If Gallagher v. Reliance Standard, 305 F. 3d 264 (4th Cir. 2002) was the beginning of the end, the recent case of Cosey v. Prudential, 2013 WL 5977151 (4th Cir. Nov. 12, 2013) was the nail in the coffin.
Ever since Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S. Ct. 948 (1989), prudent benefit plan drafters have included explicit language in their plans to bestow discretionary authority upon the administrator to determine benefit eligibility and entitlement. Under the Firestone edict, if such language is in the Plan, a Court will review the administrator’s decision for abuse of discretion, rather than de novo.
For years, defendants finding themselves in court without explicit language in their plans have pointed to other provisions as a grant of discretionary authority in an effort to win a deferential review by the Court. For instance, in Ceasar v. Hartford Life and Accident Insurance Co., 947 F. Supp. 204 (S.C. 1996), the defendant argued, and the Court agreed, that the administrator’s reservation of “the right to determine if Proof of Loss is satisfactory” conferred the requisite discretionary powers on the plan administrator to trigger a deferential review. And in Wilcox v. Reliance Standard, 175 F. 3d 1018 (4th Cir. 1999), the defendant pointed to the plan language that provided: “We will pay a Monthly Benefit if an Insured… submits satisfactory proof of Total Disability to us.” The Court held that this language was sufficient to trigger a deferential “abuse of discretion” review, declaring that “only the most tortured reading of the language … could lead to a conclusion that the plan in this case is not vested with the discretionary authority to determine eligibility for benefits.”
Along came Gallagher, a case involving the exact same plan language as in Wilcox: “We will pay a Monthly Benefit if the Insured … submits satisfactory proof of Total Disability to us.” However, the Fourth Circuit declined to follow Wilcox, which was an unpublished opinion. The Gallagher Court held that this language was insufficient to trigger a deferential review, based upon the reasoning that “the prepositional phrase ‘to us,’ as written in the Plan, is more naturally read as modifying ‘submit’ rather than “satisfactory.’”
The placement of the preposition did not seem to matter to the Cosey Court. In Cosey, Prudential’s plan stated that benefits would be paid to a claimant who “submit[s] proof of continuing disability satisfactory to Prudential.” The Cosey Court framed the issue as “whether the phrase ‘proof satisfactory to [the plan administrator]’ unambiguously confers discretionary decision-making authority on a plan administrator.” It found this issue to be a matter of first impression, noting that the Gallagher Court’s musings about hypothetical phrases were dicta. The Cosey Court characterized the phrase “proof satisfactory to us” as “inherently ambiguous,” thus allowing it to construe it against the drafters. The Court went on to comment that such language did not put the participants on notice as to whether the administrator had discretionary authority, and rationalized that drafters had been given ample opportunity after Firestone to insert clear language in their plans. The Cosey Court remanded the case to the District Court to review the administrator’s decision de novo.
In the end, while the Court in Cosey, citing Gallagher, gave lip service to the principle that “no magic words” were required to ensure deferential review, it has now triggered a disappearing act on the charmed life of “satisfactory proof” language.