Appeal from the United States District Court for the Southern District of Indiana, Terre Haute Division. No. 93 C 215--Larry J. McKinney, Judge.
Before BAUER, KANNE, and DIANE P. WOOD, Circuit Judges.
DIANE P. WOOD, Circuit Judge.
ARGUED SEPTEMBER 11, 1995
DECIDED FEBRUARY 29, 1996
The question in this case turns on what exactly Hercules Incorporated promised its employees in the Hercules Income Protection Plan, with respect to the long term disability portion of that plan, and more particularly on how much discretion it conferred on the plan administrator. Linda Ramsey, an employee of Hercules from October 1975 until 1991, challenged the decision of Provident Life and Accident Insurance Company, the plan administrator, to terminate her long term disability benefits as of July 8, 1993. The district court concluded that the Plan gave the administrator discretionary authority to determine participant eligibility, and it thus reviewed Ramsey's claim under the "arbitrary and capricious" standard. From that perspective, the court found that the administrator's action was neither arbitrary, capricious, nor "downright unreasonable," and it granted summary judgment to the defendants. Because we conclude, upon an independent review of the language of this particular Plan, that the administrator did not have the necessary discretion to support this standard of review, we reverse and remand for further proceedings.
After working for Hercules for more than fifteen years, Ramsey submitted a claim for long term disability benefits under the Plan on June 11, 1991, stating that she had been totally disabled since January 8, 1991. (Between January and June, Ramsey received short term disability benefits, which are not at issue here.) The plan administrator found her eligible for benefits, and she received total disability benefit payments for twenty-four months. During that time period, Provident monitored Ramsey's abilities. As a result of its review, on April 23, 1993, Provident decided that her benefits should cease as of July 8, 1993. Upon Ramsey's request for reconsideration, Provident took another look at the record and decided on July 23, 1993, to reaffirm its earlier decision. Ramsey then brought an action in the district court under the Employment Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. sec. 1132(a)(1)(B), which permits plan beneficiaries to sue in federal court to recover benefits due to them.
The Plan describes the short term disability benefits and the long term disability plan in separate sections. It explains at the outset that the two types of benefits offer different coverage and have different eligibility requirements. Both the short term benefits and the long term benefits sections address the important question "when benefits end." For short term benefits, the Plan provides that benefits end at the earliest of the following:
* When you refuse to provide information about your disability to the Company or refuse medical examinations by a physician chosen by the Company to determine your fitness for work.
* When you are no longer disabled and you are capable of returning to work as determined by the Company.
* When you refuse reasonable work at your location.
* When you have been paid all the benefits for which you are eligible. (Emphasis added).
With respect to long term benefits, the Plan states that benefits begin after short term benefits end. In most situations, the Plan continues, "these benefits continue as long as you remain disabled, up to age 65." Thus, logically enough, when disability ends, the right to benefits ends also. In a section entitled "End of Disability," located in the ...