Edward Sanford v. Life Ins. Co. of North America

NOT RECOMMENDED FOR PUBLICATION
File Name: 15a0131n.06

No. 14-5332

UNITED STATES COURTS OF APPEALS
FOR THE SIXTH CIRCUIT

EDWARD SANFORD, )
FILED
) Feb 13, 2015
Plaintiff-Appellant, ) DEBORAH S. HUNT, Clerk
)
v. ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
LIFE INSURANCE COMPANY OF NORTH ) COURT FOR THE MIDDLE
AMERICA, ) DISTRICT OF TENNESSEE
)
Defendant-Appellee. )
)

BEFORE: NORRIS, ROGERS, and WHITE, Circuit Judges.

ROGERS, Circuit Judge. On November 3, 2010, Edward Sanford retired from his job

as an executive at LifePoint Hospitals, Inc. Five days later he injured his back while deplaning

from his private aircraft. Sanford sought short- and long-term disability coverage from

LifePoint’s insurer, Life Insurance Company of North America, which denied coverage on the

ground that Sanford’s alleged disability began after his employment at LifePoint had ended. The

district court affirmed the denial of benefits, concluding that, because Sanford was not in “Active

Service” when the injury occurred, he was not eligible for benefits. Sanford appeals that

decision. Because he was not in “Active Service” at the time of his injury, however, and because

“Active Service” is a prerequisite for coverage under the relevant plans, Sanford was not entitled

to benefits.
No. 14-5332
Sanford v. LINA

Sanford was the CEO/Administrator for LifePoint. On October 4, 2010, he notified

LifePoint in writing that he was resigning from the company effective November 3, 2010.

Sanford v. LINA, Case No. 2:12-cv-56, doc. # 19-2, PageID 86. On the date of his retirement, he

had accrued four weeks of paid time off (“PTO”), which LifePoint continued to pay through

November 27, 2010.

On November 8, 2010, Sanford flew his private plane to Louisiana. While deplaning, he

fractured his back. He was subsequently diagnosed with multiple myeloma.

In April 2011, Sanford applied to LifePoint’s insurer, Life Insurance Company of North

America (“LINA”), for short- and long-term disability benefits. LINA denied both claims on the

ground that Sanford was not a LifePoint employee at the onset of his alleged disability, so that he

was ineligible for coverage under the relevant policies (“the Plans”). A.R. 240-42, 246.

Sanford used LINA’s internal appeals process to challenge the denials. LINA

investigated Sanford’s claims by contacting LifePoint to confirm that Sanford’s last day of

employment had been November 3, 2010. LifePoint confirmed as much, even double-checking

with the current CEO of the facility where Sanford had worked. Id. at 159. After receiving

confirmation from LifePoint that Sanford was retired at the time of his injury, LINA affirmed its

denials on the ground that Sanford was not in “Active Service” at the time of his injury,

meaning, under the Plans, that he was not eligible for benefits. Id. at 230-32, 254.

Several months later, Sanford filed this action for wrongful denial of short- and long-term

disability benefits. Both parties moved for judgment on the pleadings and the district court

ultimately granted LINA’s motion for judgment on the administrative record. Sanford v. Life Ins.

Co. of N. Am., 1 F. Supp. 3d 829 (M.D. Tenn. 2014). The district court concluded that LINA had

not acted arbitrarily or capriciously in concluding that Sanford was ineligible for benefits

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No. 14-5332
Sanford v. LINA

because Sanford was retired when the injury occurred. The Plans provided that a participant’s

coverage would terminate in the event that the participant: (1) ceased to be in “Active Service”;

or (2) was no longer a member of an “eligible class.” A.R. 275. The district court held that

LINA’s decision was rational because, at the time of the injury, Sanford was neither a member of

an “eligible class,” nor in “Active Service,” and was also not entitled to invoke the Continuation

of Insurance Provision in the Plans. Sanford, 1 F. Supp. 3d at 835. Sanford appeals that

decision.

To prevail on appeal, Sanford must demonstrate that LINA’s conclusion—that he was not

“in Active Service” at the onset of his alleged disability—was arbitrary or capricious. See

Firestone Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). According to the Plans:

An employee is in Active Service on a day which is one of the Employer’s scheduled
work days if either of the following conditions are [sic] met.
1. The Employee is performing his or her regular occupation for the Employer
on a full-time basis. He or she must be working at one of the Employer’s usual
places of business or at some location to which the employer’s business
requires an Employee to travel.
2. The day is a scheduled holiday or vacation day and the Employee was
performing his or her regular occupation on the preceding scheduled work
day.
An Employee is in Active Service on a day which is not one of the Employer’s
scheduled work days only if he or she was in Active Service on the preceding
scheduled work day.
A.R. 286. Sanford does not meet the first condition because he was not “performing his . . .

regular occupation for [LifePoint] on a full time basis” at the onset of his alleged disability. Id.

Thus, he is only eligible for coverage under the Plans if he met the second condition.

LINA’s conclusion that Sanford did not meet the second condition was neither arbitrary

nor capricious because LINA could reasonably have determined that Sanford was not on a

“vacation day” when he injured himself, but rather retired. The Plans do not define “vacation,”

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No. 14-5332
Sanford v. LINA

so LINA was required by law to interpret that term according to its ordinary meaning. Morgan

v. SKF USA, Inc., 385 F.3d 989, 992 (6th Cir. 2004). A “vacation,” LINA could reason, must be

from something—be it inclement weather, the monotony of one’s daily routine, or, as is

frequently the case, job responsibilities. See, e.g., WEBSTER’S II NEW COLLEGE DICTIONARY

1217 (2001) (defining “vacation”). Particularly in the context of an employer’s disability plan, it

is reasonable—and not arbitrary or capricious—to read “vacation” to mean “vacation from the

Plan participant’s job responsibilities.” On this reading, Sanford could not “vacation” from his

job responsibilities because, having retired, he had no job responsibilities whatsoever. Thus,

LINA could reasonably conclude that Sanford was not on “vacation” when the injury occurred,

meaning he would not have been “in Active Service” for purposes of receiving benefits under the

Plans.

Sanford argues that LINA’s interpretation of “vacation” is artificially narrow, but

language in the Plans suggests otherwise. Specifically, the Continuation of Insurance provision

in the Plans states that, “if an Employee’s Active Service ends due to layoff, termination of

employment, or any other termination of the employment relationship, insurance will terminate

and Continuation of Insurance under this provision will not apply.” A.R. 307. The clear

implication is that “an Employee’s Active Service ends” upon “any [] termination of the

employment relationship.” LINA’s conclusion—that Sanford was not “in Active Service” at the

onset of his disability—is in keeping with the Continuation of Insurance provision, whereas

Sanford’s proffered interpretation of “Active Service” is not. That, too, undermines Sanford’s

argument that LINA’s decision in this matter was arbitrary or capricious.

Sanford makes a few other arguments, none of which is compelling. First, he points out

that, at the time of the injury, his former employer was still deducting insurance premiums from

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No. 14-5332
Sanford v. LINA

his payouts. But an otherwise ineligible employee does not somehow become eligible for

coverage simply because he continued to pay premiums. Moss v. Unum Life Ins. Co., 495 F.

App’x 583, 594 (6th Cir. 2012). Sanford also cites a number of cases for the proposition “that

unused vacation time at the end of the employment relationship may extend the period of

employment for purposes of benefit eligibility and/or calculation.” He did the same thing at the

district court and the district court persuasively explained why each case cited by Sanford was

inapposite. Sanford, 1 F. Supp. 3d at 836–37.

The judgment of the district court is AFFIRMED.

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