AETNA's Denial of Pilot's Benefits Overturned

United States District Court, W.D. Virginia,
Charlottesville Division.

Christopher McINTYRE, Plaintiff
v.
AETNA LIFE INSURANCE COMPANY, Defendant.

Civil Action No. 3:08-cv-00029.

Oct. 8, 2008.

MEMORANDUM OPINION

NORMAN K. MOON, District Judge.

This action pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (“ERISA”), is before the Court upon consideration of the parties' cross-motions for summary judgment (docket nos. 13 and 15), the ensuing responses and replies, and the parties' arguments in support of their motions, presented by counsel at a hearing on September 29, 2008. For the reasons stated herein, I will grant Plaintiff's motion for summary judgment and deny Defendant's motion for summary judgment. Furthermore, Plaintiff's motion includes a request for an award of attorney's fees and costs, which I will grant; accordingly, I will direct Plaintiff's counsel to file a complete petition for attorney's fees and costs. I will also direct Plaintiff's counsel to submit a proposed order of judgment calculating the exact back benefits and pre-and post-judgment interest due and owing as of the date of judgment.

I. Factual and Procedural Background

Christopher McIntyre (“Plaintiff”) was diagnosed in 2005 with Type I diabetes (and consequent insulin dependence). Until that diagnosis, he earned a living as an airplane pilot, most recently working for Gannett Co., Inc. (“Gannett”), through which he was covered by a long-term disability (“LTD”) plan (also “the Plan”) that was administered initially by Prudential, and later by Defendant, Aetna Life Insurance Company.

Plaintiff is a 39-year-old married man and father of a toddler. He was employed as an airplane pilot by Gannett from April 2000 to May 6, 2005, his last day of work before diabetes forced him off the job. The record indicates that Plaintiff's sole duty was to fly executives of Gannett to their chosen destinations. In late 2004, while he was still a pilot for Gannett, Plaintiff incorporated and began to operate a side business, a screen-printing company called Ink Works, which has always operated at a loss.

Subsequent to his diagnosis as an insulin-dependent diabetic, Plaintiff was permanently grounded by the Federal Aviation Administration (“FAA”), and lost his aviation career and livelihood forever. The FAA refuses licensure to anyone with Plaintiff's medical condition. (M027.) An endocrinologist opined that Plaintiff “can perform any work except for flying an airplane. He has no restrictions related to his physical capacity.” (M-092.)

Plaintiff was an eligible participant in Gannett's LTD plan. (M-001-018.) The Plan grants the Plan Administrator (also “Administrator”) the discretion to determine eligibility. (M013.) The Plan indicates that Gannett pays money into a trust to fund the payment of disability benefits, and that “[t]he funds contributed to the Trust shall be held for the exclusive purpose of providing benefits under the Plan and defraying reasonable expenses of administering the Plan....” (M-012.) The Plan directs the Plan Administrator (now Aetna) to develop a “funding policy” that will “ensure the proper liquidity of the Trust.” (M-013.)

The Plan states, in Section III, “Synopsis of Plan”: “An eligible employee who becomes disabled will receive a benefit commencing after 26 continuing weeks of his or her disablement in an amount equal to 60 percent of his or her basic monthly compensation, including other disability benefits to which he or she becomes entitled.” (M-018.) The Plan includes the following “Definition of Disability,” quoted in pertinent part:

Disability exists when, due to a medically determinable sickness or accidental injury, all of the following conditions are met: (a) the person is unable to perform the material and substantial duties of his or her occupation for two years and unable thereafter to perform the material and substantial duties of any job for which the person is reasonably fitted considering education, training and experience; (b) the person is not working at any job for wage or profit (unless as expressly authorized pursuant to the rehabilitation rules of this Plan); and (c) the person is under the regular care of a physician. The two-year period referred to in (a) is measured from the date immediately following the 26 continuous week elimination period set forth in [Section] III, [“Synopsis of Plan,”] above.

* * *

In the case of airline pilots, the loss of a First Class medical certificate, the failure to pass a required physical examination and the loss of necessary licensure are included within the definition of disability. Notwithstanding the foregoing, however, if the failure to pass is due to a drug or alcohol-related reason, the failure to pass is not included in the definition and no benefits are payable therefor under this Plan.
(M-017-18; emphasis added.)

Plaintiff applied for LTD benefits with Prudential, Defendant's predecessor as the Plan Administrator. In a letter dated January 26, 2006, Prudential informed Plaintiff that it had determined that he was eligible for benefits effective November 5, 2005. (M-033.) That letter included the following statements:

Under the terms of the Plan you must meet the following definition of disability.

Disability exists when, due to a medically determinable sickness or accidental injury, all of the following conditions are met; [sic] (a) the person is unable to perform the material and substantial duties of his or her occupation for two years and unable thereafter to perform the material and substantial duties of any job for which the person is reasonably fitted considering education, training and experience; (b) the person is not working at any job for wage or profits (unless as expressly authorized pursuant to the rehabilitation rules of the Plan); and (c) the person is under the regular care of a physician. The two-year period referred to in (a) is measured from the date immediately following the 26 continuous week elimination period.

In addition under the Gannett Plan, In [sic] the case of airplane pilots, the loss of a First Class medical certificate, the failure to pass a required physical examination and the loss of necessary licensure are included within the definition of disability....

(M-033.) Plaintiff was informed that the payment of LTD benefits would continue for the periods established by the Plan, one of which was until “the date of disability ceases.” (M-31-33; M-94.) Plaintiff was initially awarded a monthly benefit of $2,878.30, and it appears that he received this payment for about a year. (M-032; M-017.) As already observed, the LTD Plan pays 60 percent of an eligible participant's basic monthly compensation. Prudential based Plaintiff's disability award on a monthly salary of $4,797.17. (M-030.)

Prudential continued to monitor Plaintiff's situation. On March 25, 2006, in response to a vocational rehabilitation inquiry from Prudential, asking “How long have you been actively searching for a job?” Plaintiff responded, “Am starting my own business, operates at a loss.” (M-50.) The Plan required Plaintiff to apply for Social Security Administration (“SSA”) disability benefits; the Plan contains specific language stating that it offsets its award by the amount of other disability benefits. (M-016.) On March 31, 2006, Plaintiff's claim for SSA benefits was disapproved on the ground that Plaintiff was capable of engaging in substantial gainful activity, given that his monthly earnings averaged over $860. (M-257; M-127-123; M56-61.) On May 3, 2006, Prudential's internal notes observe that Plaintiff has “his own business which is currently operating at a loss.” (M-092.) Prudential's notes for May 3, 2006, also indicate Prudential's intention to refer Plaintiff for job placement because it had determined that he “will likely qualify for occupations such as electronic and electromechanical assembly and microcomputer support specialist” with “[a]nticipated wages between $14 to $22/hr.” (M092.) Prudential's notes for May 22, 2006, indicate that it planned to talk to Plaintiff “regarding another job or going to school.” (M-090.)

On August 28, 2006, Prudential's notes indicate that Plaintiff' “can't be a pilot because he can't renew his license while using insulin. He is disabled for his own occupation under the Gannett plan.” (M-086.) Prudential further noted that Plaintiff had informed them that “he was performing self employment” and that it intended to “request an [sic] evaluate 2005 tax information.” Prudential requested-and obtained-the tax information. Prudential also initiated a surreptitious investigation; the investigator reported, inter alia, that a requested “gym canvass” had led to “no information ... suggesting the possibility that [Plaintiff] works out at a gym.” (M-96-101.) The investigator recommended “conducting a weekend day of surveillance in an attempt to see him maintaining his lawn or property.”

On October 17, 2006, Prudential informed Plaintiff that it had determined that, even though Plaintiff's screen printing company was not profitable, the fact that the company had reported income rendered Plaintiff ineligible for benefits because Plaintiff was “working for wage or profit.” (M-078-79; M-085.) On November 30, 2006, the Plan Administrator sent a letter to Plaintiff demanding $18,496.82 for alleged net overpayments made from November 5, 2005, to October 31, 2006. (M-080.) Plaintiff has not repaid any portion of the alleged overpayments.

In the ensuing months, Gannett terminated its relationship with Prudential and selected Aetna as its new Plan Administrator. Plaintiff hired counsel and initiated an administrative appeal, arguing that the “specific definition of disability applying solely to airplane pilots who [have] lost their necessary licensure due to a medical issue does not include requirements either that they not be working at any job for wage or profit or that they be under the regular care of a physician”; rather, Plaintiff argued, “[t]hose are requirements in the general ... definition of disability, but not the specific one applying directly to [Plaintiff].” Plaintiff further argued that, even were he subject to the general definition of disability spelled out in the first paragraph of the Plan's “Definition of Disability,” he would meet those requirements as well, because he was not “working at any job for wage or profit.” He acknowledged that he had the “tiny” screen printing business, but that he had it “before he became disabled,” and that “it has never returned a dime of profit to [Plaintiff].” Thus, according to Plaintiff, he met the general definition of disability because he “did not earn a wage or profit from his little company....” (M-142-45.)

The appeal was denied by Aetna on August 13, 2007. (M-257.) After confirming that Plaintiff's first date of disability was May 7, 2005, and that he had received LTD benefits until October 31, 2006, Aetna stated that Prudential had terminated Plaintiff's coverage because it had “received notification that [Plaintiff] was self employed and working,” and that Aetna was upholding the denial of benefits. Aetna stated that it could not change its position until it received “[p]roof that [Plaintiff] is not working,” reasoning that, “even though [Plaintiff's] company is losing money, he is still working toward making a wage or profit.” Aetna added the following statement “regarding Prudential's interpretation of disability found within the Plan”: “You base this appeal on your interpretation that airplane pilots are only subject to the one paragraph. This is not the case. All employees eligible for benefits under this Plan are subject to the definition of disability in its entirety.”

Plaintiff appealed further, reemphasizing, inter alia, that the Administrator's reasoning “read[s] the specific section on [the disability of] pilots out of existence,” that “it makes sense that the plan would have a special definition for airplane pilots” because they are often “medically unable to do their jobs for reasons that would not disable someone from doing many other regular occupations,” and that “[n]o airplane pilot would value a disability policy if he would not be covered despite the FAA's grounding him for medical reasons.” (M-298-301.) Plaintiff's final appeal was denied for the same reasons the Administrator had previously given. (M-304-06.) This lawsuit ensued.

II. Standards of Review

A. Cross Motions for Summary Judgment

Federal Rule of Civil Procedure 56(c) provides that a court shall grant summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If both parties have moved for summary judgment, a court should consider “each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law.” Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir.2003) (citation omitted). For each motion, “the court must take care to ‘resolve all factual disputes and any competing, rational inferences in the light most favorable’ to the party opposing that motion.” Id. (quoting Wightman v. Springfield Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir.1996)). The party