2012 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

5-17-2012

Robert Fleisher v. Standard Ins Co

Precedential or Non-Precedential: Precedential

Docket No. 11-2490

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 11-2490

_____________

ROBERT FLEISHER, D.M.D.,

 Appellant

v.

STANDARD INSURANCE COMPANY

___________ 

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil No. 1-10-cv-02678)

District Judge: Honorable Robert B. Kugler

____________ 

Argued February 6, 2012 

Before: SLOVITER, VANASKIE and GARTH, Circuit 

Judges

(Filed: May 17, 2012)
2

Clifford D. Swift, III, Esq. (Argued)

Mark F. Seltzer & Associates

1515 Market Street

Suite 1100

Philadelphia, PA 19102

Counsel for Appellant

Brooks R. Magratten, Esq. (Argued)

Pierce Atwood

10 Weybosset Street

Suite 400

Providence, RI 02903

Byrne J. Decker, Esq.

Pierce Atwood

254 Commercial Street

Merrill's Wharf

Portland, ME 04101

Counsel for Appellee

___________ 

OPINION OF THE COURT

___________

VANASKIE, Circuit Judge.

Robert Fleisher, D.M.D., filed suit against the 

Standard Insurance Company (“Standard”), alleging, inter 

alia, a violation of § 502(a)(1)(B) of the Employee 

Retirement Income Security Act of 1974 (“ERISA”), 29 

U.S.C. § 1132(a)(1)(B). The suit arises out of Standard’s 

decision to reduce Fleisher’s monthly long-term disability 

(“LTD”) benefits by the amount of the monthly benefits he 
3

receives under a separate LTD insurance policy issued to him 

by the North American Company for Life and Health 

Insurance (“North American”). Fleisher disputes Standard’s 

decision that the North American Policy constitutes “group 

insurance coverage,” and that the monthly payment he 

receives under that Policy is therefore “Deductible Income” 

under the Standard Policy. The District Court, applying the 

deferential abuse of discretion standard of review, granted 

Standard’s motion to dismiss. Specifically, it found that 

Standard’s determination to offset the North American 

monthly benefit of $1,500 from Standard’s monthly 

obligation of $10,000 is supported by substantial evidence

and not unreasonable. Fleisher now appeals this decision. 

For the reasons stated herein, we will affirm the decision of 

the District Court.

I.

During the course of his career as a dentist, Fleisher

obtained LTD insurance coverage under two separate 

policies. In July 1979, Fleisher obtained coverage under a 

policy issued by North American (“North American Policy”) 

to the American Association of Endodontics (“AAE”), of 

which Fleisher is a member. The North American Policy 

provides for LTD benefits of $1,500 per month.

In August 2002, Fleisher became eligible for LTD

insurance coverage under a group policy issued by Standard 

(“Standard Policy”) to his employer, Endodontics, Ltd., P.C. 

(“Endodontics”). The LTD coverage offered by Fleisher’s 

employer is an employee benefit governed by ERISA. See

Shaw v. Delta Air Lines, 463 U.S. 85, 91 n. 5 (1983) (“An 

‘employee welfare benefit plan’ [governed by ERISA] 

includes any program that provides benefits for contingencies 
4

such as illness, accident, disability, death, or 

unemployment.”). The Standard Policy provides for monthly 

LTD benefits equal to a percentage of the plan participant’s 

pre-disability earnings, which in Fleisher’s case was a 

maximum of “$10,000 before reduction by Deductible 

Income.” (A. 61.) The Policy defines “Deductible Income” 

to include “[a]ny amount you [a plan participant] receive or 

are eligible to receive because of your disability under 

another group insurance coverage.” (A. 72) (emphasis 

added). The Standard Policy excludes from “Deductible 

Income” benefits paid under “any individual disability 

insurance policy.” (A. 72.) The Policy does not define either 

“another group insurance coverage” or “individual disability 

insurance policy.”

In January 2008, Fleisher became disabled and 

claimed LTD benefits under both 

the Standard and the North American policies. Shortly after 

Fleisher began collecting under both policies, Standard 

reduced his monthly benefits from $10,000 to $8,500 based 

on its determination that the North American Policy 

constitutes “another group insurance coverage,” and that the 

$1,500 in benefits he receives under it is therefore 

“Deductible Income.” Fleisher filed an administrative appeal

of Standard’s decision, arguing that the North American 

Policy qualifies as an individual disability insurance policy, 

and therefore is not subject to deduction. By letter dated July 

11, 2008, Standard rejected Fleisher’s appeal and continued 

making the deduction.

On May 26, 2010 Fleisher filed a Complaint in the 

United States District Court for the District of New Jersey, 

asserting individual and class claims for wrongful denial of 
5

benefits under ERISA, along with various state law claims. 

After Standard moved to dismiss the Complaint, Fleisher filed 

an Amended Complaint on September 8, 2010. After

Standard moved to dismiss the Amended Complaint, Fleisher 

filed a Second Amended Complaint (“SAC”) on October 1, 

2010.

1

Standard moved to dismiss the SAC pursuant to Fed.

R. Civ. P. 12(b)(6). On May 2, 2011, the District Court 

granted Standard’s motion. The District Court initially 

concluded that the benefits offset determination was governed 

by “the deferential abuse of discretion standard.” (A. 14.) 

Applying that narrow standard of review, the Court held that 

Fleisher could not show that Standard’s decision reflected an 

unreasonable interpretation or application of the Standard 

Policy. The District Court recognized that there was a 

conflict of interest arising from the fact that Standard both 

paid benefits and made the offset decision, and that such a 

conflict had to be considered in deciding whether Standard 

had abused its discretion. It concluded, however, that 

Standard’s interpretation of pertinent policy provisions was 

not so close as to make the conflict of interest a determinative 

factor. The Court also dismissed Fleisher’s § 502(a)(3) 

claims for breaches of fiduciary duty and contract, concluding 

that Standard’s conduct was not improper.

The SAC asserts three ERISA claims: breaches of 

fiduciary duty (Count I) and contract (Count III), both 

pursuant to § 502(a)(3), 29 U.S.C. § 1132(a)(3), and breach of 

contract pursuant to § 502(a)(1)(B) (Count II). The SAC

seeks restitution for the deductions previously taken as well 

as injunctive relief to govern future deduction decisions. 

 1

Although Fleisher filed the SAC without obtaining 

leave of the Court pursuant to Fed. R. Civ. P. 15, the Court 

dismissed the SAC on the merits pursuant to Rule 12(b)(6).
6

II.

We have jurisdiction over this appeal pursuant to 28 

U.S.C. § 1291. We exercise plenary review over a district 

court’s grant of a motion to dismiss pursuant to Rule 12(b)(6). 

Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 

(3d Cir. 2009). Accordingly, we must “‘accept all factual 

allegations as true, construe the complaint in the light most 

favorable to the plaintiff, and determine whether, under any 

reasonable reading of the complaint, the plaintiff may be 

entitled to relief.’” Fowler v. UPMC Shadyside, 578 F.3d 

203, 210 (3d Cir. 2009) (quoting Phillips v. Cnty. of 

Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)). To survive a 

motion to dismiss, a complaint must contain sufficient factual 

allegations, taken as true, to “state a claim to relief that is 

plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 

544, 570 (2007); see also Ashcroft v. Iqbal, 129 S.Ct. 1937, 

1949 (2009) (holding that the plausibility pleading standard 

articulated in Twombly applies to all civil actions).

III.

Fleisher’s coverage under the Standard Policy, an 

employee welfare benefit plan, is governed by ERISA, 29 

U.S.C. §§ 1001, et seq. Section 502(a)(1)(B) of ERISA

creates a civil cause of action for a plan participant “to 

recover benefits due to him under the terms of his plan, to 

enforce his rights under the terms of the plan, or to clarify his 

rights to future benefits under the terms of the plan.” To 

assert a claim under this provision, a plan participant must 

demonstrate that “he or she . . . ha[s] a right to benefits that is 

legally enforceable against the plan,” and that the plan 

administrator improperly denied those benefits. Hooven v. 

Exxon Mobil Corp., 465 F.3d 566, 574 (3d Cir. 2006). The 
7

SAC alleges that Standard “breached its obligations under 

ERISA to Dr. Fleisher . . . by taking a deduction to which it 

was not entitled and thus unreasonably failing to pay those 

benefits in full.” (A. 140-41.)

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 

101, 115 (1989), the Supreme Court held:

[A] denial of benefits challenged under [§

502(a)(1)(B)] is to be reviewed under a de novo

standard unless the benefit plan gives the 

administrator or fiduciary discretionary 

authority to determine eligibility for benefits or 

to construe the terms of the plan.

When a plan grants its administrator such discretionary 

authority, “[t]rust principles make a deferential standard of 

review appropriate,” id. at 111, and “we review a denial of 

benefits under an ‘arbitrary and capricious’ standard.”

Orvosh v. Program of Group Ins. for Salaried Emps. of 

Volkswagen of Am., Inc., 222 F.3d 123, 129 (3d Cir. 2000).2

 2 We have clarified that “[i]n the ERISA context, the 

arbitrary and capricious and abuse of discretion standards of 

review are essentially identical.” Miller v. Am. Airlines, Inc., 

632 F.3d 837, 845 n.2 (3d Cir. 2011) (citing Howley v. 

Mellon Fin. Corp., 625 F.3d 788, 793 n.6 (3d Cir. 2010)). 

Accordingly, we use the phrases “abuse of discretion” and 

“arbitrary and capricious” interchangeably when referring to 

the deferential standard of review applicable in this case.

 

Likewise, when an administrator acts pursuant to her

authority “to construe the terms of the plan,” Critzer v. CBS, 

Inc., 275 F.3d 291, 295 (3d Cir. 2002) or “to act as a finder of 

facts,” Mitchell v. Eastman Kodak Co., 113 F.3d 433, 438 (3d 
8

Cir. 1997), abrogated on other grounds as recognized by

Miller v. Am. Airlines, Inc., 632 F.3d 837, 847 (3d Cir. 2011), 

we also apply the arbitrary and capricious standard when 

reviewing those interpretations and factual findings.

“An administrator’s decision is arbitrary and 

capricious ‘if it is without reason, unsupported by substantial 

evidence or erroneous as a matter of law.’” Miller, 632 F.3d 

at 845 (quoting Abnathya v. Hoffmann-La Roche, Inc., 2 F.3d 

40, 45 (3d Cir. 1993)) (internal quotation marks omitted). An 

administrator’s interpretation is not arbitrary if it is 

“reasonably consistent with unambiguous plan language.” 

Bill Gray Enters. v. Gourley, 248 F.3d 206, 218 (3d Cir. 

2001). When a plan’s language is ambiguous and the 

administrator is authorized to interpret it, courts “must defer 

to this interpretation unless it is arbitrary or capricious.” 

McElroy v. SmithKline Beecham Health & Welfare Benefits 

Trust Plan, 340 F.3d 139, 143 (3d Cir. 2003). “The 

determination of whether a term is ambiguous is a question of 

law. A term is ambiguous if it is subject to reasonable 

alternative interpretations.” Taylor v. Cont’l Group Change 

in Control Severance Pay Plan, 933 F.2d 1227, 1233 (3d Cir. 

1991) (citations omitted).

Courts defer to an administrator’s findings of facts 

when they are supported by “substantial evidence,” which we 

have “defined as such relevant evidence as a reasonable mind 

might accept as adequate to support a conclusion.” Soubik v. 

Dir., Office of Workers’ Comp. Programs, 366 F.3d 226, 233 

(3d Cir. 2004). When reviewing an administrator’s factual 

determinations, we consider only the “evidence that was 

before the administrator when he made the decision being 

reviewed.” Mitchell, 113 F.3d at 440. The Standard Policy 
9

vests the administrator with: “[F]ull and exclusive authority 

to control and manage the Group Policy, to administer claims, 

and to interpret the Group Policy and resolve any questions 

arising in the administration, interpretation, and application of 

the Group Policy.” (A. 79.) This language clearly triggers 

application of the deferential abuse of discretion standard of 

review. See Abnathya, 2 F.3d at 45, abrogated on other 

grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 112 

(2008). 

In the District Court, Fleisher argued that Standard’s 

decision is not entitled to arbitrary and capricious review, 

asserting that this deferential standard only applies to an 

administrator’s interpretation of documents that are part of 

the plan itself. Because Standard’s deduction decision was 

based in part on its finding that the North American Policy—

a non-plan document—constituted “group insurance 

coverage,” Fleisher reasoned that de novo review is 

appropriate.

We rejected a similar argument in Mitchell, in which a 

plan administrator denied Mitchell’s claim for benefits based 

on a factual finding about his eligibility, rather than on an 

interpretation of the terms of the plan. 113 F.3d at 438. The 

plan vested the administrator with “full discretionary 

authority to determine all questions arising in the 

administration, interpretation and application of the plan.” Id. 

We held that this “broad grant of discretionary authority to 

the Administrator” to apply the plan “must encompass the 

resolution of factual disputes,” because such “fact-based 

determinations of eligibility for LTD benefits are certainly 

one of the ‘questions arising in the administration, 

interpretation and application of the plan.’” Id. at 438-39.
10

The District Court relied on our reasoning in Mitchell

in rejecting Fleisher’s argument for de novo review. The 

Court found that the Standard Policy grants the administrator 

discretionary authority over “application” of the Policy, 

which includes the authority to “interpret the plan and make 

findings of fact necessary to determine eligibility.” (A. 14.) 

Accordingly, the Court reviewed Standard’s deduction 

decision—including its “interpretation and characterization of 

the North American Policy”—under the arbitrary and 

capricious standard. 

Fleisher apparently reasserts his challenges to this

deferential standard now, declaring: “On appeal, this Court 

reviews the plan administrator’s denial of benefits by 

applying the standard of review the district court should have 

used initially.” (Appellant Br. at 12, citing Mitchell, 113 F.3d 

at 437; Dewitt v. Penn-Del Directory Corp., 106 F.3d 514, 

519 n.4 (3d Cir. 1997)). Fleisher, however, offers no further 

argument to support this apparent challenge, and we discern 

no error with the District Court’s determination that the 

arbitrary and capricious standard of review applies here. We 

will therefore apply the arbitrary and capricious standard of 

review to Standard’s denial of benefits, including its 

determination about the North American Policy.3

 3 As our dissenting colleague observes, the conflict of 

interest inherent in the fact that Standard both pays and 

decides what should be paid is a factor to be considered in 

applying the abuse of discretion standard of review. It is not, 

however, inherently a determinative factor. See Glenn, 554 

U.S. at 117-19. Indeed, “the existence of a conflict,” such as 

the one in this case, “[does] not change the standard of review 

from abuse of discretion to a more searching review.” 
11

IV.

The Standard Policy permits it to reduce Fleisher’s 

monthly LTD benefits by any amount paid or payable under

“another group insurance coverage.” At issue here is the 

meaning of “group insurance” and whether Standard 

reasonably determined that the North American Policy falls 

within the meaning of this term. In this regard, Standard’s 

determination involved both an interpretation of “group 

insurance” and a factual determination about the North 

American Policy. 

The District Court recognized, and the parties do not 

dispute, that the term “group insurance” is ambiguous. The 

Court consulted various insurance law treatises and found that 

insurers use the term “group insurance” to refer to “at least 

two subsets of collective insurance products,” including “true 

group insurance” and “franchise insurance.” (A. 17.) The 

Court explained a basic difference between the two:

Group insurance is an arrangement by which a 

single insurance policy is issued to a central 

 

Doroshow v. Hartford Life & Acc. Ins. Co., 574 F.3d 230, 

234 (3d Cir. 2009). Instead, we are to “apply a deferential 

abuse of discretion standard of review across the board and 

consider any conflict of interest as one of several factors in 

considering whether the administrator or the fiduciary abused 

its discretion.” Est. of Schwing v. Lilly Health Plan, 562 F.3d 

522, 525 (3d Cir. 2009). While our dissenting colleague 

expounds at great length on the significance of the conflict of 

interest in this case, Fleisher does not even mention this factor 

in his briefs on appeal, let alone explain how it affects the

analysis of his claim. 
12

entity—commonly an employer, association, or 

union—for coverage of the individual members 

of the group. Franchise insurance is a variation 

on group insurance, in which all members of the 

group receive individual policies.

(A. 17, quoting Couch on Insurance § 1:29 (3d ed. 2002)).

The District Court also identified other distinguishing

features of the two types of group policies. Under true group

insurance policies, the certificate holder is typically an 

employee of the master policy holder, “all members or 

employees are automatically enrolled,” and the master policy 

holder works directly with the insurer and is responsible for 

paying premiums, notifying the insurer about changes 

concerning which persons are covered at a given time, and 

submitting members’ claims. (A. 17, citing Appleman on 

Insurance Law & Practice §§ 41, 54 (rev. ed. 1981) 

(“Appleman”)).

Franchise insurance is also issued through a group 

which holds the master policy that provides for the general 

terms. While the master policy holder and insurer “‘may

negotiate’ with the insurer to modify or terminate the plan, in 

all other respects the relationship between members and the 

insurer is ‘precisely that of an insurer dealing directly with its 

policyholders.’” (A. 18, quoting Appleman § 54.) As the 

District Court explained:

[F]ranchise insurance generally has the 

following characteristics: (1) members of the 

relevant association or entity may enroll in the 

plan but are not required to do so; (2) members 

pay premiums directly to the insurer; (3) 
13

members make claims directly to the insurer; 

and (4) insurers agree to “waive underwriting, 

and take all applicants across the board.”

(A. 18, quoting Appleman § 54.)

Therefore, “[a]lthough true group insurance and 

franchise insurance are distinct products,” the District Court 

found that, “‘lawyers, legal writers, publishers, and the courts 

can refer to them individually and collectively as “group 

insurance.”’” (A. 18, citing Holmes’ Appleman on Insurance 

§ 2.5 (2d ed. 2002)). On this basis, the Court concluded that 

the term “group insurance” is ambiguous because it “may 

reasonably refer to at least two different types of collective 

insurance products.” (A. 19.)

Our dissenting colleague, relying upon “general 

principles of contract law,” (Dissenting Op. at 4), suggests 

that we should apply the well-established principle that 

ambiguous terms in an insurance policy “must be construed 

most strongly against the insurance company that drafted it.” 

(Id. at 3). He vigorously asserts that our review must be 

“informed both by [such] general principles of contract law

and by ERISA’s purposes as manifested in its specific 

provisions.” (Id. at 4, quoting Burstein v. Retirement Account 

Plan for Emp. Of Allegheny Health Educ. & Research 

Found., 334 F.3d 365, 385 (3d Cir. 2003) (emphasis added by 

Judge Garth) (internal quotation marks and citations 

omitted)). The dissent argues that the result here is 

inequitable because “the Standard Policy to which Dr. 

Fleisher subscribed at no time alerted him to its deductible 

provisions, nor did Standard offer an interpretation of those 
14

provisions so that a layperson such as Dr. Fleisher could 

assess the protection that he was seeking.”4

 (Id.

With all due respect to our dissenting colleague, we 

think that he misapprehends the nature of the abuse of 

discretion standard of review. Notably, the case he cites for 

applying general principles of contract law to interpret 

ERISA plan terms, Burstein, 334 F.3d 365, did not involve 

review of a benefits determination under an abuse of 

discretion standard, but instead concerned a conflict between 

a summary plan description and the plan document itself. 

And while we have applied the doctrine of contra 

proferentem in the context of ERISA claims, we have done so 

only to decide whether the plan documents confer 

discretionary authority on the plan administrator so as to 

trigger deferential review, a decision we make under a

plenary standard of review. See, e.g., Heasley v. Belden & 

Blake Corp., 2 F.3d 1249, 1254, 1257-58 (3d Cir. 1993). 

Where, however, the abuse of discretion standard applies, we 

have made clear that we must defer to the plan 

administrator’s interpretation of ambiguous plan terms unless 

that interpretation is arbitrary or capricious. See McElroy 340 

F.3d at 143 (“Because the language of the . . . Plan is 

equivocal, the plan administrator was authorized to interpret 

it, and we must defer to this interpretation unless it is 

arbitrary or capricious.”). 

at 3-4.)

 4 It bears mentioning that the record before this Court

does not include an actual insurance policy, but does include 

the ERISA Summary Plan Description (“SPD”) for the 

disability coverage provided by Standard. The dissent is 

correct that the SPD does not describe its deductible 

provisions in large block lettering or in any other way that 

would call a reader’s attention to this specific provision.
15

The dissent’s application of the contra proferentem

doctrine would supplant deference to an administrator’s 

reasonable interpretations of ambiguous terms with a 

presumption that such an interpretation is unreasonable. In 

addition to undermining the established deferential standard, 

contrary to Supreme Court authority, such an approach also 

eviscerates the provision of the Standard Policy which 

granted the administrator discretion in the first place. Indeed, 

the administrator can hardly be said to exercise discretion if 

her interpretations of the policy’s terms is burdened by a 

presumption against the insurer. 

Notably, every Court of Appeals to have addressed the 

issue has concluded that a court reviewing a benefits decision 

for abuse of discretion cannot apply the principle that 

ambiguous plan terms are construed against the party that 

drafted the plan. See, e.g., D & H Therapy Assoc., LLC v. 

Boston Mut. Life Ins. Co., 640 F.3d 27, 35 (1st Cir. 2011) 

(“We have emphasized that our review of whether a plan 

administrator abused its discretion does not require that we 

determine either the ‘best reading’ of the ERISA plan or how 

we would read the plan de novo. We have also noted that the 

doctrine of contra proferentem does not apply to review of an 

ERISA plan construction advanced by an administrator given 

authority to construe the plan.”) (citations omitted); Marrs v. 

Motorola, Inc., 577 F.3d 783, 787 (7th Cir. 2009) 

(“[A]lthough, generally, ambiguities in an insurance policy 

are construed in favor of an insured, in the ERISA context in 

which a plan administrator has been empowered to interpret 

the terms of the plan, this rule does not obtain.”) (citation and 

quotation marks omitted); Carden v. Aetna Life Ins. Co., 559 

F.3d 256, 260-61 (4th Cir. 2009); White v. Coca-Cola Co., 

542 F.3d 848, 857 (11th Cir. 2008); Lennon v. Metro. Life 
16

Ins. Co., 504 F.3d 617, 627 n.2 (6th Cir. 2007); Kimber v. 

Thiokol Corp., 196 F.3d 1092, 1100-01 (10th Cir. 1999); 

Winters v. Costco Wholesale Corp., 49 F.3d 550, 554 (9th 

Cir. 1995); Pagan v. NYNEX Pension Plan, 52 F.3d 438, 443-

44 (2d Cir. 1995) (“[A]pplication of the rule of contra 

proferentum is limited to those occasions in which this Court 

reviews an ERISA plan de novo.”). District Courts in our 

Circuit also have recognized that the doctrine of contra 

proferentem does not apply where, as here, judicial review is 

constrained by the abuse of discretion standard. See, e.g.,

Brown v. First Reliance Standard Life Ins. Co., 2011 WL 

1044664, at *16, n.13 (W.D. Pa. 2011); Doe v. Hartford Life 

& Accident Ins. Co., 2008 WL 5400984, at *4 (D. N.J. 2008).

The dissenting opinion reads as if we were interpreting 

an ambiguous term in an insurance policy under a de novo

standard of review. It alludes to notions of contracts of 

adhesion and reasonable expectations of the insured that 

populate cases interpreting insurance policies in the first 

instance. Those concepts are simply not applicable where, as 

here, the ERISA plan document makes the plan administrator 

the competent authority to interpret ambiguous plan 

provisions in the first instance. See Kimber, 196 F.3d at 1101 

(“[T]he reasonable expectation doctrine is inapplicable to the 

review of an ERISA disability benefits plan under the 

arbitrary and capricious standard.”). As Judge Cudahy 

explained in Morton v. Smith, 91 F.3d 867, 871 n.1 (7th Cir. 

1996):

Courts invoke [the contra proferentem] rule 

when they have the authority to construe the 

terms of a plan, but this authority arises only 

when the administrators of the plan lack the 
17

discretion to construe it themselves. . . . When 

the administrators of a plan have discretionary 

authority to construe the plan, they have the 

discretion to determine the intended meaning of 

the plan’s terms. In making a deferential review 

of such determinations, courts have no occasion 

to employ the rule of contra proferentem. 

Deferential review does not involve a 

construction of the terms of the plan; it involves 

a more abstract inquiry—the construction of 

someone else's construction.

(internal citations omitted.)

Ultimately, we think Judge Garth is mistaken 

inasmuch as he implies that Fleisher has somehow been the 

victim of a contract of adhesion, or that he was otherwise 

misled by Standard. Although the Standard Policy did not 

define the terms “group insurance” or “individual insurance” 

or reference the term “franchise insurance,” it reposed in the 

administrator the authority to interpret ambiguous terms. 

Thus, we are not concerned that plan participants like 

Fleisher—or, as Judge Garth suggests, sophisticated plan 

participants like the judges on this panel—are misled by 

insurance policies such as Standard’s. Since the Standard 

Policy vested the administrator with discretion to interpret the 

Policy, under our well-established case law we have no 

option but to uphold this interpretation unless it is arbitrary or 

capricious. As our dissenting colleague observed in another 

ERISA case, “a court must actually apply the correct standard 

[of review]; mere lipservice and mere citation to a standard of 

review will not suffice.” Lasser v. Reliance Standard Life 

Ins. Co., 344 F.3d 381, 399 (3d Cir. 2003) (Garth, J., 
18

dissenting). In this case, application of the deferential 

standard of review precludes reliance upon the general 

principles of contract law on which the dissent rests. Whether 

we would reach a different interpretation under de novo

review is therefore irrelevant.

Having established that “group insurance” is 

ambiguous and that the Standard administrator is authorized 

to interpret it, the District Court evaluated the features of the 

North American Policy to determine whether Standard could 

reasonably interpret it as a type of group insurance coverage. 

The Court observed several features of the North American 

Policy consistent with franchise insurance, including that the 

Policy was “issued through a group, [the AAE], whose 

members could individually apply for coverage,” and that 

“the members otherwise interacted directly with the North 

American regarding coverage and premiums.” (A. 19.) The 

Court also noted that “the Certificate, which [Fleisher] 

attaches to the Complaint, clearly states that it is issued 

pursuant and subject to ‘group policy PG A320,’ which is 

held by AAE, and that [Fleisher] obtained the Certificate as a 

member of the AAE.” (A. 19.) The Court acknowledged 

Fleisher’s argument that the Policy “bears certain features 

characteristic of individual insurance policies,” but concluded

that the Policy can nonetheless be “reasonably characterized 

as a franchise policy.” (A. 19). On this basis, the Court 

dismissed Fleisher’s § 502(a)(1)(B) claim.

Fleisher challenges this conclusion on appeal, urging

that Standard’s determination is unreasonable because it is

based on a factual finding—that the North American Policy is 

franchise insurance—that is not supported by the evidence.

Instead, Fleisher contends that the evidence supports the 
19

conclusion that the Policy “is an individual disability 

insurance policy with all the characteristics of an individual 

disability insurance policy and none of the characteristics of a 

group insurance policy.” (Appellant Br. at 21.)

First, Fleisher notes that unlike franchise insurance, 

where “insurers agree to ‘waive underwriting, and take all 

applicants across the board,’” (A. 18), the North American 

Policy “was subject to individual underwriting.” (Appellant 

Br. at 19.) In this respect, he cites portions of the SAC that 

allege that he was “required to complete a medical 

questionnaire as part of his application” for the North 

American Policy, and that the application “itself indicates that 

North American ordered a Retail Credit Report,” and stated 

that the underwriting procedure may entail “an investigative 

consumer report.” (Id.

The District Court did not suggest—nor do any of the 

treatises it cited indicate—that waiver of underwriting is a 

sine qua non of franchise insurance. Rather, the Court listed 

waiver of underwriting as one of four characteristics that 

franchise insurance “generally has.” (A. 18.) Moreover, the 

relevant inquiry is whether Standard’s interpretation is 

supported by “substantial evidence,” which does not require 

that the evidence uniformly supports its conclusion, but 

merely requires “such relevant evidence as a reasonable mind 

might accept as adequate to support a conclusion.” Soubik, 

366 F.3d at 233. The District Court correctly found that 

Standard’s interpretation is supported by substantial evidence, 

including that the North American Policy possesses the other 

general features of franchise insurance, that it was issued to 

Fleisher through his membership in a group, and that it states 

that it is a “group policy.” Thus, the fact that the North 

at 19-20.)
20

American Policy lacks one feature of franchise insurance 

does not outweigh the other evidence in support of Standard’s 

interpretation.

Fleisher next argues that the evidence supports a 

finding that the North American Policy is an individual 

disability insurance policy, and therefore excluded from the 

definition of “Deductible Income” under Standard’s Policy. 

In this regard, Fleisher enumerates six features of the North 

American Policy that, he claims, it shares in common with 

individual policies, including: (1) it is individually 

underwritten; (2) members pay premiums directly; (3) 

members enroll directly; (4) members submit claims directly; 

(5) members receive individual billing statements; and (6) it

is non-cancellable and guaranteed renewable.

The fact that the Policy shares features in common 

with individual disability insurance policies is not necessarily

inconsistent with a finding that the Policy is franchise 

insurance. Indeed, three facets of the Policy that Fleisher 

cites as evidence of an individual policy—direct payment of 

premiums, direct enrollment, and direct submission of 

claims—are among those that the District Court identified as 

characteristics of franchise insurance. Thus, Fleisher’s 

argument that the Policy has “none of the characteristics of a 

group insurance policy” is plainly untrue, as these three 

features in fact support the conclusion that the Policy is

franchise insurance, which itself is a type of group insurance.

5

 5 To the extent that Fleisher attempts to demonstrate 

that the Policy is not “true” group insurance, this argument is 

unavailing. Fleisher has conceded that the term “group 

insurance” is ambiguous, and that “franchise insurance” is a 
21

Moreover, as the District Court aptly observed, even 

accepting that the Policy possesses some features of 

individual policies, it “is certainly not a pure individual policy 

because it plainly states that it was issued pursuant to a group 

policy held by AAE.” (A. 16-17.) Indeed, there are several 

features of individual policies that the North American Policy 

does not possess. Notably, unlike individual policies, 

Fleisher has only a certificate of coverage, which is expressly 

subject to the terms of the group policy and to termination of 

the group policy, as well as numerous other conditions 

determined by the holder of the group policy. (Appellee Br. 

at 12-13.) 

Finally, Fleisher argues that the District Court 

“ignored the most compelling evidence that the North 

American Policy is an individual rather than a group policy, 

Reassure America’s own characterization of the policy it sold 

to Dr. Fleisher.” (Appellant Br. at 22.) The SAC alleges that

in his administrative appeal of the deduction decision, 

Fleisher submitted a letter from Ken Selasky, the Assistant

Vice President at Reassure America, which administers the 

North American Policy. Selasky’s letter states: “[E]ven 

though this policy was issued through this group [referring to 

AAE], it is an individual income policy and we are treating 

all aspects of Dr. Fleisher’s claim as an individual disability 

income policy.” (Appellant Br. at 22.)

While the opinion of the administrator of the North 

American Policy as to the nature of the policy is not 

 

type of “group insurance.” Therefore, the relevant inquiry is 

whether there is substantial evidence that the Policy is 

franchise insurance. The question whether it is “true” group 

insurance is irrelevant.
22

immaterial, we do not consider it sufficiently persuasive to 

establish that Standard’s contrary interpretation was 

unreasonable. Indeed, under the arbitrary and capricious 

standard of review, the relevant inquiry is not whether it is 

reasonable to interpret the North American Policy as an 

individual insurance policy, but whether it is unreasonable to 

interpret it as group insurance. We conclude that this 

determination is not unreasonable: the North American Policy 

exhibits several characteristic features of franchise insurance, 

which is a species of group insurance, and Fleisher’s 

arguments to the contrary do not undermine the sufficiency of 

this evidence.6

 6 As noted above, the dissent makes much of a point 

not argued by Fleisher in his principal brief or in his reply 

brief: the conflict of interest arising from the fact that 

Standard benefits from its decision to set off the North 

American payment of $1,500 per month from the Standard’s 

monthly obligation of $10,000. The type of conflict here is 

not uncommon. See Marrs, 577 F.3d at 789 (“[A] conflict of 

interest . . . is a given in almost all ERISA claims”.). We 

have recognized that a conflict may be determinative where 

the issue is close. See Est. of Schwing, 562 F.3d at 526. We 

agree with the District Court’s conclusion that the issue in 

this case is not so close as to make the conflict a tiebreaking 

factor. Franchise insurance is a species of group insurance, 

Fleisher procured coverage through a group, the coverage he 

obtained had a number of features of franchise insurance, and 

he received only a certificate of insurance, not a policy. It 

plainly was not unreasonable to consider the North American 

Policy group insurance, and the conflict of interest does not 

alter this conclusion.
23

V.

For the foregoing reasons, we will affirm the District 

Court’s decision dismissing this action.
1

No. 11-2490

Fleisher v. Standard Insurance Co.

GARTH, Circuit Judge, dissenting.

While I have no quarrel with the majority’s statutory analyses, I reach a different 

result and, therefore, respectfully dissent.

I have looked beneath the surface of the principles upon which the majority rely, 

to the fair and equitable roots of this controversy with Standard. As a result, I would 

remand this case to the District Court to explore and determine the equitable factors in 

play, as well as the conflict and ambiguities that have resulted in a complete frustration of 

Dr. Fleisher’s objectives and expectations. 

Dr. Fleisher, a dentist specializing in endodontistry, in an effort to protect his 

future earning capacity, subscribed to a North American Disability Policy in 1979. He 

was to receive a benefit of $1,500 a month. At that time, he was not disabled, but he was 

aware of the possibility that he might be in future years. Accordingly, when he became 

eligible for a group policy, he subscribed to one written by the Standard Insurance 

Company. This was some 23 years after he had subscribed to his initial disability policy 

with North American. His later subscription to the Standard policy was obviously to 

protect and augment his financial livelihood, by insuring that he had increased protection 

in the event he became disabled.

In January 2008, he became disabled and claimed the benefits under both policies,

Standard, for the first time, informed him that he could not receive the $10,000 a month 

which was the amount of the policy which he had taken out. Why? Because the 1979 
2

policy to which he had originally subscribed was, in Standard’s opinion, a “group policy” 

and, as such, the amount of the benefits which Dr. Fleisher could receive from the 

Standard policy was reduced by the amount of the North American policy benefit that he 

would henceforth receive.

Accordingly, at this time, Dr. Fleisher, who is no longer eligible for disability 

benefits from any company and can no longer subscribe for disability protection, is 

remitted to $10,000 a month, rather than $11,500 a month, the sum total of both policies 

which he had taken out.

Why should this be, when the Standard policy at no time brought to Dr. Fleisher’s 

attention the deductibility provision of the Standard policy, nor did it acquaint him with 

any definitions of the terms: “group policy”, “ individual policy”, or “franchise 

policies”?

All members of the majority and I (as well as the District Court judge) agree that 

the terms and language of the Standard Insurance policy are ambiguous. Nowhere in the 

Standard policy are the terms “group insurance” and “individual insurance” defined. No 

matter how diligently one may look at or study the Standard policy, there is no guidance 

to help the policyholder determine the characteristics of either type of policy or how these 

characteristics would affect the benefits that Dr. Fleisher expected to receive.

Moreover, although the District Court and the majority here have focused their 

analysis on “franchise policies,” and have detailed the characteristics of a “franchise 

policy,” neither the Standard policy nor the individual policy that Dr. Fleisher originally 

purchased, even mention, much less define, the term “franchise policy.” Yet the 
3

characteristics and definition of a “franchise policy” dominate and control the holding of 

both the District Court opinion and the majority opinion here.

“Franchise policies” were never described in any insurance document that Dr. 

Fleisher had received, but are rather a matter of characterization that can be found only in 

an insurance treatise such as Appleman’s.

As to the characterization of the individual and group policies, there was no 

warning or alert given to Dr. Fleisher which could send up a red flag warning that he 

should not purchase the Standard policy with its deductible provisions or that if he did, he 

would not achieve the disability benefits that he sought to receive. (See footnote 1, 

supra.) In other contexts, our society has taken great pains to alert consumers of products 

detrimental to their well-being: warnings appear in large letters in the advertisements and 

on the packaging of tobacco, drugs, and alcohol. Large block lettering or other emphatic 

warnings on the Standard policy might have alerted Dr. Fleisher to the problem that he 

now faces.

It is well established that when the language of an insurance policy is ambiguous, 

that language must be construed most strongly against the insurance company that 

drafted it. American Legacy Foundation, R.P. v. National Union Fire Ins. Co., 623 F.3d 

135, 139 (3d Cir. 2010) (quoting Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. 

Co.

In the present case, the Standard policy to which Dr. Fleisher subscribed at no time 

alerted him to its deductible provisions, nor did Standard offer an interpretation of those 

provisions so that a layperson such as Dr. Fleisher could assess the protection that he was 

, 616 A.2d 1192, 1195-96 (Del. 1992)).
4

seeking. Further, as I have emphasized, the Standard policy makes no mention of the 

status or even the nature of a “franchise policy,” a characterization which governs the 

District Court’s and the majority decisions. 

The mere fact that this case implicates ERISA does not mean that these basic 

fundamental contract principles should be ignored. “In interpreting plan terms for 

purposes of claims under § 1132(a)(1)(B), we apply a federal common law of contract, 

informed both by general principles of contract law and by ERISA's purposes as 

manifested in its specific provisions.” Burstein v. Retirement Account Plan for 

Employees of Allegheny Health Education and Research Foundation

Although there is no direct precedent that confirms ERISA must be considered in 

light of equitable realities, there are countless instances in which equity has been 

predominant in ERISA’s concerns. 

, 334 F.3d 365, 381 

(3d Cir. 2003) (Emphasis added, internal quotation marks omitted, internal citations 

omitted).

See, e.g., Skretvedt v. E.I. DuPont De Nemours, 372 

F.3s 193, 196 (3d Cir. 2004) (prejudgment interest on an ERISA award is governed in 

certain circumstances not by “a rigid theory of compensation for money withheld, but is 

given in response to considerations of fairness. It is denied when its exaction would be 

inequitable.”) (Quoting Board of Commissioners of Jackson County, Kansas v. United 

States

Dr. Fleisher’s situation is particularly problematic in light of the conflict under 

which the Standard administrator labors. The conflict that 

, 308 U.S. 343, 352, (1939)). (Italics added.)

Firestone Tire & Rubber Co. 

v. Bruch, 489 U.S. 101 (1989) and Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105
5

(2008) have recognized where the benefit-giver and the administrator of the benefit are 

the same, is clearly patent on this appeal. Standard profits by the deduction of $1500 per 

month from Dr. Fleisher’s benefits. It does so by relying wholly upon an extraneous 

statement in the North American policy, which reads “[h]aving issued group policy 

PGA320, hereinafter called ‘policy.’” 

Standard, the District Court, and the majority here discredit North American’s 

own characterization of its own [North American] policy. North American’s Assistant 

Vice President, Mr. Ken Selasky has clearly written and explained that “even though this 

[North American] policy was issued through this group [AAE], it is an individual income 

policy and we are treating all aspects of Dr. Fleisher’s claim as an individual disability 

income policy.” (Emphasis added). 

The District Court and the majority completely overlook the nature of the North

American policy, to wit, that it was individually underwritten, non-cancellable, 

guaranteed renewable, that Dr. Fleisher paid his premiums and made claims directly to 

North American, that he enrolled for coverage directly with North American, and that he 

received an individual billing statement. These are not traditional group policy 

characteristics. These are the basic characteristics of an individual policy. 

Our Supreme Court has said that it is “more important (perhaps of great 

importance) where the circumstances suggest a higher likelihood that it affects the 

benefits decision . . . to take steps to reduce potential bias and to promote accuracy.” 

Glenn, supra 554 U.S. at 117. In other words, to properly consider the impact of conflict 
6

of interest in determining the reasonableness of an administrator’s decision, a reviewing 

court must consider the closeness of the case and the severity of the conflict of interest. 

The District Court, in dismissing Dr. Fleisher’s complaint, did not undertake any 

factfinding or substantial discussion related to the administrator’s conflict of interest or 

its severity. Although the District Court acknowledged that a conflict of interest did in 

fact exist, the order dismissing Fleisher’s complaint summarily concluded that “this is not 

so close a case that any conflict of interest would break the tie and tip the scales in favor 

of the plaintiff.” Although my colleagues in the majority agree with the District Court, I 

cannot. This case goes beyond the point of being close, to the point of the administrator’s 

decision being incorrect--if ever there were a situation where the administrator’s conflict 

of interest must properly be considered as a factor, this is it! 

Indeed, it should be remembered that the District Court dismissed Dr. Fleisher’s 

complaint pursuant to F.R.A.P. Section 12(b)(6). Such a dismissal requires that a Court 

accept the allegation of the complaint as true, and that it construe the complaint in the 

light most favorable to the plaintiff. 

Dismissal with prejudice is a drastic sanction termed “extreme” by the Supreme 

Court in National Hockey League v. Met. Hockey Club. 427 U.S. 639, 643 (1976), yet, 

here, the District Court did not only dismiss Dr. Fleisher’s complaint, with prejudice, but 

in doing so, it dealt with the merits of his action.

If the hallmark of the District Court’s “arbitrary and capricious standard of 

review” is reasonableness, and if the relevant inquiry, as the majority of this Court states, 

“....is not whether it is reasonable to interpret the North America policy as an individual 
7

policy, but whether it is unreasonable to interpret it as group insurance,” Maj. Op. at 20,

then I suggest that we should look to other measures of dismissal for a balancing of what 

is or is not reasonable. 

In Poulis v. State Farm Fire and Casualty Company, 747 F.2d 863 (3d Cir. 1984), 

this Court, by Judge Sloviter, prescribed a test consisting of six (6) factors by which a 

dismissal with prejudice should be balanced and analyzed.1

While the context of Poulis differs from Dr. Fleisher’s claims, it is quite evident 

that prejudice is one of the most significant factors in determining the appropriateness of 

dismissal. And what could be more prejudicial or conflict-ridden than the actions of 

Standard in decreasing Dr. Fleisher’s benefits by $1500 a month while it continues to 

receive premiums based on $10,000 in coverage?

 True, the Poulis case

involved a sanction and did not arise under the ERISA statute, but it is instructive to 

recognize the length to which we have gone in preserving cases for a merits 

determination rather than dismissing them on a mere reading of the complaint. 

I see no reason why the same sort of analysis should not be employed in an ERISA 

context where the reasonableness of a dismissal is at issue. A balancing of prejudice and 

 1 In Poulis v. State Farm Fire and Casualty Company, 747 F.2d 863, 868 (3d Cir. 1984), 

we required the District Court to assess:

1. The extent of the parties responsibility;

2. prejudice to the adversary;

3. a history of dilatoriness;

4. whether the attorney’s conduct was willful or in bad faith;

5. alternative sanctions; and

6. the meritoriousness of the claim, 

cautioning that dismissal must be a last resort.
8

a balancing of the factors that result in a dismissal would only improve the analysis of a 

Section 12(b)(6) dismissal under ERISA.

The majority has held that the District Court was not unreasonable to interpret the 

North America policy as a group insurance policy. I, of course, disagree using the same 

loadstar of reasonableness as did the majority.

While I am loathe to discount all of the analyses found in the majority opinion, I 

cannot accept the fact that fair and equitable means should be so thoroughly disregarded 

in favor of fitting a legal square peg into a legal round hole. To me, the majority has 

resolved Dr. Fleisher’s problem by merely seeking out some the legal principles which 

would support its conclusion without regard to the fundamental precepts of equity, 

fairness and justice2

When I assemble these various concerns and concepts in this case, I realize that 

this entire area of equitable concern has not been addressed in any fashion by the 

majority. I conclude that we should redeem this failing by remanding this appeal to the 

District Court for consideration of the various factors and particularly the equitable and 

fairness elements to which I have adverted. 

. A major consideration on this appeal should include judicial insight 

to the nature of the problem, the nature of the conflict which the administrator of an 

ERISA plan must analyze, the nature of the ramifications that may ensue from this 

Court’s decision, and the nature of the actions that a litigant can take to protect a 

particularly vital interest.

 2 The goal to which we as judges are all wedded, in addition to the oath which we take, is 

found in Deuteronomy 16:20, “Justice, justice shalt thou pursue.”
9

I, therefore, respectfully dissent.