F I L E D
United States Court of Appeals
Tenth Circuit
APR 30 2002
PUBLISH
PATRICK FISHER
UNITED STATES COURT OF APPEALS Clerk
TENTH CIRCUIT
RUFUS A. CALDWELL, III,
Plaintiff - Appellee/
Cross-Appellant.
v. (Nos. 00-3256, 00-3288)
LIFE INSURANCE COMPANY OF
NORTH AMERICA,
Defendant - Appellant/
Cross-Appellee.
Appeal from the United States District Court
for the District of Kansas
(D.C. No. 93-CV-2550-GTV)
Richard N. Bien (R. Kent Sellers, with him on the briefs), Lathrop & Gage L.C.,
Kansas City, Missouri, for Defendant-Appellant/Cross-Appellee.
Michael W. Blanton, Blue Springs, Missouri (William P. Ronan, III, Overland
Park, Kansas, on the briefs), for Plaintiff-Appellee/Cross Appellant.
Before SEYMOUR and PORFILIO, Circuit Judges, and STAGG, * District
Judge.
The Honorable Tom Stagg, United States District Judge, Western District
*
of Louisiana, sitting by designation.
SEYMOUR, Circuit Judge.
This case deals with whether disability benefits should be provided to Rufus
Caldwell by Life Insurance Company of North America (LINA). LINA denied Mr.
Caldwell’s claim for both “own occupation” and “any occupation” long-term total
disability benefits. 1 On review, the district court upheld LINA’s determination as
to “any occupation” benefits, but held that Mr. Caldwell is entitled to “own
occupation” benefits for disability resulting from injuries suffered while working
for Western Atlas International (Western Atlas). 2 It also awarded prejudgment
interest to Mr. Caldwell. We affirm in part and reverse in part.
I
1
This opinion involves many definitions of “disability,” reflecting the
varying standards used by different federal and state agencies and private actors.
The standard we use in determining the outcome of this case is that set by LINA’s
long-term disability benefits policy. According to LINA’s policy, “own
occupation” benefits are available to an employee for up to two years after
sickness or injury if the employee is unable to perform all the essential duties of
his job at the time of injury. App. vol. II at 513. “Any occupation” benefits are
available to an employee if, after the first twenty-four months of disability, the
employee “is unable to perform all the duties of any job for which he is, or may
become, reasonably qualified based on his education, training or experience.” Id.
2
After deducting earnings and benefits Mr. Caldwell had received from
other sources, the district court awarded him $16,793.41 in short term disability
benefits.
2
From November 3, 1975 until April 28, 1989, Rufus Caldwell was employed
by Western Atlas International (“Western Atlas”), an oil drilling services
company. Mr. Caldwell held a number of positions during his tenure at Western
Atlas, including rig hand, completion engineer, senior completion engineer, and
customer service representative. In the last of these jobs, which he held at the
time of his accident, he was required to perform the relatively sedentary duties of a
normal customer service representative, as well as a variety of more physically-
demanding tasks. Western Atlas listed Mr. Caldwell’s duties as involving sitting
(75%), walking (10%), standing (8%), bending (5%), reaching (1%), and stooping
(1%). App. vol. II at 294. The company also stated that Mr. Caldwell was
occasionally required to carry, push, pull and lift objects weighing between 50 and
100 pounds for distances of 20 to 30 feet. Id.
Mr. Caldwell described his job as follows in his deposition:
Q. At the time you suffered that injury in January of 1989, what
was your title, the title of your position?
A. Customer service representative.
Q. Was there a job description that you are aware of for that
position?
A. It was PR-type work.
Q. What do you mean by that?
A. If they had trouble on a location, I was supposed to go out and
please the company we were working for and see what we had
to do to make the job right.
Q. That was your job title and the duties that you understood that
you were to do; is that correct?
A. Yes, sir. That, and I did a little bit of selling, but not much.
3
Q. In actuality, did you have other duties that were required of
you, other than those you have just described?
A. I ran a relief truck, if they didn’t have enough engineers; if they
didn’t have enough rig hands, I had to rig.
Q. What do you mean you ran a relief truck?
A. They used me as a relief engineer, logging and perforating.
Q. Tell me what kinds of physical activities you would be involved
in?
A. Rigging was lifting anything from a 25-pound gun to a 450-pound
gun.
Q. What other physical activities would you have to do?
A. Help rig up and help rig down, all the work that goes with the job.
Id. vol. V at 1159-60 (emphasis added). Mr. Caldwell also testified:
Q. What would happen if you didn’t do those things that you have
described to act as a rig hand or run a relief truck?
A. I would have been relieved of my job.
Q. Was that made clear to you?
A. Yes, sir.
Id. at 1162. Most significantly for present purposes, the company required Mr.
Caldwell to lift and move heavy objects with some regularity, including anything
from a 30-pound logging tool to his share of a 450-pound perforating gun. Id. at
1110; see also id. at 1160. It is undisputed that Western Atlas expected Mr.
Caldwell to fulfill the non-sedentary duties of other positions, especially that of rig
hand, as needed by the company.
Oil drilling is a physically demanding job that results in a great number of
on-the-job injuries. Mr. Caldwell’s medical history demonstrates the toll the work
took on his body. He suffered repeated injuries throughout his decade and a half
with Western Atlas that caused him chronic neck, back, knee, and elbow pain. On
4
January 31, 1989, Mr. Caldwell was injured while fulfilling rig hand duties at a
drilling site. Id. at 1159 (“I was going to help my hand rig down; we were
shorthanded.”). He was descending from a truck when he caught the toe of his
boot on a step and fell to the ground. As a result of the fall Mr. Caldwell suffered
a chip fracture and severe sprain in his ankle. He went to Dr. L.T. Fleske, who
placed his ankle in a cast. Mr. Caldwell was on crutches during the time he wore
the cast. Dr. Fleske removed the cast on February 20th and by March 6th allowed
Mr. Caldwell to discontinue use of the crutches. Nevertheless, pain and swelling
in his ankle did not subside.
In seeming contradiction to the claim that he was disabled, Mr. Caldwell did
not miss any work in the months after he was injured. However, he testified that
Western Atlas had him come to work to perform only the sedentary duties of his
job. Thus, Mr. Caldwell testified in his deposition that “[w]hile I was in the cast, I
did customer service work; and after the cast was off, I did what little I could do
around the shop. If they would tell me to do what I couldn’t do, I didn’t do it.”
Id. at 1168. He also testified that, at the time he was laid off, he was not able to
do the part of his job that required lifting. Id. at 1209. This evidence is not
disputed.
On April 28, Western Atlas terminated Mr. Caldwell. His ankle pain
persisted in July when Dr. Fleske saw him for the last time and recommended that
5
he continue physiotherapy and see a bone specialist in Oklahoma City, closer to
his home. On July 6, 1989, Mr. Caldwell saw Dr. Larry White in Oklahoma City.
Dr. White noted that Mr. Caldwell continued to suffer a “great deal” of ankle pain
and was suffering constant low back pain that worsened with activity. Id. vol. III
at 774. The ankle swelling and pain still persisted in November, at which time Dr.
Glenn Smith concluded that Mr. Caldwell had a permanent disability due to the
loss of range of motion and chronic pain in his ankle. Id. at 766-67. The doctor
advised Mr. Caldwell that he would not be able to return to the type of
employment that he had prior to the injury. Id.
Mr. Caldwell subsequently spent a year working as a self-employed truck
driver, delivering materials to drilling sites after Western Atlas terminated him.
The job required no heavy lifting, and he discontinued this business when his
doctors ordered him to do so, because even driving aggravated his back problems.
LINA, a division of CIGNA Corporation, provided life insurance and
disability coverage to employees of Western Atlas. LINA was both the
administrator and insurer of the plan. In March 1994, after learning about the
disability policy, Mr. Caldwell filed a claim with LINA for disability benefits and
also added LINA to the present federal court action that he had pending against
6
Western Atlas for wrongful discharge. 3 Under the policy held by Western Atlas,
LINA was required to pay “own occupation” disability benefits to an employee for
the first twenty-four months after sickness or injury if the employee was “unable
to perform all the essential duties of his occupation.” Id. vol. II at 277. LINA
denied Mr. Caldwell’s claim in July 1995 on grounds that he had failed to
establish he was totally disabled within the meaning of the “own occupation”
provision of LINA’s policy. This determination accordingly precluded Mr.
Caldwell’s claim for “any occupation” disability benefits as well. 4 Mr. Caldwell
appealed the denial to the district court, which held that LINA had not conducted a
full and fair review of the claim and remanded it for further administrative
proceedings. Caldwell v. Life Ins. Co. of N. Am., 959 F.Supp. 1361, 1367-69
(D.Kan. 1997)(Caldwell I).
LINA conducted a second review of the claim and, in a letter dated October
24, 1997, it again denied Mr. Caldwell both “own” and “any occupation” disability
benefits. On review of this second denial, the district court held the LINA
3
Mr. Caldwell originally filed this action against Western Atlas claiming
inter alia retaliatory discharge because his repeated on-the-job injuries resulted in
worker’s compensation claims. Mr. Caldwell was first told by Western Atlas of
the LINA disability plan during discovery. After learning of the coverage
available to him, Mr. Caldwell filed a claim with LINA for disability benefits
and, at the same time, amended his complaint to add LINA as a party to this
lawsuit. The claims against Western Atlas were settled and the company was
dismissed from the suit.
4
See supra note 1.
7
administrator’s decision was arbitrary and capricious as to “own occupation”
benefits. The court determined Mr. Caldwell was, in fact, disabled from
performing all the essential duties of his own occupation at the time he was fired
by Western Atlas, and that this disability continued through January 31, 1991.
Caldwell v. Life Ins. Co. of N. Am., 37 F.Supp.2d 1254, 1261-62 (D.Kan. 1998)
(Caldwell II). The court affirmed the administrator’s decision denying “any
occupation” benefits for the period thereafter. Id. at 1262.
On appeal, LINA raises two issues. First, it claims the district court erred in
reversing the LINA administrative decision as arbitrary and capricious because,
LINA maintains, the district court misapplied the sliding scale standard of
deference applicable to administrative decisions. Second, LINA claims the district
court abused its discretion in awarding prejudgment interest to Mr. Caldwell.
Mr. Caldwell cross-appeals the district court’s decision to affirm LINA’s denial of
“any occupation” benefits.
II
LINA first challenges the district court’s reversal of its administrator’s
decision to deny Mr. Caldwell’s “own occupation” disability claim. Specifically,
LINA maintains the court failed to properly analyze the nature and effect of
LINA’s conflict of interest as the administrator.
8
The district court used an arbitrary and capricious standard in analyzing
LINA’s denial of benefits. Caldwell II, 37 F.Supp.2d at 1256. Mr. Caldwell does
not challenge this determination on appeal. The district court’s determination of
whether an ERISA benefits decision is arbitrary and capricious is a legal
conclusion subject to de novo review. Sandoval v. Aetna Life & Cas. Ins. Co., 967
F.2d 377, 380 (10th Cir. 1992).
Indicia of arbitrary and capricious decisions include lack of substantial
evidence, mistake of law, bad faith, and conflict of interest by the fiduciary. Id. at
380 n.4; Charter Canyon, 153 F.3d at 1135. Substantial evidence is “‘such
evidence that a reasonable mind might accept as adequate to support the
conclusion reached by the [decisionmaker].’” Sandoval, 967 F.3d at 382 (quoting
Flint v. Sullivan, 951 F.2d 264, 266 (10th Cir. 1991) (alteration in original)).
Substantiality of the evidence is based upon the record as a whole. In determining
whether the evidence in support of the administrator’s decision is substantial, we
must “‘take[] into account whatever in the record fairly detracts from its weight.’”
Washington v. Shalala, 37 F.3d 1437, 1439 (10th Cir. 1994) (quoting Nieto v.
Heckler, 750 F.2d 59, 61 (10th Cir. 1984)); see also Casias v. Sec’y of Health &
Human Servs., 933 F.2d 799, 800-01 (10th Cir. 1991) (citing Universal Camera
Corp. v. NLRB, 340 U.S. 474, 488 (1951)). We give less deference if a plan
9
administrator fails to gather or examine relevant evidence. Kimber v. Thiokol
Corp., 196 F.3d 1092, 1097 (10th Cir. 1999). Moreover, if a conflict of interest
exists, the reviewing court “must decrease the level of deference given to the
conflicted administrator’s decision in proportion to the seriousness of the
conflict.” Chambers v. Family Health Plan Corp., 100 F.3d 818, 825 (10th Cir.
1996); see also Pitman v. Blue Cross & Blue Shield of Oklahoma, 217 F.3d 1291,
1297 (10th Cir. 2000).
The district court held that the LINA administrator’s decision was entitled to
some deference, but that deference would be lessened to the degree necessary to
neutralize any untoward influence resulting from the conflict it found. Caldwell
II, 37 F.Supp.2d at 1256. LINA is both the administrator and insurer of the
Western Atlas disability plan. As such, an inherent conflict exists. Pitman, 217
F.3d at 1296. LINA does not deny that under our case law it was operating under
a conflict. Rather, relying on our decision in Kimber, it contends the district court
failed to make the required analysis of the nature or severity of that conflict. See
196 F.3d at 1097-98. We need not address this issue because we conclude that the
LINA administrator’s decision is arbitrary and capricious without regard to the
conflict.
Under LINA’s policy, “own occupation” disability occurs when an employee
is “unable to perform all the essential duties of his occupation.” App. vol. II at
10
277. Payments begin only when LINA receives “due proof that: (1) the employee
[became] Totally Disabled while insured for this Long-Term Disability Insurance;
and (2) his Total Disability has continued for a period longer than the Benefit
Waiting Period shown in the Schedule.” Caldwell II, 37 F.Supp.2d at 1258
(quoting LINA policy). LINA’s decision to deny Mr. Caldwell’s disability claim 5
rested on three main sources: the findings and conclusions of the administrative
law judge in Mr. Caldwell’s worker’s compensation case; the findings and
conclusions stemming from his Social Security disability claim; and Mr.
Caldwell’s medical records. We analyze each of these sources separately.
The administrative law judge, in denying Mr. Caldwell’s worker’s
compensation claim under the applicable Kansas scheme, determined Mr. Caldwell
was never “temporarily totally disabled.” The judge pointed to the fact that Mr.
Caldwell returned to work with an ankle cast in February and continued working
until he was fired on April 28, 1989. The LINA administrator’s decision letter
quoted the ALJ’s determination that “Claimant testified that he was capable of
performing the duties of a customer service representative,” that he worked up
until the time of his departure, and that his condition substantially worsened
following his departure from Western Atlas. App. vol. IV at 827. LINA also
We refer to the second time LINA denied Mr. Caldwell’s claim, after
5
remand by the district court. See supra page 7.
11
relied on the Social Security administrative decision finding that Mr. Caldwell
became totally unable to work on August 18, 1990, which was more than a year
after he left Western Atlas.
The district court held the findings and conclusions of the two
administrative proceedings irrelevant to Mr. Caldwell’s ability to perform his own
job duties when employed by Western Atlas. We agree. Significantly, the Kansas
Workers’ Compensation Act stated during the relevant time period that
“[t]emporary total disability exists when the employee, on account of the injury,
has been rendered completely and temporarily incapable of engaging in any type of
substantial and gainful occupation.” K AN . S TAT . A NN . § 44-510c(b)(2) (1989
Supp.) (emphasis added). As we have pointed out, the relevant LINA standard for
“own occupation” disability is whether Mr. Caldwell was capable of performing
his own job at Western Atlas on April 28, 1989. The LINA administrator admitted
that she based her decision in part on the determination of the workers’
compensation judge, app. vol. I at 122, despite not knowing “what the standard
was in Kansas in 1989 for qualifying for temporary total disability benefits,” id. at
123.
The Social Security hearing on which the LINA administrator relied in
denying “own occupation” benefits to Mr. Caldwell was also aimed at determining
Mr. Caldwell’s ability to perform any job for which he was qualified. The LINA
12
administrator’s reliance on the workers’ compensation and social security
decisions to deny “own occupation” benefits was thus arbitrary and capricious
given that each such determination relied on irrelevant standards that conflicted
with the LINA policy definition of “own occupation” disability.
The LINA administrator also ignored evidence that was relevant to her
decision. A key determination in the inquiry before the administrator was whether
Mr. Caldwell could perform all the essential duties of his job at the time he left
Western Atlas. Mr. Caldwell does not deny that he could perform the normal
duties of a customer service representative on April 28, 1989. As we have noted,
however, it is undisputed that Western Atlas required Mr. Caldwell to perform
more than just those sedentary duties. Mr. Caldwell presented unrefuted evidence
of his heavy lifting duties. Western Atlas itself described the customer service
representative job on a form as requiring “occasionally” (more than “seldom”) the
carrying, pulling, pushing, and lifting of 50 to 100 pounds; and as working
“with/near dangerous machinery,” i.e., “oilfield service rigs.” Id. vol. II at 294.
The LINA administrator testified that she was aware Mr. Caldwell’s
customer service job occasionally required lifting and carrying 50 to 100 pounds.
Id. at 122. She further testified that she assumed he could fulfill the lifting and
carrying requirements of his job, id., having relied on the Workers’ Compensation
judge’s determination that Mr. Caldwell was not disabled during the relevant time
13
period. In making this determination, the LINA administrator failed to assess all
of the relevant evidence. In her determination letter, the administrator said that
she had reviewed, among other things, “[t]ranscripts of the Worker’s
Compensation Deposition of Mr. Caldwell taken on 4/30/91 and 7/26/91.” Id. vol.
IV at 826. However, those records include Mr. Caldwell’s testimony that Western
Atlas required him to perform the duties of a rig hand when they were
shorthanded, that he was performing those very duties when he injured his ankle in
January 1989, and that the rig hand duties required heavy lifting he could not do
after his ankle injury. Despite having this unrefuted evidence before her, the
LINA administrator concluded “Mr. Caldwell has not established that he was
unable to perform all the essential duties of his occupation as a Customer Service
Representative either as of 1/31/89 or 4/28/89.” Id. vol. IV at 830.
The LINA administrator also based her decision on a skewed reading of Mr.
Caldwell’s medical records. Her decision relied almost exclusively on the medical
records of Dr. L.T. Fleske, who treated Mr. Caldwell at the time of his injury.
Specifically, the administrator stated that Dr. Fleske’s medical records do not
support the conclusion that Mr. Caldwell was unable to return to his job as a
customer service representative. She noted that Dr. Fleske placed no restrictions
on Mr. Caldwell’s activities as a customer service representative, and that years
after he stopped treating Mr. Caldwell, Dr. Fleske wrote LINA: “From treating that
14
type of problem [Mr. Caldwell] would be off work for a brief period of time but
should not be totally or permanently disabled.” Id. at 828.
A closer review of the record reveals the questionable worth of Dr. Fleske’s
records and opinions with regard to the issue before us. Nowhere in the record
does it indicate that Dr. Fleske was aware of the full range of duties Western Atlas
required of Mr. Caldwell. A release to work without clear knowledge that Mr.
Caldwell had to engage in heavy lifting does not provide substantial evidence that
Mr. Caldwell could perform all the essential duties of his job.
Further undermining LINA’s reliance on Dr. Fleske’s records and testimony
is the fact that Dr. Fleske’s care of Mr. Caldwell was brief. Mr. Caldwell saw Dr.
Fleske regarding his ankle for the first time on February 8, 1989. Significantly, on
July 24, 1989, Dr. Fleske recommended that Mr. Caldwell seek help from a doctor
in Oklahoma City for his continuing ankle problems. Doctor and patient never
saw each other again as a series of other doctors took over Mr. Caldwell’s
treatment. Drs. White and Smith, the doctors who treated Mr. Caldwell
immediately following Dr. Fleske, noted that Mr. Caldwell suffered chronic ankle
pain. App. vol. III at 767, 774. Dr. Smith concluded that Mr. Caldwell’s
continuing pain prevented him from engaging in the type of work he was doing at
Western Atlas prior to his surgery. Id. at 766-67. In other words, contrary to the
finding of the LINA administrator, the medical evidence clearly shows that the
15
problem for which Dr. Fleske treated Mr. Caldwell did not resolve itself in March
but rather continued long after Mr. Caldwell’s dismissal from Western Atlas in
April 1989. The LINA administrator did not mention either Dr. Smith, to whom
Mr. Caldwell was referred by Dr. Fleske, or Dr. White in the final decision
denying “own occupation” disability benefits. We have recognized that “deference
is decreased when a plan administrator fails to gather or examine relevant
evidence.” Kimber, 196 F.3d at 1097.
The LINA administrator also misconstrued Mr. Caldwell’s testimony. The
decision correctly states Mr. Caldwell testified that Dr. Fleske released him to
work in March 1989 and that Mr. Caldwell understood the release to be for “light
duty.” App. vol. IV at 829. The decision also quotes Mr. Caldwell as stating that
he could “do the customer service work,” and, in response to a question from an
attorney for the insurance company, agreed that he could “do the work that went
along with [his] job title.” Id. (quotation omitted). Taken out of context, of
course, Mr. Caldwell’s own statements seem to undermine his contention that his
disability prevented him from performing his job on April 28, 1989. When viewed
in light of the entire record, however, his statements are wholly consistent with the
assertion that he could not perform all the essential duties Western Atlas expected
him to perform. He could perform the sedentary duties of a customer service
16
representative, but not those of a rig hand, the very duties he was performing on
the day he was injured.
Our de novo review of the record supports the conclusion that Mr. Caldwell
was unable to meet the rigors of the rig hand position after his injury on January
31, 1989. Mr. Caldwell visited one doctor after another who confirmed what Dr.
Fleske observed at the time of the accident: serious ankle pain. That the disabling
pain continued, and even grew worse, in the months following Western Atlas’
firing of Mr. Caldwell tends to support the view that Mr. Caldwell could not
perform all the essential duties of his job at Western Atlas after his injury in
January. The LINA administrator’s conclusion to the contrary is not supported by
substantial evidence. In short, we agree with the district court, especially in light
of the LINA administrator’s inappropriate reliance on the workers’ compensation
and social security decisions and her failure to consider all the evidence in the
record, that the decision denying Mr. Caldwell “own occupation” disability
benefits was arbitrary and capricious.
III
LINA also challenges the district court’s award of prejudgment interest to
Mr. Caldwell. We review prejudgment interest awards for an abuse of discretion.
Malloy v. Monahan, 73 F.3d 1012, 1019 (10th Cir. 1996); Eastman Kodak Co. v.
17
Westway Motor Freight, Inc., 949 F.2d 317, 321 (10th Cir.1991). An abuse of
discretion is “‘an arbitrary, capricious, whimsical, or manifestly unreasonable
judgment.’” Coletti v. Cudd Pressure Control, 165 F.3d 767, 777 (10th Cir. 1999)
(quoting FDIC v. Oldenburg, 34 F.3d 1529, 1555 (10th Cir. 1994)). A two-step
analysis governs the determination of such an award. “The district court must first
determine whether the award of prejudgment interest will serve to compensate the
injured party. Second, even if the award of prejudgment interest is compensatory
in nature, the district court must ‘still determine whether the equities would
preclude the award of prejudgment interest.’” Eastman Kodak Co., 949 F.2d at
321 (quoting U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1257 (10th
Cir. 1988)).
The district court held here that the loss to Mr. Caldwell began when he
failed to receive each of the monthly benefits to which he was entitled. The court
then concluded that “the award of prejudgment interest serves a compensatory
function, in that it compensates plaintiff for the loss of the use of the money
involved in the award of benefits. The court also concludes that the award is
eminently fair because it is an essential component of full compensation for
plaintiff.” App. vol. I at 265. On this basis, the court awarded prejudgment
interest to begin as of August 1989.
18
LINA challenges this determination in two ways. It contends the district
court abused its discretion by awarding any prejudgment interest because it failed
to consider that damages in the case were difficult to ascertain and that Mr.
Caldwell contributed to the delay by filing his claim five years after his accident
and then failing to provide medical documentation in a timely fashion. In the
alternative, LINA argues that prejudgment interest should only be awarded from
the date of the final benefits determination, October 24, 1997.
As to the first claim, this type of ERISA case inevitably involves complex
determinations. If we were to find for that reason that equitable considerations
favor insurance companies, no plaintiff would ever receive prejudgment interest.
In addition, while Mr. Caldwell did not file his claim with LINA until April 1994,
almost five years after he was fired by Western Atlas, his former employer did not
inform him of the availability of the LINA disability benefits until March 1994. In
other words, Mr. Caldwell diligently filed a claim once he knew he could do so.
While the delays LINA alleges may be a factor in the appropriate starting time for
prejudgment interest, as we discuss below, the fact that the court did not find those
delays to warrant a total denial of prejudgment interest does not amount to an
abuse of discretion.
As to LINA’s alternate argument that interest should be awarded from
October 24, 1997, rather than August 1989, the rule in this circuit is that
19
prejudgment interest is generally available “‘to compensate the wronged party for
being deprived of the monetary value of his loss from the time of the loss to the
payment of the judgment.’” Anixter v. Home-Stake Prod. Co., 977 F.2d 1549,
1554 (10th Cir. 1992) (quoting U.S. Indus., Inc., 854 F.2d at 1256). The question
in a case such as this is what constitutes the “time of loss.” The district court
found that the time of loss began in August 1989 when Mr. Caldwell failed to
receive the first monthly benefits to which he was entitled. The court held that
“[p]rejudgment interest, therefore, should run on each monthly award of benefits
from the time such benefit became due until the judgment as modified by this
order entered.” App. vol. I at 266-67.
The First Circuit, ruling on this very point, held under ERISA that a cause
of action and prejudgment interest both accrue when the fiduciary first denies a
claim. Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 223-24 (1st Cir.
1996). The Eighth Circuit, in a similar case, held that prejudgment interest
compensates assignees as if the plan had paid benefits when the employee first
filed his or her claim. Lutheran Med. Ctr. of Omaha v. Contractors, Laborers,
Teamsters & Eng’rs. Health & Welfare Plan, 25 F.3d 616, 623 (8th Cir. 1994). It
was this latter case to which the district court cited in holding as it did.
Mr. Caldwell did not file a claim with LINA until five years after his injury.
This delay was due to Western Atlas’ failure to inform him of the availability of
20
disability benefits through the LINA plan, rather than any delay caused directly by
LINA. To award prejudgment interest as far back as 1989, therefore, would
penalize a party not responsible for the delay. Consequently, we are persuaded the
district court abused its discretion in ruling as it did. Under the circumstances of
this case, the equities preclude the award of prejudgment interest for five years
prior to the time the insurance company was notified of the claim.
LINA maintains that Mr. Caldwell should receive prejudgment interest only
back to the time his claim was denied, in accordance with the First Circuit rule. 6
We find the Eighth Circuit’s rule in Lutheran Medical the more persuasive. The
policy that underlies awarding prejudgment interest seeks to make persons whole
for the loss suffered because they were denied use of money to which they were
legally entitled. Because we hold that Mr. Caldwell was legally entitled to “own
occupation” disability benefits, he was entitled to those benefits as of the date he
filed his claim. Consequently, prejudgment interest should run from the date the
claim for benefits was first filed, April 25, 1994.
Finally, LINA maintains the district court abused its discretion in
calculating the rate of interest applied to the prejudgment interest award. The
6
LINA contends in its briefs that were we to follow the First Circuit rule,
the date of loss would be October 24, 1997. See Cottrill v. Sparrow, Johnson &
Ursillo, Inc., 100 F.3d 220, 223-24 (1st Cir. 1996). However, LINA first denied
Mr. Caldwell’s claim on July 25, 1997, and only made the second denial on
remand from the district court.
21
court looked at post-judgment rates for the period from August 1989 to July 1991,
the period during which it found plaintiff entitled to prejudgment interest,
determined that rates varied from 8.7% to 6.09%, and set a single rate of 8%.
LINA urged the court to apply the rate of interest as determined by 28
U.S.C. § 1961(a). We decline to follow its suggestion. Section 1961 applies to
post-judgment interest, and the district court was not bound by its strictures. Many
circuits have held that courts are not required to use section 1961 in calculating
prejudgment interest and that the calculation rests firmly within the sound
discretion of the trial court. Taxman v. Bd. of Educ., 91 F.3d 1547, 1566 (3d Cir.
1996); Ingersoll Milling Mach. Co. v. M/V Bodena, 829 F.2d 293, 310 (2d Cir.
1987); EEOC v. Wooster Brush Co. Employees Relief Ass’n, 727 F.2d 566, 579
(6th Cir. 1984). We now join them. In setting the interest rate at 8%, the district
court did not abuse its discretion. In light of our holding that prejudgment interest
should run from April 25, 1994, however, we remand to the district court to
calculate a new rate of interest for the relevant time period.
IV
On cross-appeal, Mr. Caldwell maintains the district court erred in affirming
LINA’s denial of “any occupation” benefits in two ways. First, he contends the
court failed to take into account LINA’s failure to consider vocational or
22
occupational evidence. Second, he argues the court improperly applied the “any
occupation” standard. 7
The LINA administrator’s October 24, 1997 denial letter makes no specific
findings regarding whether Mr. Caldwell is entitled to “any occupation” benefits,
no doubt because the administrator had already concluded Mr. Caldwell did not
meet the less onerous “own occupation” standard. In other words, within the logic
of her decision, analysis of Mr. Caldwell’s “any occupation” benefits claim was
unnecessary.
Despite the LINA administrator’s lack of analysis, the district court upheld
her implied denial of “any occupation” benefits, concluding that, “substantial
evidence supports defendant’s determination that plaintiff was not entitled to
benefits after January 31, 1991.” Caldwell II, 37 F.Supp.2d at 1262. The district
court based its conclusion on the administrator’s reliance in her “own occupation”
analysis on Mr. Caldwell’s medical records, his post-termination employment as a
truck driver, and his admissions as to his ability to work. Specifically, the district
7
LINA asserts that we need not reach the merits of Mr. Caldwell’s claims.
Pointing to Tenth Circuit Rule 28.2(C)(2) as well as our decisions in United
States v. Heckard, 238 F.3d 1222, 1230 (10th Cir. 2001), and Harolds Stores, Inc.
v. Dillard Dep’t Stores, Inc., 82 F.3d 1533, 1540 n.3 (10th Cir. 1996), it argues
that Mr. Caldwell failed to raise these issues below and thus did not preserve
them for appeal. The record demonstrates, however, that Mr. Caldwell
specifically presented and discussed the issue of vocational evidence below and
also presented arguments on the “any occupation” issue. We thus decline LINA’s
invitation to dismiss these issues on procedural grounds.
23
court pointed to the fact that on multiple occasions Mr. Caldwell admitted he was
capable of driving a truck at the time he was terminated and performing the normal
duties of a customer service representative.
Plaintiff’s admissions establish that he was able to perform the essential
duties of various occupations for which he was qualified. Furthermore,
defendant’s denial is supported by plaintiff’s ability to start and run an oil
field hauling business shortly after he was laid off and less than a year after
he was injured.
Id. at 1262.
We conclude the district court erred in reaching the merits of Mr. Caldwell’s
“any occupation” claim. ERISA section 1133(1) requires that a claims
administrator provide adequate notice to any participant whose claim has been
denied, “setting forth the specific reasons for such denial. . . .” 29 U.S.C. §
1133(1). No such reasons appear in the LINA administrator’s letter. The remedy
when an ERISA administrator fails to make adequate findings or to explain
adequately the grounds of her decision is to remand the case to the administrator
for further findings or explanation. See Gallo v. Amoco Corp., 102 F.3d 918, 923
(7th Cir. 1996); see also Counts v. Am. Gen. Life & Accident Ins. Co., 111 F.3d
105, 108 (11th Cir. 1997); Weaver v. Phoenix Home Life Mut. Ins. Co., 990 F.2d
154, 159 (4th Cir. 1993). A remand for further action is unnecessary only if the
evidence clearly shows that the administrator’s actions were arbitrary and
capricious, Weaver, 990 F.2d at 159, or “the case is so clear cut that it would be
24
unreasonable for the plan administrator to deny the application for benefits on any
ground.” Gallo, 102 F.3d at 923 (citing Weaver, 990 F.2d at 159). Neither of
these exceptions is satisfied here because there is disputed evidence regarding
whether Mr. Caldwell became totally disabled from performing “any occupation”
due to the injuries he received while working at Western Atlas or from subsequent
injuries. 8 Such a determination requires interpretation of the LINA plan term and
further findings of fact. We therefore remand the case to the district court to
remand to the LINA administrator for a full and fair review of the record in light
of the “any occupation” standard.
Relevant to LINA’s review on remand is an issue raised by Mr. Caldwell on
appeal. Mr. Caldwell contends that a claims administrator must consider
vocational evidence when assessing a claim for disability benefits under an “any
occupation” standard, and that the LINA administrator’s failure to do so makes her
decision arbitrary and capricious. Whether an administrator must consider such
evidence is a question of first impression in this court.
8
We question the district court’s holding on this issue in light of the fact
that the terms of the LINA “any occupation” plan are quite unclear. While it is
true that Mr. Caldwell was able to perform the duties of a truck driver in the time
between January 31, 1989 and January 31, 1991, this does not necessarily
preclude a finding that his disability prevented him from performing “any
occupation” after January 31. 1991. In fact, given the Social Security
determination of total disability as of August, 1990, there is certainly evidence
that Mr. Caldwell was, in fact, unable to perform “any occupation” on January 31,
1991.
25
Determining whether a claimant’s disability is so serious as to prevent him
from performing, under LINA’s standard, “any occupation for which he is or may
reasonably become qualified based on his education, training, or experience,” App.
vol. II at 513, requires a complicated evaluation of a claimant’s abilities, skills,
and education as well as an assessment of the labor market in the claimant’s
geographic region. Vocational evidence – most typically from a vocational expert
– regarding how the employee’s impairment effects his ability to perform jobs
other than that held prior to the onset of disability is often helpful in making this
evaluation. What Mr. Caldwell asks us to do is hold that such evidence be
required before an administrator determines whether or not a claimant is indeed
disabled under the “any occupation” standard.
To date, five other circuits have ruled on this question. Not one has held
such evidence to be the sine qua non of an “any occupation” evaluation in all
cases. Rather, the courts have consistently allowed for a case-by-case
determination of whether a vocational or occupational assessment is required when
deciding whether a claimant is able to perform “any occupation” as that term is
defined by the insurer’s policy. See Pari-Fasano v. ITT Hartford Life & Accident
Ins. Co., 230 F.3d 415, 420-21 (1st Cir. 2000) (vocational assessment not
necessary in light of substantial medical evidence and conclusions of reviewing
physicians that claimant had no more than minor restrictions on her ability to
26
work); Quinn v. Blue Cross & Blue Shield Ass’n, 161 F.3d 472, 476 (7th Cir.
1998) (administrator under no obligation to undertake full-blown vocational
evaluation of claimant’s job and abilities, but has duty to make reasonable inquiry
into type of skills possessed by claimant and whether skills may be used at another
job in the same salary range); McKenzie v. Gen. Tel. Co. of California, 41 F.3d
1310, 1317 (9th Cir. 1994) (consideration of vocational evidence unnecessary
where evidence in record supports conclusion that claimant does not have
impairment preventing him from performing some identifiable job); Duhon v.
Texaco, Inc., 15 F.3d 1302, 1309 (5th Cir. 1994) (reviewing court determines on
case-by-case basis whether, under particular facts, plan administrator abused
discretion by not obtaining opinion of vocational rehabilitation expert). But
compare Gunderson v. W.R. Grace & Co. Long Term Disability Income Plan, 874
F.2d 496, 499 (8th Cir. 1989) (plan should not have terminated claimant’s benefits
without aid of qualified opinion from vocational expert), with Potter v.
Connecticut Gen. Life Ins. Co., 901 F.2d 685, 686 (8th Cir. 1990) (no need for
introduction of vocational expert testimony in light of substantial other evidence
claimant not disabled).
Persuaded by their reasoning, we join our sister circuits in holding that
whether a claims administrator must consider vocational or occupational evidence
in reaching its determination to deny a claimant “any occupation” benefits depends
27
on the circumstances of the particular case and the terms of the benefits plan. If a
claims administrator can garner substantial evidence to demonstrate that a claimant
is, in fact, able to perform other occupations (within the definition set out by the
insurer) in the open labor market, then consideration of vocational expert evidence
is unnecessary.
It is important to note that our decision today does not hold that vocational
evidence is never required. Rather, we hold that a plan administrator is not
required “‘in every case where the ‘any occupation’ standard is applicable to
collect vocational evidence in order to prove there are available occupations for
the claimant.’” Regula v. Delta Family-Care Disability Survivorship Plan, 266
F.3d 1130, 1141 n.6 (9th Cir. 2001) (construing and quoting McKenzie, 41 F.3d at
1317).
V
In sum, we AFFIRM the determination of the district court as to Mr.
Caldwell’s “own occupation” disability claim, we REVERSE as to its calculation
of the date from which prejudgment interest is owed, and we REMAND for a new
calculation of the rate of prejudgment interest in accordance with this opinion.
With respect to the cross-appeal, we REVERSE the district court’s determination
as to Mr. Caldwell’s “any occupation” disability claim and REMAND to the
28
district court with instructions that it REMAND the matter to the LINA claims
administrator for further findings of fact pursuant to the plan’s standard for “any
occupation” disability.
29