Court Opinion

ID: 5116220
Source: CourtListenerOpinion
Date Created: 2021-10-06 00:00:38.760355+00
Date Added: 2024-06-11T08:21:55.046195
License: Public Domain

Case: 20-10475     Document: 00516043273           Page: 1   Date Filed: 10/05/2021

              United States Court of Appeals
                   for the Fifth Circuit
                                                                       United States Court of Appeals
                                                                                Fifth Circuit

                                                                              FILED
                                                                        October 5, 2021
                                   No. 20-10475                          Lyle W. Cayce
                                                                              Clerk

   Melinda Martinez, widow and heir of Jose Chavez,

                                            Plaintiff—Appellee/Cross-Appellant,

                                       versus

   Standard Insurance Company,

                                          Defendant—Appellant/Cross-Appellee.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                           USDC No. 3:18-CV-2013

   Before Jones, Southwick, and Engelhardt, Circuit Judges.
   Per Curiam:*
          Jose Chavez filed for long-term disability benefits under his
   employer-sponsored welfare benefit plan. Standard Insurance Company
   initially determined that Chavez was entitled to “own-occupation” benefits,
   which would last up to 24 months.            It made no determination as to
   “any-occupation” benefits, which would be provided only after the

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
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                                       No. 20-10475

   own-occupation-benefits period expired. Before the expiration of the 24
   months and before making a determination as to Chavez’s entitlement to
   any-occupation benefits, Standard determined that a provision limited his
   benefits to 12 months. Chavez sought review of that decision, and Standard
   affirmed it. He brought a claim under the Employment Retirement Income
   Security Act in federal court. The district court determined that Chavez’s
   injury was not subject to the 12-month limitation and also awarded any-
   occupation benefits until the date of judgment, holding that Standard had
   waived the right to contest any-occupation benefits to that point. Standard
   now appeals only the any-occupation-benefits holding. We REVERSE and
   REMAND with instructions that the district court remand to the
   Administrator for an any-occupation-benefits determination.
               FACTUAL AND PROCEDURAL BACKGROUND
          Jose Chavez is a former employee of Nix Door & Hardware, Inc.,
   through which he participated in an employee welfare benefit plan that Nix
   sponsored. The plan provided disability benefits to eligible employees and
   was insured by Standard Insurance Company. The plan lists Nix Door &
   Hardware as the Plan Administrator and Standard as the Claims
   Administrator. 1
          The policy provides two different benefits periods, each with different
   disability definitions. The “Own Occupation Period” lasts for the “first 24
   months for which [long-term disability (“LTD”)] Benefits are paid,” while
   the “Any Occupation Period” lasts “[f]rom the end of the Own Occupation

          1
            Chavez’s brief says that “Standard was ‘the de facto plan administrator.’ See
   Archer v. United Techs. Corp., No. 3:07-CV-1485, 2009 WL 561375, at *1 (N.D. Tex.
   Mar. 3, 2009).” Standard never refutes this, and both parties seem to assume that a
   remand to the administrator would be to Standard rather than to Nix.

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   Period to the end of the Maximum Benefit Period.” The any-occupation
   period, then, kicks in only after 24 months of benefits have been paid.
          A member meets the own-occupation definition of disability if “as a
   result of Physical Disease, Injury, Pregnancy, or Mental Disorder,” the
   member is (1) “unable to perform with reasonable continuity the Material
   Duties of [his] Own Occupation” and (2) he “suffer[s] a loss of at least 20%
   in [his] Indexed Predisability Earnings when working in [his] Own
   Occupation.” A member meets the any-occupation definition of disability if
   “as a result of Physical Disease, Injury, Pregnancy, or Mental Disorder, [the
   member is] unable to perform with reasonable continuity the Material Duties
   of Any Occupation.”
          Importantly, though, the policy excludes all LTD benefits for certain
   conditions and limits all LTD benefits for “Other Limited Conditions”
   (“OLC Limitation”) to 12 months. The definition of “Other Limited
   Conditions,” for which benefits are limited to a maximum of 12 months
   (under either definition of disability), includes “carpal tunnel or repetitive
   motion syndrome, . . . arthritis, . . . and sprains or strains of joints or
   muscles.”
          From May to June 2016, Chavez sought medical care for hand pain.
   On June 5, he visited the emergency room for continued hand pain, and
   surgery was performed on his hand to remove fluid on June 7. The drained
   fluid tested positive for methicillin susceptible staphylococcus aureus (staph
   infection). Chavez had a second surgery on his wrist in July, draining more
   fluid, which again tested positive for staph. His post-operative diagnosis was
   septic arthritis and carpal tunnel syndrome. In August, his diagnosis was
   noted as “[p]yogenic arthritis, unspecified.” In November, Chavez’s wrist
   showed severe arthritic damage, and he underwent two more surgeries as

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   treatment; one to remove bone and cartilage and fuse the joint with screws
   and another in March 2017 to remove the screws.
           Chavez filed a claim for LTD benefits in June 2016.           On the
   application, his doctor listed the diagnosis as “cellulitis and abscess” of the
   right hand. Standard determined that his own-occupation benefits should
   run from September 3, 2016 to September 2, 2018 and that his eligibility for
   LTD benefits would end the day before he turned 65.
           In March 2017, Chavez fell and landed on his right shoulder, and he
   sought medical attention. Then, in May, he was in a motor-vehicle accident
   in which that same shoulder hit the steering wheel. After the accident, he
   learned that he had “full thickness and partial tearing of tendons in his right
   rotator cuff.” He had surgery in attempt to repair the rotator cuff in March
   2018.
           Standard sent a letter to Chavez on June 29, 2017, informing him that
   it would investigate to determine if the OLC Limitation applied to his claim
   and limited his benefits to 12 months. The letter explained that if the
   limitation did apply, Chavez would receive benefits through September 2,
   2017, but not after. On February 12, 2018, Standard informed Chavez that it
   had determined that Chavez’s injuries, i.e., “right wrist arthritis, right
   shoulder sprain/strain and right rotator cuff tear,” fit within the OLC
   Limitation. It noted that his file was reviewed by a Physician Consultant to
   reach this conclusion. Because he was “only eligible for 12 months of LTD
   Benefits and since [he had] already received over 12 months of LTD
   Benefits,” Standard informed him that his “claim ha[d] been closed as of the
   date of th[e] letter.”
           Chavez orally requested that his claim be reviewed by the
   Administrator, as he did not believe “his shoulder pain or hand pain should
   be considered limited conditions.” In March 2018, Standard sent Chavez a

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   letter indicating that the Administrative Review Unit separately reviewed
   and affirmed the prior determination that Chavez’s injuries fit within the
   OLC Limitation.
          On August 2, 2018, Chavez filed suit in federal district court under
   the Employment Retirement Income Security Act (“ERISA”), 29 U.S.C.
   § 1132(a)(1)(B), arguing that Standard’s OLC Limitation determination
   should be overturned and that Chavez should receive benefits from February
   13, 2018 to the date of judgment plus prejudgment interest. The district court
   conducted a “trial on the papers, limited to the administrative record[,]. . .
   supporting affidavits[, and] deposition excerpts.”
          The district court held that Chavez’s wrist condition did not fall
   within the plan’s OLC Limitation. Further, the court concluded that the
   plain meaning of “arthritis” that was used in the OLC Limitation did not
   include the infection-caused damage to Chavez’s wrist, though technically it
   was a species of arthritis. Rather, the “average plan participant,” see 29
   U.S.C. § 1022(a), would understand arthritis to refer to the degenerative
   joint disease osteoarthritis.
          The district court also held that Standard was required to prove that
   either the rotator-cuff injury or the carpal-tunnel syndrome was a but-for
   cause of the disability; Standard had not met that burden. Thus, Chavez was
   entitled to LTD benefits. It then held that Chavez was entitled to any-
   occupation benefits through the month of final judgment, holding “Standard
   ha[d] waived its right to request evidence of ‘Any Occupation’ disability so
   far, [but] Standard should [not] be precluded from requesting such evidence
   in the future.” It rejected Standard’s motion to amend findings, for a new
   trial, and to modify or correct the judgment reiterating that though its ruling
   did not “hold or find that Chavez was or is entitled to any occupation
   benefits[, it] simply held that by failing to initiate any administrative action

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   by the time of judgment, Standard ha[d] waived the right to a retrospective
   administrative determination through judgment.”
          The issue in this appeal arises from the remedy the district court
   awarded Chavez. Standard argued that if the district court determined the
   OLC Limitation applied, it should remand to the administrator for Standard
   so it could decide initially whether Chavez met the any-occupation definition
   of disability. Chavez argued that he should be awarded past benefits through
   the date of judgment as well as future benefits. Instead, the district court held
   that Standard waived its right “to request evidence of ‘Any Occupation’
   disability so far, [but] Standard should [not] be precluded from requesting
   such evidence in the future.”
          Standard filed a motion to amend findings, for a new trial, and to
   modify or correct the judgment, pursuant to Federal Rules of Civil Procedure
   52, 59, and 60. In its motion, Standard argued that the court could award
   benefits only through the own-occupation period, but it had to remand for an
   administrative determination of the any-occupation period before it could
   award benefits for that period. The district court rejected this argument. It
   clarified that its ruling held only that Standard waived its right to a
   retrospective administrative determination because it did not initiate
   administrative action before judgment.
          Standard filed a notice of appeal from the final judgment two days
   after the motion to amend, arguing that the district court erred by not
   remanding for the Administrator to decide first whether Chavez was entitled
   to any-occupation benefits.      Chavez cross-appealed, arguing that he is
   entitled to LTD benefits from the district court’s May 2020 final-judgment
   order through the appeal.
          This court was notified in early March 2021 that Chavez had died. His
   widow, Melinda Martinez, has been substituted as a party to the appeal.

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                                   DISCUSSION
          Standard appeals only the district court’s holding that it waived its
   right to contest Chavez’s entitlement to any-occupation benefits to that
   point, leaving out the district court’s holding as to the OLC Limitation.
   Chavez cross-appeals, arguing that the court should award any-occupation
   benefits through the date the appeal becomes final rather than just through
   the date of the district court’s order.
          The district court agreed with Chavez, stating that “by failing to
   initiate any administrative action by the time of judgment, Standard has
   waived the right to a retrospective administrative determination through
   judgment.” Waiver, all parties agree, is “the voluntary or intentional
   relinquishment of a known right.” Pitts ex rel. Pitts v. Am. Sec. Life Ins. Co.,
   931 F.2d 351, 357 (5th Cir. 1991).
          The district court held that because Standard “never gave notice to
   Chavez that it was denying benefits because Chavez did not meet the
   definition of ‘any occupation’ disability,” it could not “now . . . assert that
   basis for denial.”     It noted that ERISA’s written-notice requirement
   supported its waiver holding.
          ERISA requires that Standard “set[] forth the specific reasons for [a]
   denial” of benefits. See 29 U.S.C. § 1133(1). “[T]he plan administrator has
   the obligation to identify the evidence in the administrative record and . . .
   the claimant may then contest whether that record is complete.” Vega v.
   Nat’l Life Ins. Servs., Inc., 188 F.3d 287, 299 (5th Cir. 1999) (en banc),
   overruled on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008).
   The regulations provide more detail as to what is required, including specific
   reasons for the determination and references to the applicable plan
   provisions. See 29 C.F.R. § 2560.503-1(g).

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          On requiring specific reasons for determination, the en banc Fifth
   Circuit has explained: “Our motivating concern here is that our procedural
   rules encourage the parties to resolve their dispute at the administrator’s
   level.” Vega, 188 F.3d at 300. Further, “ERISA requires that specific
   reasons for denial be communicated to the claimant and that the claimant be
   afforded an opportunity for full and fair review by the administrator.”
   Schadler v. Anthem Life Ins. Co., 147 F.3d 388, 393 (5th Cir. 1998) (quotation
   marks omitted) (quoting Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 688
   (7th Cir. 1992)).
          We agree with Standard that our decision in Schadler v. Anthem Life
   Insurance is a helpful comparison, though not directly on point. There, the
   administrator had determined that the plaintiff was not entitled to benefits
   on behalf of her husband because his policy had never gone into effect due to
   an error with the paperwork. Id. at 391. Following that determination, the
   plaintiff filed an ERISA suit in federal court, where the defendant–insurer
   argued for the first time that even if the policy was effective, several
   exclusions in the policy excluded coverage. Id. at 392. This court rejected
   the plaintiff’s argument that “the administrator ha[d], by determining that
   [the husband] was not covered by the . . . Policy, waived the right to interpret
   any particular provisions of the . . . Policy once it ha[d] been shown that [the
   husband] was in fact covered.” Id. at 369–97. We distinguished the situation
   presented in Schadler from one where “the administrator asserted one plan
   exclusion at the administrative level and trial counsel then bolstered the
   administrator’s position before the district court with other exclusions”
   where a waiver holding might be warranted. Id. at 396.
          A Seventh Circuit decision is also helpful. See Pakovich v. Broadspire
   Servs., Inc., 535 F.3d 601 (7th Cir. 2008). The court rejected a rule that
   “would require [administrators] denying benefits under an ‘own occupation’
   standard to also spend their resources evaluating participants under the ‘any

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   occupation’ standard, solely in anticipation of a possible reversal on the ‘own
   occupation’ issue on appeal.”         Id. at 605.     Such an approach was
   “unworkable.” Id. A finding that the participant was ineligible for own-
   occupation benefits was necessarily a conclusion as to any-occupation
   benefits, and “[r]equiring this further analysis would be impractical and
   redundant.” Id. “[W]hen the plan administrator has not issued a decision
   on a claim for benefits that is now before the courts, the matter must be sent
   back to the plan administrator to address the issue in the first instance.” Id.
   at 607.
             Here too, Standard’s OLC Limitation determination made analysis of
   entitlement to any-occupation benefits unnecessary. Once the administrator
   found that the OLC Limitation provided benefits only for 12 months, there
   was no need to analyze next if Chavez was entitled to any-occupation benefits
   that would begin only after the first 24 months of benefits.
             Because the district court held that the OLC Limitation determination
   was erroneous, and that decision has not been appealed, we remand to the
   administrator to determine Chavez’s entitlement to any-occupation benefits.
   We reject Chavez’s invitation to remand to the district court to determine
   the amount of any-occupation benefits to which Chavez is entitled. Our de
   novo review of the administrator’s decision does not eliminate the need for
   an initial administrative decision. De novo review is still a review. We should
   not circumvent “the procedure provided by the statute . . . [by] making the
   initial benefits decision ourselves.” See Schadler, 147 F.3d at 398.
             We REVERSE the district court’s waiver holding, VACATE the
   district court’s award of any-occupation benefits and REMAND to the
   district court with instructions to remand to the Administrator to make an
   initial determination of Chavez’s any-occupation benefits.

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