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Fourth Circuit Holds that “Proof Satisfactory to Us” Language in ERISA Group Disability Plan Is Ambiguous and Does Not Confer Discretionary Authority on Plan Administrator

Cosey v. The Prudential Insurance Co. of America, et al.
No. 12-2360 (U.S. Court of Appeals for the Fourth Circuit, November 12, 2013)

by Colleen K. O’Brien, Associate
Semmes, Bowen & Semmes (

In this appeal, the Fourth Circuit held, as a matter of first impression, that “proof satisfactory to us” language in an ERISA plan was inherently ambiguous and failed to confer discretionary authority on a plan administrator. The plan administrator’s determination to deny disability benefits should have been reviewed by the district court de novo rather than under an abuse of discretion standard. Further, the district court erred in concluding that the plan required objective proof of the disability in order for the employee to qualify for plan benefits.

Plaintiff Cosey’s employer had a group insurance contract with Prudential, and Prudential acted as the claims administrator for short term disability (STD) and long term disability (LTD) benefits. Cosey was a participant in the plans. Under both plans, the employee was entitled to benefits if she was “unable to perform the material and substantial duties of [her] regular occupation due to [her] sickness or injury.” Cosey submitted a disability claim complaining of fatigue, sleep disorder, fibromyalgia, dysautonomia, myoclonus, and dizziness. After a brief period of approving STD benefits, Prudential thereafter denied further STD benefits, and also concluded that Cosey was not entitled to LTD benefits because there was insufficient medical evidence in support of her claim. Prudential’s decision was based on mixed reports from Cosey’s own treating physicians and reports by four (4) medical reviewers that it hired who concluded that Cosey’s test results did not support a finding of impairment; there was no medical explanation for her self-reported symptoms; and that Cosey’s condition did not preclude her from full-time work. Additionally, surveillance of Cosey revealed that she had opened a coupon-related business less than one month after she stopped working. Cosey appealed the adverse benefits decision, but Prudential upheld its denial decision on appeal. Cosey, thereafter, filed suit. The trial court held that Prudential’s decision did not constitute an abuse of discretion, and in the alternative, was proper under even a de novo review. The court entered summary judgment in favor of the insurer, and Cosey appealed.

The appellate court began by reviewing the language purporting to confer Prudential with discretionary authority. The LTD plan stated that benefits will only be paid to a claimant who “submit[s] proof of continuing disability satisfactory to Prudential.” In Gallagher v. Reliance Standard Life Insurance Co., 305 F.3d 264 (4th Cir. 2002), the Court stated that hypothetically a requirement that a claimant submit “proof . . . that is satisfactory to [the plan administrator]” would be sufficient to confer discretionary authority. The Court, however, concluded that prior statement was dictum and that it was not bound by that prior hypothetical example in considering the language of the instant case. Therefore, the Court held, as a matter of first impression, that the phrase “proof satisfactory to [the plan administrator]” does not unambiguously confer discretionary authority on the plan administrator. In reaching this conclusion, the Court noted that it was aligning with five (5) of its sister circuits: the First, Second, Third, Seventh, and Ninth Circuits. The Court concluded that this language was ambiguous, and that under existing ERISA precedent, it must be construed against the drafter, who had every opportunity to avoid adverse rulings on this issue. Indeed, the group insurance contract in this case was dated 2007, which was after the Second, Seventh, and Ninth Circuits had already rejected as inadequate the “proof satisfactory to us” formulation. Finally, the Court was not persuaded by Prudential’s citation to the summary plan description which granted the administrator with “sole discretion” to interpret the terms of the contract, to make factual findings, and to determine eligibility for benefits. The Court held that the language in the summary plan description was not controlling under CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), and moreover, because the plan language was ambiguous and construed against the plan administrator, there was no basis for crediting a conflicting grant of authority contained in a non-plan document.

Next, the Court considered whether discretionary authority was conferred by the STD plan. The parties stipulated that the STD plan was not governed by ERISA and the Court turned to North Carolina law of contract interpretation. The STD plan required that claimants “submit satisfactory proof of continuing disability.” The Court held that this language was the functional equivalent of language that it had held was ambiguous in Gallagher. Because the Court concluded the language was ambiguous, it construed it against Prudential as the drafter, and concluded that this language also failed to confer discretionary authority.

Although the district court purported to review Prudential’s benefits denial decision under a de novo review as an alternative holding, the appellate court still disagreed with the trial court’s overall ruling, because it was based, in part, on the requirement that Cosey present objective evidence of her disability. While the Court expressed no opinion about whether a company lawfully could draft a benefits plan requiring a claimant to produce objective proof of disability, in this case, there was no such language requiring objective proof in either plan. The Fourth Circuit therefore, vacated the district court decision awarding summary judgment in favor of Prudential and remanded the case.