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Fourth Circuit Abolishes Contra Proferentum in Cases Reviewed for Abuse of Discretion and Affirms Insurer’s Decision to Offset Workers’ Compensation Settlement From Long Term Disability Benefits, Notwithstanding that Settlement was Paid for Condition Unrelated to Employee’s Disability
In Carden v. Aetna Life Ins. Co., 559 F.3d 256 (4th Cir. 2009), the Fourth Circuit affirmed Aetna’s decision to offset a lump sum workers’ compensation settlement Plaintiff received as a result of asbestosis from long term disability benefits he received for vertigo under a long term disability Plan that was administered and insured by Aetna. The Court concluded that Aetna’s interpretation of the Plan provisions pertaining to the offset of “other income benefits,” including lump sum payments from workers’ compensation, was reasonable, notwithstanding Plaintiff’s argument that the Plan unambiguously provided for the offset of other income only if it was received as a result of the same disability. The Court also rejected Plaintiff’s alternative argument that, because of Aetna’s conflict of interest, the plan provisions on which Aetna relied, if ambiguous, should be construed in favor of Plaintiff and against Aetna under the doctrine of contra proferentum pursuant to the Court’s prior opinion in Carolina Care Plan, Inc. v. McKenzie, 467 F.3d 383 (4th Cir. 2006). Carden, at 259-260.
The Court explained that “[s]ince we decided Carolina Care Plan and the other cases on which it relies, the Supreme Court decided Metropolitan Life Insurance Co. v. Glenn, ___ U.S. ___, 128 S.Ct. 2343 (2008)…,” and under Glenn, courts are foreclosed from applying the rule of contra proferentum “to curb the discretion given an administrator by a plan…” Carden, at 259-260. The Court held that this “adjustment to…ERISA jurisprudence in light of Glenn” is further necessitated by the emphasis on resolving ERISA questions under principles of trust law, under which “[a] trustee may be given power to construe disputed or doubtful terms, and in such circumstances the trustee’s interpretation will not be disturbed if reasonable.” Id., at 261, citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 110, 111 (1989).
Rather than construing plan provisions against a conflicted fiduciary, the Court explained that it should consider an administrator’s conflict of interest as “‘one factor among many’ in determining the reasonableness of the administrator’s decision exercising discretionary authority.” Id., at 260-261, citing Glenn, at 2351. The Court indicated that when a plan administrator “employs its interpretive discretion to construe an ambiguous provision in favor of its financial interest,” such interpretation may weigh against the reasonableness of its decision, and vice versa, but in either case, its interpretation “is only considered with all of the other factors that may be brought to bear in determining whether an administrator abused his discretion.” Id., at 261, citing Glenn, at 2351.
In Carden, the Court examined the eight non-exclusive factors identified in Booth v. Wal-Mart Stores, Inc. Associates Health & Welfare Plan, 201 F.3d 335 (4th Cir. 2000) and found that Aetna’s interpretation of the plan, which provided, in part, for the offset of “disability benefits under any….workers’ compensation law…which are meant to compensate the worker for….any degree of permanent impairment” was reasonable. Carden, at 262-263. In addition, the Court determined that Aetna’s interpretation was consistent with the purpose of the plan “to assure an income stream for the disabled employee during the period of disability rather than an independent benefit quantified by a specific disability.” Id., at 262. Finally, the Court found that Aetna’s interpretation and application of the offset provision was consistent with other terms in the plan. Id., at 262-263. When all of the relevant factors – including Aetna's conflict of interest – were considered and weighed together, the Court concluded that “Booth factors (1) (language of the plan), (2) (purposes and goals of the plan), and (4) (consistency with other terms in the plan) strongly evidence the reasonableness of Aetna’s interpretation” and, therefore, Aetna did not abuse its discretion. Id., at 263.
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