnote that by not adopting a per se rule “different relationships between the

parties could effect a different result.” Id. at 388 n.6. The court when on to cite

and quote the following:

[A] conflict may arguably be ameliorated where, as here,

the plan is experience-rated because the premiums

charged to the employer are adjusted annually based on

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4Other than Potter and Pinto, an electronic westlaw database search reveals

only two cases in the Third Circuit that address experience-rated plans under

ERISA. In one case, the discussion is limited to one dicta sentence that assumes

Pinto’s sliding scale did not apply to an experience-rated plan that “directly

ameliorate[s]” an insurer’s structural conflict. Lasser v. Reliance Standard Life Ins.

Co., 146 F. Supp. 2d 619, 622 (D.N.J. 2001).

14

claims paid the previous year and thus the fiduciary’s

incentive to deny claims to increase profits is lessened, if

not eliminated.

Id. (quoting Metropolitan Life Ins. Co. v. Potter, 992 F.Supp. 717, 730 (D.N.J.

1998)).

Unfortunately, there is very little Third Circuit caselaw on experience-rated plans

under ERISA.4 Although the district court in Potter noted that an experience-rated

plan “may arguably” ameliorate a conflict of interest, even that court postponed

deciding “whether, or to what extent, plaintiff's dual role as plan fiduciary and

administrator must be weighed in determining whether plaintiff abused its

discretion.” Potter, 992 F.Supp. at 730.

Similarly, Judge Rufe in Rosen v. Provident Life & Accident Ins. Co.,

rejected an insurer’s claim that any conflict of interest is ameliorated under an

experience-rated plan. 2003 WL 22254805, *7 (E.D. Pa. Sept. 30, 2003). Judge

Rufe characterized the footnote in Pinto that discussed Potter as dicta. Id. He then

evaluated the facts under all four factors employed by courts in determining Pinto’s

sliding scale. Ultimately, Judge Rufe determined that because of the inherent

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 14 of 19
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conflict of interest caused by the insurer’s dual role and because of the difference

in the level of sophistication of the parties, the court applied a heightened review

that fell “near the middle of the Pinto sliding scale.” Id.

Although we find persuasive defendant’s argument that an experience-rated

plan will ameliorate any structural conflict, we are not prepared at this time to adopt

a highly deferential, unadulterated, unheightened, arbitrary and capricious standard

of review. Instead we will direct both parties, in the context of cross motions for

summary judgment to brief where on Pinto’s sliding scale our review should fall. 

These briefs should address all four factors set out in Pinto and recited above.

IV. Scope of Evidentiary Record

Generally, a court conducting an arbitrary and capricious review of a plan

administrator’s denial of benefits is limited to the administrative record on which

the plan administrator’s decision is based, and that record cannot be supplemented

during litigation. Kosiba, 384 F.3d at 67 n.5 (citing Mitchell v. Eastman Kodak

Co., 113 F.3d 433, 440 (3d Cir. 1997)); Lasser, 130 F. Supp. 2d at 627-30 (D.N.J.

2001) (holding record may not be expanded beyond record that was before plan

administrator when decision to terminate benefits was made when a court conducts

a heightened arbitrary and capricious review) aff’d 344 F.3d 381 (3d Cir. 2003). 

Nevertheless, when a reviewing court is deciding whether to employ the arbitrary

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and capricious standard or a more heightened standard of review, it may consider

evidence of potential biases and conflicts of interest that are not found in the

administrator’s record. Kosiba, 384 F.3d at 67 n.5. Therefore, the record in this

case shall be limited to the administrative record upon which the plan

administrator’s decision was based and may otherwise be supplemented only with

evidence that relates to the four factors to be considered when determining the

exact degree of scrutiny under Pinto’s sliding scale.

CONCLUSION:

The court will apply an arbitrary capricious standard of review. The court

has not yet determined where on Pinto’s sliding scale that review shall fall. The

parties shall brief opposing cross-motions for summary judgment which shall

address the four factors for determining the exact degree of scrutiny under Pinto

that we should apply to this case. The evidentiary record will be limited to the

record that was before the plan administrator when the benefits were denied and

may only be supplemented with information pertaining to the four factors related to

addressing Pinto’s sliding scale.

 s/ James F. McClure, Jr. 

James F. McClure, Jr.

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 16 of 19
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United States District Judge

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 17 of 19
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IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

DANA M. GARDNER :

Plaintiff, No. 4:04-CV-02474

v. :

LIFE INSURANCE COMPANY : (Judge McClure)

OF NORTH AMERICA

Defendant :

O R D E R

April 26, 2005

For the reasons set forth in the accompanying memorandum,

NOW, THEREFORE, IT IS ORDERED THAT:

1. Defendant’s motion in limine to establish the arbitrary and capricious

standard of review and limit the evidence to the administrative record is

granted, to the extent it is consistent with the following conditions regarding

supplementing the evidentiary record to determine the exact degree of

heightened scrutiny, if any, to be applied. (Rec. Doc. No. 10.) 

2. The court will apply some form of arbitrary and capricious review to the

defendant’s denial of plaintiff’s benefits.

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2

3. The parties shall file cross-motions for summary judgment that shall also

address the exact degree of scrutiny we should apply to our decision under

Pinto’s sliding scale.

4. The evidentiary record shall be limited to the administrative record that was

before the plan administrator when the decision to deny plaintiff’s benefits

was made. That record may only be supplemented with evidence related to

Pinto’s four factors that courts employ in determining the exact degree of

scrutiny.

5. Discovery may proceed, limited to seeking evidence pertaining to the four

factors which the court must consider in determining the exact degree of

scrutiny. 

6. Discovery shall be completed June 30, 2005.

7. Cross summary judgment motions shall be filed on or before July 28, 2005. 

 s/ James F. McClure, Jr. 

James F. McClure, Jr.

United States District Judge

Case 4:04-cv-02474-JFM Document 13 Filed 04/26/05 Page 19 of 19