Carden v. Aetna Life Insurance

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

LARRY CARDEN, 
Plaintiff-Appellant,
v.  No. 07-2165
AETNA LIFE INSURANCE COMPANY,
Defendant-Appellee.

Appeal from the United States District Court
for the District of South Carolina, at Greenville.
R. Bryan Harwell, District Judge.
(6:05-cv-02053-RBH)

Argued: December 3, 2008

Decided: March 11, 2009

Before NIEMEYER and MICHAEL, Circuit Judges,
and Rebecca Beach SMITH, United States District Judge
for the Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Judge Niemeyer wrote the
opinion, in which Judge Michael and Judge Smith joined.

COUNSEL

ARGUED: Robert Edward Hoskins, FOSTER LAW FIRM,
L.L.P., Greenville, South Carolina, for Appellant. Thomas
Edward Vanderbloemen, GALLIVAN, WHITE & BOYD,
2 CARDEN v. AETNA LIFE INSURANCE
P.A., Greenville, South Carolina, for Appellee. ON BRIEF:
Jennifer E. Johnsen, Nicole J. Buntin, GALLIVAN, WHITE
& BOYD, P.A., Greenville, South Carolina, for Appellee.

OPINION

NIEMEYER, Circuit Judge:

In paying Larry Carden monthly benefits under a long-term
disability plan governed by the Employee Retirement Income
Security Act of 1974 ("ERISA"), Aetna Life Insurance Com-
pany, the insurer and administrator of the plan, offset work-
ers’ compensation benefits that Carden received for an illness
unrelated to his disability. Aetna relied on its reading of the
plan’s offset provisions and the plan language giving it discre-
tion to interpret the plan.

The district court concluded that Aetna’s determination was
consistent with the language of the plan and that therefore its
interpretation was not unreasonable. It accordingly concluded
that "Aetna is entitled to offset Plaintiff’s long-term disability
benefits by the workers’ compensation benefits which he
received."

Challenging Aetna’s reading of the plan, especially in light
of Aetna’s financial conflict of interest, Carden appealed. For
the reasons that follow, we affirm.

I

Larry Carden, a power plant operator for Duke Energy Cor-
poration since 1966, began experiencing symptoms of epi-
sodic vertigo (causing imbalance and dizziness) in 1982. In
April 1997, he ceased working as a result of this condition
and made a claim under Duke Energy’s long-term disability
plan. Aetna, which administered and paid benefits under the
 CARDEN v. AETNA LIFE INSURANCE 3
plan, accepted Carden’s application and began paying Carden
monthly disability benefits.

Unbeknownst to Aetna, Carden made a workers’ compen-
sation claim against Duke Energy a few months later, in
August 1997, alleging that he was suffering from asbestosis
"as a direct and proximate result of his employment" with
Duke Energy. Although Duke Energy contested the claim,
asserting that Carden had not been "exposed to the hazards of
asbestos," it ultimately entered into a settlement agreement
with Carden in May 1999 for a lump sum payment of
$53,248, of which $39,936 was allocated to Carden’s "alleged
permanent impairment" and $13,312 to attorneys fees. Duke
Energy also agreed to pay future medical expenses relating to
asbestosis.

When Aetna first learned of Carden’s workers’ compensa-
tion settlement in late 2004, it notified Carden by letter dated
December 7, 2004, that the workers’ compensation award was
"other income" under the plan that needed to be offset against
his disability benefits. Aetna set out a schedule, under which
Carden would repay the $39,936 through a $665.60 reduction
in his monthly disability checks for 60 months, and explained
that it was making the adjustment "[s]ince you have received
disability benefits in excess of your entitlement." When Car-
den appealed the decision, Aetna affirmed, explaining to Car-
den’s attorney:

Our interpretation of the plan is Worker’s compensa-
tion benefits Mr. Carden received is [sic] considered
as "other income" as described on page 9 in the cov-
erage summary. Therefore, we feel it should be off-
set or reduce his monthly [long-term disability]
payments.

Carden commenced this action under ERISA, 29 U.S.C.
§ 1132, challenging Aetna’s interpretation of the plan, and the
parties thereafter entered into a stipulation of the material
4 CARDEN v. AETNA LIFE INSURANCE
facts and the issue to be decided. They agreed that there are
no facts in dispute and that "the basis for Mr. Carden’s dis-
ability claim with [Aetna] [by reason of vertigo] and the phys-
ical basis for his Workers’ Compensation claim [asbestosis]
are different." They stipulated to the "administrative record"
and to the plan documents and language. They agreed that
Aetna is a fiduciary as defined by ERISA and that it had dis-
cretionary authority to interpret the plan under plan language
that read, "Aetna shall have discretionary authority to: deter-
mine whether and to what extent employees and beneficiaries
are entitled to benefits; and construe any disputed or doubtful
terms of this policy." They also agreed that because of
Aetna’s role in evaluating and paying claims, "the ‘modified
abuse of discretion standard’ as interpreted and applied by the
Fourth Circuit Court of Appeals and this Court is applicable
for this matter."* Finally, they agreed that the case turned
entirely on the proper interpretation of the plan language,
articulating the issue as follows:

The parties agree that the substantive issue to be
resolved is whether [Aetna], under the specific lan-
guage of the plan documents . . . is entitled to offset
worker’s compensation benefits recovered by Mr.
Carden against the monthly disability benefits being
paid by [Aetna] to Mr. Carden when the physical
basis for the disability benefits being paid by [Aetna]
[i.e., vertigo] is different than the physical basis
which gave rise to the worker’s compensation award
[i.e., asbestosis].

The district court found that Aetna’s interpretation of the
plan was reasonable and was supported by substantial evi-
dence, resulting from a deliberate, principled reasoning pro-

*After this stipulation was agreed to, the Fourth Circuit altered the stan-
dard of review in light of Metropolitan Life Insurance Co. v. Glenn, ___
U.S. ___, 128 S. Ct. 2343 (2008). See Champion v. Black & Decker (U.S.)
Inc., 550 F.3d 353, 359 (4th Cir. 2008).
 CARDEN v. AETNA LIFE INSURANCE 5
cess. Accordingly, it entered a judgment on November 5,
2007, declaring, "Aetna is entitled to offset Plaintiff’s long-
term disability benefits by the workers’ compensation benefits
which he received based on his asbestosis." From that judg-
ment, Carden appeals.

II

The plan in this case provides long-term disability benefits
to employees, and, because Carden suffers from vertigo, he
has been receiving disability benefits since 1997. There is no
dispute about whether the benefits are payable and their
amount. Rather, the issue here is whether Aetna, functioning
under a conflict of interest, acted reasonably in construing the
plan’s language to provide for an offset against those benefits
in the amount that Carden received in 1999 as a lump-sum
payment for his permanent impairment caused by asbestosis.

Carden contends that the plan, in addressing "Lump Sum
Payments From Workers’ Compensation," provides that such
a lump-sum payment may be set off against disability benefits
only when the lump-sum payment is for the same "disability"
for which long-term disability benefits are paid. While Carden
claims that the plan provisions are unambiguous in this
regard, he argues that if the plan language is ambiguous, it
must be interpreted "in favor of [him] and against the insurer"
because of Aetna’s conflict of interest, citing to a line of cases
represented by Carolina Care Plan, Inc. v. McKenzie, 467
F.3d 383 (4th Cir. 2006). In Carolina Care Plan, we said,
"When an ERISA plan vests discretion in an administrator
who also insures the plan, reasonable exercise of that discre-
tion requires that the administrator construe plan ambiguities
against the party who drafted the plan." 467 F.3d at 389
(emphasis added).

Since 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
6 CARDEN v. AETNA LIFE INSURANCE
(2008), altering several aspects of judicial review of ERISA
plan determinations. See Champion, 550 F.3d at 357-59. In
Glenn, the Court held that judicial review of an ERISA plan
administrator’s decision is "under a de novo standard unless
the plan provides to the contrary." Glenn, 128 S. Ct. at 2348
(citations and internal quotation marks omitted). But when the
plan language grants the administrator discretionary authority,
review is conducted under the familiar abuse-of-discretion
standard. Id.; Champion, 550 F.3d at 358.

Of especial importance here, the Glenn Court also held that
the administrator’s conflict of interest did not change the stan-
dard of review from the deferential review, normally applied
in the review of discretionary decisions, to a de novo review,
or some other hybrid standard. Glenn, 128 S. Ct. at 2350;
Champion, 550 F.3d at 358. Indeed, the Court stated more
broadly that the conflict of interest should not lead to "special
burden-of-proof rules, or other special procedural or evidenti-
ary rules, focused narrowly upon the evaluator/payor con-
flict." Glenn, 128 S. Ct. at 2351. Rather, a conflict of interest
becomes just one of the "several different, often case-specific,
factors" to be weighed together in determining whether the
administrator abused its discretion. Id.

The Glenn Court found a conflict when the plan adminis-
trator serves in the dual role of evaluating claims for benefits
and paying the claims. Glenn, 128 S. Ct. at 2346, 2348-50.
Specifically, it held that an insurance company, which served
as both administrator with discretionary authority to deter-
mine claims and insurer with responsibility of paying the
claims, functioned under a conflict of interest. Id. at 2349-50.

Inasmuch as Aetna serves both as administrator of the plan
with discretionary authority to determine entitlement to bene-
fits and to construe disputed terms and as insurer of the plan
with responsibility for paying benefits, it has a conflict of
interest, as defined by Glenn.
 CARDEN v. AETNA LIFE INSURANCE 7
Carden maintains that because of this conflict of interest
the plan language must be interpreted in his favor, thus bar-
ring Aetna from offsetting his asbestosis settlement against
his long-term disability benefits for vertigo. Carden would
have us reach this conclusion despite the plan’s language stat-
ing that "Aetna shall have discretionary authority to . . . con-
strue any disputed or doubtful terms of this policy."

Before Glenn, we had indeed developed a rule whereby
ambiguities in ERISA plans were construed against the drafter
whenever a conflict of interest existed. See Carolina Care
Plan, 467 F.3d at 389; Bynum v. Cigna Healthcare of N.C.,
Inc., 287 F.3d 305, 313-14 (4th Cir. 2002); Bailey v. Blue
Cross & Blue Shield of Va., 67 F.3d 53, 58 (4th Cir. 1995);
Doe v. Group Hospitalization & Med. Servs., 3 F.3d 80, 88-89
(4th Cir. 1993). In those cases, we applied this "contra profer-
entem" rule even when the plan language gave discretion to
the plan administrator to interpret disputed or doubtful terms.

But Glenn now forecloses our application of that rule to
curb the discretion given an administrator by a plan, ruling
that it is not "necessary or desirable for courts to create spe-
cial burden-of-proof rules, or other special procedural or evi-
dentiary rules, focused narrowly upon the evaluator/payor
conflict." 128 S. Ct. at 2351. Indeed, the Court rejected the
very idea of applying hard and fast rules for the review of
ERISA determinations, calling them "formulas that will fal-
sif[y] the actual process of judging" and "instrument[s] of
futile casuistry." Id. at 2352 (alterations in original) (citation
and internal quotation marks omitted). Rather, under the
Glenn review structure, we must consider the administrator’s
conflict of interest as only "one factor among many" in deter-
mining the reasonableness of the administrator’s decision
exercising discretionary authority. Id. at 2351.

As the result of Glenn, whenever a plan administrator
employs its interpretive discretion to construe an ambiguous
provision in favor of its financial interest, that fact may be
8 CARDEN v. AETNA LIFE INSURANCE
considered as a factor weighing against the reasonableness of
its decision. Conversely, when the administrator exercises its
interpretive discretion to construe an ambiguous provision
against its financial interest, that fact may be considered as a
factor weighing in favor of the reasonableness of the decision.
But this factor—in either case—is only considered with all of
the other factors that may be brought to bear in determining
whether the administrator abused his discretion. See Glenn,
128 S. Ct. at 2351. The weight accorded to this factor will, of
course, depend largely on the plan’s language and on consid-
eration of other relevant factors. In Booth v. Wal-Mart Stores,
Inc. Associates Health & Welfare Plan, 201 F.3d 335 (4th Cir.
2000), we identified eight nonexclusive factors that guide our
ERISA abuse-of-discretion review:

(1) the language of the plan; (2) the purposes and
goals of the plan; (3) the adequacy of the materials
considered to make the decision and the degree to
which they support it; (4) whether the fiduciary’s
interpretation was consistent with other provisions in
the plan and with earlier interpretations of the plan;
(5) whether the decisionmaking process was rea-
soned and principled; (6) whether the decision was
consistent with the procedural and substantive
requirements of ERISA; (7) any external standard
relevant to the exercise of discretion; and (8) the
fiduciary’s motives and any conflict of interest it
may have.

Id. at 342-43 (footnote omitted).

The adjustment to our ERISA jurisprudence in light of
Glenn is necessitated also by Glenn’s reemphasis on resolving
ERISA questions such as these under principles of trust law,
analogizing the plan administrator to a trustee. See Glenn, 128
S. Ct. at 2347. The Court thus reaffirmed its holding in Fire-
stone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989),
that courts are to apply trust-law principles to ERISA determi-
 CARDEN v. AETNA LIFE INSURANCE 9
nations. Among the principles of trust law reiterated by Fire-
stone are those that "[a] trustee may be given power to
construe disputed or doubtful terms, and in such circum-
stances the trustee’s interpretation will not be disturbed if rea-
sonable." 489 U.S. at 111 (citing G. Bogert & G. Bogert, Law
of Trusts and Trustees § 559, at 169-171 (2d rev. ed. 1980)).

We now turn to our review of Aetna’s interpretation of the
plan, beginning with consideration of the plan’s language.
The key sections of the plan are three unnumbered sections,
labeled by plain-language descriptions as follows: (1) "Other
Income Benefits—This section outlines income benefits
which you may receive from other sources while disabled and
which will be considered as an offset to payments you receive
under this plan"; (2) "Other Income Benefits Which Do Not
Reduce Benefits"; and (3) "How Aetna Determines Other
Income Benefits." Thus, sections (1) and (2) (our numbering)
list the income from other sources that will and will not
reduce Carden’s long-term disability benefits. Aetna applied
section (1) to Carden, which provides in part that offsets will
be made for the following sources of "other income benefits":

Disability, retirement, or unemployment benefits
required or provided for under any law of a govern-
ment. Examples are:

Unemployment compensation benefits.

Temporary or permanent, partial or total
disability benefits under any state or federal
workers’ compensation law or any like law,
which are meant to compensate the worker
for any one or more of the following: loss
of past or future wages; impaired earning
capacity; lessened ability to compete in the
open labor market; any degree of perma-
nent impairment; and any degree of loss of
bodily function or capacity.
10 CARDEN v. AETNA LIFE INSURANCE
Statutory disability benefits.

Benefits under the Federal Social Security
Act, the Railroad Retirement Act, the Can-
ada Pension Plan, and the Quebec Pension
Plan.

Veterans’ benefits.

(Emphasis added). Because Carden received workers’ com-
pensation benefits in the amount of $39,936 as "compensation
for Employee-Plaintiff’s alleged permanent impairment,"
(emphasis added), Aetna applied this income as an offset.
Aetna relied on the specific language in section (1) that pro-
vides offsets of income from "permanent . . . disability bene-
fits under any state . . . workers’ compensation law . . . which
are meant to compensate the worker for any one or more of
the following: . . . any degree of permanent impairment; and
any degree of loss of bodily function or capacity." (Emphasis
added).

Aetna then applied section (3), which explains how to off-
set a disability benefit that is paid in a "lump sum payment."
Section (3) provides in relevant part:

Lump Sum Payments From Workers’ Compensa-
tion:

That part of the lump sum payment that is for dis-
ability will be counted, even if it is not specifically
apportioned or identified as such. This will be done
if it is or is not the result of a compromise, settle-
ment, award or judgment. . . . This amount will be
broken down to a period of time equal to the lesser
of: (a) the remaining benefit duration; and (b) 60
months.

(Emphasis added).
 CARDEN v. AETNA LIFE INSURANCE 11
Carden argues that the "for disability" language in section
(3) refers to the same disability for which he is receiving dis-
ability benefits because that is the only relevant disability.
Because he is receiving disability benefits for vertigo, he con-
tends, the lump sum payment for asbestosis is not "for [his]
disability." Therefore, the term "disability" used in these sec-
tions of the plan refers to his vertigo disability. The plan lan-
guage, he argues, does not authorize Aetna to offset the lump
sum workers’ compensation settlement he received for asbes-
tosis. He argues further that because asbestosis does not nec-
essarily disable its victims, the "for disability" language in
section (3) cannot be referring to his asbestosis settlement.

While Carden attempts to demonstrate why the plan does
not provide for offsets with respect to disability benefits
involving two different medical conditions, the plan likewise
does not provide that disability from one medical condition
cannot be set off against the disability benefits provided by
another condition. It is silent on the matter. But taking into
account the comprehensive list of other sources of income
included in section (1), it is reasonable to conclude that Aetna
has the authority to include offsets from any disabilities
related to any permanent impairment or any loss of bodily
function or capacity.

This conclusion appears to be consistent with the plan’s
design, which is to assure an income stream for the disabled
employee during the period of disability rather than an inde-
pendent benefit quantified by a specific disability. This is
demonstrated by plan provisions requiring most sources of
collateral income paid to the employee during disability be
applied to reduce the disability benefit so long as the overall
income stream remains constant. Thus, the plan provides that
the administrator may require proof from the employee "of
income you receive from any occupation for compensation or
profit," and it specifically offsets income from pensions, other
retirement benefits, and unemployment benefits.
12 CARDEN v. AETNA LIFE INSURANCE
Carden finally directs us to the definition of "disability"
under North Carolina’s workers’ compensation law, which
governed his asbestosis settlement. But this effort to apply a
meaning different from that given in the plan will not succeed
in overruling the plan’s language. See Smith v. Cont’l Cas.
Co., 369 F.3d 412, 419-20 (4th Cir. 2004) (declining to adopt
Social Security disability definitions in connection with
ERISA determinations); Elliott v. Sara Lee Corp., 190 F.3d
601, 607 (4th Cir. 1999) (same).

Considering the Booth factors, we conclude that Aetna’s
interpretation of the plan was a reasonable one, if not the best
one, and was consistent with the purposes stated in the plan.
The plan makes clear that its purpose is to ensure sufficient
support, with a specified level of "continuing income" from a
variety of income sources, for employees who are "unable to
work due to illness or injury." The settlement Carden received
from Duke Energy for asbestosis provided him with $39,936,
net of attorneys fees and future medical expenses related to
asbestos, so that the full amount of $39,936 could be included
as part of the specified level of continuing income for his sup-
port.

In sum, Booth factors (1) (language of the plan), (2) (pur-
poses and goals of the plan), and (4) (consistency with other
terms in the plan) strongly evidence the reasonableness of
Aetna’s interpretation. While we also consider Booth factor
(8) (Aetna’s conflict of interest), when we consider all of the
relevant factors and weigh them together, as required by
Glenn, 128 S. Ct. at 2351, we conclude that Aetna did not
abuse its discretion.

Accordingly, the judgment of the district court is

AFFIRMED.