William R. Russell, Iii v. PAUL REVERE LIFE INSURANCE COMPANY Appeal from the United States District Court For…

PRECEDENTIAL
Filed March 22, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-2824
WILLIAM R. RUSSELL, III,
Appellant
v.
PAUL REVERE LIFE INSURANCE COMPANY
Appeal from the United States District Court
For the District of Delaware
D.C. No.: 96-cv-00474
District Judge: Honorable Gregory M. Sleet
Argued: March 5, 2002
Before: SCIRICA, ROSENN, Circuit Judges, and
WARD,* District Judge.
(Filed March 22, 2002)
John M. Stull (Argued)
1300 North Market Street
P.O. Box 1947
Wilmington, DE 19899
________________________________________________________________
* Honorable Robert J. Ward, United States District Court for the
Southern District of New York, sitting by designation.
Edmond D. Johnson
The Bayard Firm
222 Delaware Avenue
P.O. Box 25130, 9th Floor
Wilmington, DE 19899
Counsel for Appellant
Mark E. Schmidtke (Argued)
Hoeppner, Wagner & Evans
103 East Lincolnway
Valparaiso, IN 46383
Gerald E. Burns
Klett, Rooney, Lieber & Schorling
18th & Arch Streets
Two Logan Square, 12th Floor
Philadelphia, PA 19103
Counsel for Appellee
OPINION OF THE COURT

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ROSENN, Circuit Judge:
William R. Russell, III, claims that he sustained total
disability while employed by Corporate Property Investors,
Inc. (CPI), as a real estate asset manager. At the time, he
was covered by both an individual policy for management
employees and a group policy as an employee benefit plan.
Both policies included a disability benefit, each covering
40% of the employee’s salary and each issued by the Paul
Revere Life Insurance Company (the Insurer or Company).
As a result of an alleged disability, Russell ceased active
employment and applied for disability status under both
policies.
The insurer initially approved the benefits but about a
year later it discontinued them on the ground that Russell
no longer met the total disability definition of both policies.
Following denial of his claims and his appeals pursuant to
the plans, Russell sued the insurer in the United States
District Court for the District of Delaware pursuant to the
Employee Retirement Income Security Act of 1974 (ERISA),
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29 U.S.C. SS 1001-1461 seeking review of the insurer’s
denial of his claim for long-term disability benefits. The
defendant insurance Company moved for summary
judgment and the District Court granted the motion. The
plaintiff, Russell, timely appealed. We affirm.
I.
Russell alleged in his complaint that he was employed by
CPI in March 1990 as a Vice President and within the next
two years became a participant in the Company’s Individual
Limited Plan and in its Group Limited Plan. He further
alleged that the defendant Company is a fiduciary of both
plans with discretionary authority to determine eligibility
for benefits. As Vice President - Asset Manager, his duties
included, inter alia, "overseeing a portfolio of commercial
real estate properties located in the states of New Jersey,
California, and Washington." This, he claims, required him
to travel from his office in New York approximately 25% of
his time. In his Statement for Disability Benefits to the
Company, Russell stated that he applied approximately
25% of his 40 hour week to coordinating the activities of
various persons involved in the leasing and management of
each property, and reviewing budgets, marketing plans and
property appraisals for each property, including frequent
travel to each property site. He also indicated that he spent
10 to 15 hours per week coordinating the work of in-house
and outside personnel associated with this effort. Finally,
he represented that about 5 to 10 hours per week were
allocated to financial analysis, mortgage financing, selling,
or purchasing additional interests. His claim designated his
occupation as sedentary, which was defined as involving
sitting, walking, or standing, and lifting objects between
zero and 10 pounds. The Company did not dispute

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Russell’s characterization of his duties.
In March 1995, at age 37, Russell filed a disability claim
with defendant requesting total disability benefits under the
Group and Individual Limited plans. Both policies
essentially provide that an eligible employee is entitled to
disability payments if "(1) because of injury or sickness, you
cannot perform the important duties of your own
occupation; and (2) you are under the regular care of a
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doctor; and (3) you do not work at all." The Company
approved benefits under both plans retroactive to April 23,
1995. However, it ceased payment of the benefits under
both policies on January 16, 1996, concluding that Russell
no longer met the definition of total disability under either
of them.
In the District Court and in his complaint, Russell
claimed that he suffers from a complex set of symptoms
involving chronic pain in his back, chest, upper right
abdominal quadrant, muscle and joint pain, as well as
digestive symptoms involving frequent painful eructation.
The District Court applied an arbitrary and capricious
standard of review with a high level of deference to the
Administrator but modified to the extent that the deference
was not absolute. It therefore limited that review to the
record before the Administrator. Mitchell v. Eastman Kodak
Co., 113 F.3d 433, 440 (3d Cir. 1997). The Court also noted
that because the Company was the Plan Administrator, it
had a conflict of interest. The Court, therefore, accorded the
Administrator’s decision "somewhat less deference."
Russell’s claims to the Administrator were supported by
written statements of his treating physicians, Dr. Frank
Petito and Dr. Lucinda Harris. Both opined that Russell
was "continuously unable to perform in his/her
occupation." Dr. Harris, however, in a letter dated April 5,
1996, stated that she believed he was "capable of doing
sedentary office work that does not require any heavy lifting
or any extensive travel." She reiterated also that he suffers
"chronic pain and believes him to be unable to do the level
of work which he was doing prior to this chronic pain
syndrome."
The language of both policies provides that the Company
reserved the right to require "additional" or"continuing"
proof of loss in order to continue paying benefits. The
Company conducted a periodic review of the disability
evidence, progress reports and activities check. Based on
this review, it ceased payment of benefits under both
policies on January 16, 1996.
The January 16, 1996, Company letters terminating
benefits advised Russell that it was "unable to determine
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any restrictions and/or limitations that would prevent [him]
from returning to [his] sedentary occupation." The
Company specifically noted that Russell’s complaints of
"chronic abdominal pain, combined with periodic nausea;
as well as frequent muscle and joint pain . . . and an
inability to work long hours," coupled with the medical
information submitted by his attending physicians and the
activities check, do not support a finding of total disability.
The District Court agreed.
The District Court specifically found that the vast
majority of the supporting claim documentation did not
support a finding of total disability. The Court found that
the medical examinations consistently were unable to find
a cause of Russell’s symptoms and that most of the
examination results were "negative" or "normal." Although
the Court found that an objective view of all the medical
evidence supported the conclusion that Russell suffered
chronic pain prior to his resignation from CPI, it also
believed that Russell’s tests and examinations were
"persuasively captured" in Dr. Rand Compton’s letter of
March 14, 1994, to Dr. Petito, stating in pertinent part:
Besides his pain, there are no symptoms or signs that
suggest a disease process. All of the laboratory tests
done here and elsewhere have been completely normal,
and given the chronicity of his problem, it is our
opinion that there is no significant pathology that can
account for his pain symptoms.
Dr. Compton, an independent consultant of the Mayo
Clinic, had previously written a letter dated March 11,
1994, stating that multiple CT scans, ultrasounds, and
accompanying laboratory tests failed to reveal any
pathology or significant abnormalities. Dr. Compton’s
associate, Dr. Bruce, made a similar assessment in April
1994 in her letter to Dr. Petito, but stated that Russell was
"quite fixed in his belief that he has a serious disease."
The District Court scrutinized the medical evidence
presented by both parties, carefully analyzing the
documentation of the treating physicians. Recognizing that
Dr. Petito’s overall assessment "would appear to support
the finding of total disability," the Court also noted that Dr.
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Petito’s report specifically referred to "extended hours" of
work and "extensive travel" as the only important job duties
that were precluded by Russell’s "diminished" capacity. The
Court also concluded that Dr. Harris’s opinion suggested a
disabling condition requiring accommodation as opposed to
a cessation of all job related activities. Specifically noting
that the opinion of Russell’s attending physician should be
given significant weight, the Court also considered the
extensive body of medical documentation (70-plus
documents) in support of Russell’s claim. The Court

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observed that the vast majority of this documentation
provides no diagnosis for Russell’s symptoms and does not
support a finding of total disability. Looking objectively at
the medical evidence and the policy terms, the Court found
it difficult to conclude that Russell was totally disabled
from performing his duties as Real Estate Asset Manager.
In addition, the Court considered Russell’s admitted level
of participation in non-job related activities as inconsistent
with a finding of total disability. Company-authorized
surveillance of Russell’s non-job activities revealed to the
Court, as well as the Plan Administrator, that his hunting
activities, although intermittent, required a level of exertion
greater than that required by his important sedentary
activities. Further, evidence of his errand running, loading
and unloading baggage of various sizes, attending computer
classes of several hours duration, also raised doubts of the
severity of Russell’s disabling condition.
Finally, the Court did not find that at any one time
Russell was precluded from performing all of his important
duties as defined under the Individual and Group policies.
The Court concluded that an arbitrary and capricious
standard, carefully administered, was not inappropriate
and that under that standard summary judgment should
be granted for the defendant Company.
II.
On appeal, Russell challenges the Court’s standard of
review of the policies, arguing that the "discretionary
language in the plan document that provides only an
inferential discretionary basis to support an application of
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the use of deferential, arbitrary and capricious standard of
review" should result in the use of a de novo , factual, and
procedural analysis of the decision of the Plan
Administrator. He also argues that even under an arbitrary,
capricious and deferential standard, the Plan
Administrator’s decision must be "reasonable," free of
procedural errors, and supported by substantial evidence.
Furthermore, he contends that where the insurer issues
policies on which the disability determinations are made
and the insurer actually makes the decision as to disability
status and bears the costs thereof, there is a "structural
conflict."
Finally, Russell asserts that there is ambiguity in the
policy language with respect to disability benefits that
mandates the use of the doctrine of contra preferentem as
a rule of contractual interpretation. This doctrine, he
argues, requires the ambiguous terms of the policies"be
construed most strongly against the drafter of the
insurance policy."
The District Court acknowledged that, under ERISA,
review of the administrator’s denial of benefits is generally

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de novo review. However, where the terms of the plan
reserve to its administrator’s discretion the determination of
a claimant’s eligibility for benefits, the administrator’s
decision is subject to review under the arbitrary and
capricious standard this Court enumerated in Mitchell, 113
F.3d at 437. Where the administrator’s decision is
confronted with a potential conflict of interest, as it is in
this case, the Court opined that the conflict must be
considered in issuing the degree of deference to be given to
his decision.
In his exhaustive and carefully crafted opinion, District
Court Judge Sleet first examined the discretionary language
of the plan. He noted that the Administrator’s discretion to
interpret the policy and determine the eligibility of
applicants for benefits was reasonably inferred from the
policy terms. Moreover, Russell conceded in his amended
complaint that the Company was a fiduciary under both
policies "with discretionary authority to determine the
eligibility of benefits."
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Because of the conflict of interest of the Plan
Administrator with its obligation to pay the benefits due a
claimant under the policies, Russell urged the District
Court to accord little or no deference to the Administrator’s
decision. The Court acknowledged that a conflict of interest
existed in this case and that a modified or heightened
arbitrary or capricious standard of review was appropriate.
Applying this standard and examining the policies as a
whole, the District Court reasonably looked at the facts to
determine the appropriate amount of deference. The Court
concluded that Russell had to prove that he could not
perform any of the important duties of his occupation. In
scrutinizing the policy terms, the District Court noted that
among the terms of both policies were provisions for
residual disability benefits. They applied to insureds who
can perform some of their occupational duties.
Taken as a whole, the Court appropriately concluded that
these provisions disclose an expectation that the insured
will continue to work in some capacity in his occupation
unless the insured cannot perform any of the important
duties of his job. The Court therefore found, inter alia, that
"the policy language places upon the employee the initial
burden to demonstrate that he or she can not perform any
of the important duties of his position."
Although Russell seems to acknowledge that he can
perform some of the important duties of his occupation, he
contends that if he is unable to perform one of those duties,
he is totally disabled and entitled to benefits accordingly.
However, the policies provide for full benefits upon total
disability. As for benefits on partial disability, they are not
payable unless the insured is working. Russell had resigned
and was not working. Russell had not provided any basis
for the payment of full benefits in the face of evidence that
he is able to perform some of the important duties of his

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occupation but elected not to work at all and spend his
time in non-occupational tasks. Turning to the Residual
Disability section of the policies, the Court rationalized that
it provided for an expectation that a partially disabled
employee "will continue to work, in some capacity, in his or
her occupation."
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In support of the Administrator’s decision that Russell
was, at the most, only partially disabled, the Labor Market
Report prepared by Pembroke Associates identified job
opportunities in Russell’s occupation in Wilmington,
Delaware, that would relieve him of the extensive travel that
he and his treating physician found unduly burdensome.
The Plan Administrator had submitted the claimant’s file to
three independent consulting doctors, each of whom opined
that Russell was capable of performing some of his
occupational duties and work, at least on a part time basis.
The District Court also carefully considered Russell’s
argument that the decision of the Plan Administrator
should be reversed because it committed procedural
irregularities with respect to the surveillance tapes. The
District Court found that the Company "substantially
complied with the requirements of the applicable
regulations, and performed a ‘full and fair review’
commensurate with [the policies]." We agree.
III.
In summary, the District Court gave thorough
consideration to Russell’s claims and arguments, including
the conflict of interest on the part of the Plan
Administrator. It found that the conflict of interest did not
unreasonably or improperly affect the Administrator’s
decision and that it complied with all of the applicable
requirements. The court also limited its review to the
evidence before the Plan Administrator. This was
appropriate. Its failure to allow Russell to view the
surveillance video tapes prior to filing his claim was
insufficient to upset the determination of the Administrator
as to preclude the award of summary judgment. After
reviewing the briefs, arguments, and pertinent portions of
the record, we perceive no error on the part of the District
Court. The judgment of the District Court will be affirmed.
Costs taxed against the appellant.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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