PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
PATRICIA WOODS,
Plaintiff-Appellant,
v.
No. 07-1580
PRUDENTIAL INSURANCE COMPANY OF
AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Virginia, at Newport News.
Jerome B. Friedman, District Judge.
(4:06-cv-00148-JBF)
Argued: May 15, 2008
Decided: June 11, 2008
Before SHEDD, Circuit Judge, HAMILTON, Senior Circuit Judge,
and Terry L. WOOTEN, United States District Judge for the
District of South Carolina, sitting by designation.
Vacated and remanded by published opinion. Judge Shedd wrote the
opinion, in which Senior Judge Hamilton and Judge Wooten joined.
COUNSEL
ARGUED: Gregory Edward Camden, MONTAGNA, KLEIN, CAM-
DEN, LLP, Norfolk, Virginia, for Appellant. Walter Laurence Wil-
liams, WILSON, ELSER, MOSKOWITZ, EDELMAN & DICKER,
LLP, McLean, Virginia, for Appellee. ON BRIEF: Dana L. Plunkett,
2 WOODS v. PRUDENTIAL INSURANCE CO.
WILSON, ELSER, MOSKOWITZ, EDELMAN & DICKER, LLP,
McLean, Virginia, for Appellee.
OPINION
SHEDD, Circuit Judge:
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), estab-
lishes the principle that courts review de novo an ERISA1 benefits
determination unless the plan confers discretionary authority on its
administrator. In this case we again confront the question of exactly
what language is sufficient under Firestone to confer discretion on a
plan administrator — and thus trigger an abuse-of-discretion review
in the courts — over benefits determinations. In answering this ques-
tion, we conclude that the plan currently before us does not clearly
vest discretionary authority in its administrator and that the district
court erred in engaging in an abuse-of-discretion review. Accord-
ingly, we vacate the district court’s judgment and remand for further
proceedings using a de novo standard of review.
I
Patricia Woods was employed by Wendy’s International, Inc. as a
co-manager. During the time of her employment, she was insured
under a long-term disability plan (the "Plan") issued and administered
by Prudential Insurance Company of America ("Prudential"). After
Woods was injured in an automobile accident, she filed a claim for
benefits under the Plan. Prudential approved Woods’ claim and paid
her benefits for an initial twelve-month period ending in January
2005. Subsequently, Prudential reevaluated Woods’ claim and denied
further benefits beyond January 2005. Woods then pursued adminis-
trative appeals with Prudential, which eventually culminated in Pru-
dential’s final denial of benefits in September 2006.
Consequently, Woods brought this action under ERISA. Both par-
ties moved for summary judgment, which the district court granted in
1
Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq.
WOODS v. PRUDENTIAL INSURANCE CO. 3
Prudential’s favor. In so doing, the court concluded that (1) the Plan
vests discretion in Prudential to make benefits determinations and (2)
under a modified abuse-of-discretion standard Prudential’s decision
must be upheld.2 Woods now appeals, asserting that a de novo stan-
dard of review applies to Prudential’s benefits determination and
requesting that we remand to the district court for reconsideration
under that standard.
II
A.
"In reviewing the denial of benefits under an ERISA plan, a court’s
first task is to consider de novo whether the relevant plan documents
confer discretionary authority on the plan administrator to make a
benefits-eligibility determination." Blackshear v. Reliance Std. Life
Ins. Co., 509 F.3d 634, 638 (4th Cir. 2007). In undertaking this
inquiry, we begin with the broad principle set out in Firestone. There,
the Court held that "a denial of benefits . . . is to be reviewed under
a de novo standard unless the benefit plan gives the administrator or
fiduciary discretionary authority to determine eligibility for benefits
or to construe the terms of the plan." Firestone, 489 U.S. at 115
(emphasis added). If such discretionary authority is conferred, the
courts’ review is for abuse of discretion. Id. Thus, Firestone estab-
lished that the default standard of review is de novo, and that an
abuse-of-discretion review is appropriate only when discretion is
vested in the plan administrator. See, e.g., Bynum v. Cigna Healthcare
of North Carolina, Inc., 287 F.3d 305, 311 (4th Cir. 2002).
In applying Firestone, we have held that an ERISA plan can confer
discretion on its administrator in two ways: (1) by language which
"expressly creates discretionary authority," and (2) by terms which
"create discretion by implication." Feder v. Paul Revere Life Ins. Co.,
228 F.3d 518, 522-23 (4th Cir. 2000). However, regardless of whether
discretion is created expressly or implicitly, we have consistently
2
The district court employed a modified abuse-of-discretion standard
because Prudential is both the administrator and the insurer of the Plan.
See, e.g., Doe v. Group Hospitalization & Med. Sers., 3 F.3d 80, 87 (4th
Cir. 1993).
4 WOODS v. PRUDENTIAL INSURANCE CO.
required that the plan manifest a clear intent to confer such discretion.
See, e.g., id. at 523; Gallagher v. Reliance Std. Life Ins. Co., 305 F.3d
264, 268 (4th Cir. 2002). Moreover, we have made it plain that "[i]f
a plan does not clearly grant discretion, the standard of review is de
novo." Id. at 270 n.6. Finally, in the context of determining whether
a plan sufficiently confers discretion, we have held that "[a]ny
ambiguity in an ERISA plan is construed against the drafter of the
plan . . . and in accordance with the reasonable expectations of the
insured." Id. (internal quotations omitted).
B.
With these principles in mind, we must determine whether the Plan
confers discretionary authority over benefit determinations on Pru-
dential. While both parties agree that the Plan does not do so
expressly, Prudential contends that such authority should be implied
because the Plan specifies that a claimant is eligible for benefits
"when Prudential determines" that eligibility exists and that disabili-
ties are "determined by Prudential."3 We find Prudential’s argument
unpersuasive.
Although the Plan’s language vests authority in Prudential, it does
not create any discretionary authority, as required by Firestone. As
we indicated in Gallagher, discretionary authority is not conferred
"by the mere fact that a plan requires a determination of eligibility or
entitlement by the administrator." 305 F.3d at 269 (internal quotations
3
The Summary Plan Description ("SPD") contains the following lan-
guage:
The Prudential Insurance Company of America as Claims
Administrator has the sole discretion to interpret the terms of the
Group Contract, to make factual findings, and to determine eligi-
bility for benefits. The decision of the Claims Administrator
shall not be overturned unless arbitrary and capricious.
J.A. 584 (emphasis added). Both Prudential and Woods acknowledge
that this language is not relevant to our inquiry because it is not con-
tained in the Plan itself. Nonetheless, its inclusion in the SPD demon-
strates that Prudential knows how to draft language expressly reserving
discretionary authority.
WOODS v. PRUDENTIAL INSURANCE CO. 5
4
omitted). In other words, almost all ERISA plans designate an
administrator who, in order to carry out its duties under the plan, must
determine whether a participant is eligible for benefits. Yet this
authority to make determinations does not carry with it the requisite
discretion under Firestone unless the plan so provides. Firestone itself
is based on this distinction. That decision, grounded in common law
trust principles, drew a contrast between trustees who had no discre-
tion but who, of course, had authority to manage a trust, and trustees
who had been granted discretion, in addition to their authority. See,
e.g., Firestone, 489 U.S. at 111 ("where discretion is conferred upon
the trustee," abuse-of-discretion review is appropriate); id. (abuse-of-
discretion review is appropriate when "discretion [is] vested in [trust-
ees] by the instrument under which they act"); see also Haley v. Paul
Revere Life Ins. Co., 77 F.3d 84, 88 (4th Cir. 1996) (noting difference
between authority/duty to pay benefits and grant of discretion over
benefit determinations). This distinction is important because ERISA
plans are to be construed "in accordance with the reasonable expecta-
tions of the insured" when ambiguous, Gallagher, 305 F.3d at 269,
and are to "enable plan beneficiaries to learn their rights and obliga-
tions at any time" by "reliance on the face of written plan documents,"
Blackshear, 509 F.3d at 643 (internal citations and alteration omitted).
A plan which simply conveys authority to an administrator creates the
expectation only that such authority will be exercised, not that the
administrator will enjoy wide discretion in wielding its authority as
well as freedom from searching judicial scrutiny.
In reaching this conclusion, we find ourselves in substantial accord
with the Seventh Circuit’s decision in Herzberger v. Standard Ins.
Co., 205 F.3d 327, 332 (7th Cir. 2000):
We hold that the mere fact that a plan requires a determina-
tion of eligibility or entitlement by the administrator . . .
4
Prudential relies heavily on our statement in Feder that "if the terms
of a plan indicate a clear intention to delegate final authority to determine
eligibility to the plan administrator, then [we] will recognize discretion-
ary authority by implication." 228 F.3d at 523. However, as we made
clear in Gallagher, we cannot infer a final authority to determine eligibil-
ity from the mere requirement that a determination be made by the
administrator.
6 WOODS v. PRUDENTIAL INSURANCE CO.
does not give the employee adequate notice that the plan
administrator is to make a judgment largely insulated from
judicial review by reason of being discretionary. Obviously
a plan will not — could not, consistent with its fiduciary
obligation to the other participants — pay benefits without
first making a determination that the applicant was entitled
to them. The statement of this truism in the plan document
implies nothing one way or the other about the scope of
judicial review of his determination, any more than our
statement that a district court "determined" this or that tele-
graphs the scope of our judicial review of that determina-
tion.
In Gallagher, we implicitly accepted this reasoning, see 305 F.3d at
269-70, and we expressly do so now.
This approach makes clear that the Plan’s language merely desig-
nates who must make benefit determinations and the timing of those
determinations. Nothing in the phrases "when Prudential determines"
or "determined by Prudential" implies the conferral of discretion, as
opposed to mere authority, on Prudential. A contrary conclusion —
that the bare assignment of authority to Prudential creates Firestone-
type discretion — would lead to an abuse-of-discretion (rather than
a de novo) review whenever an administrator is vested with authority
to make eligibility determinations. Thus, because an administrator
always possesses such authority (the responsibility to make eligibility
determinations being inherent in the office of administrator), Pruden-
tial’s argument would lead to an abuse-of-discretion review in nearly
every ERISA benefits case, thereby jettisoning Firestone’s distinction
between authority and discretionary authority.
III
Accordingly, Prudential’s denial of Woods’ claim must be
reviewed de novo. We vacate the judgment entered below and remand
for further proceedings consistent with this opinion.
VACATED AND REMANDED