The opinion of the court was delivered by: Garnett Thomas Eisele United States District Judge
Plaintiff Riddell is a physician who was employed by Defendant Tenet Healthcare Corporation ("Tenet"). In 1996, while working for Tenet, Plaintiff applied for and was issued the Long Term Disability Policy ("Policy") in question. The Policy was issued to Tenet by Defendant Unum Life Insurance Company of America ("Unum") pursuant to an employee benefit plan.
Plaintiff was diagnosed with multiple schlerosis in February 1998, and applied for long-term disability benefits later that year. Defendant Unum approved his claim for disability benefits under the Policy, and Plaintiff began receiving monthly benefit payments. Plaintiff has since been able to return to part-time work as a medical consultant for the Arkansas Department of Health. In this capacity, Plaintiff is paid biweekly based on an hourly wage assuming thirty-six (36) hours per week, plus an additional "certified physician pay", which is allegedly paid as a bonus to physicians who elect to maintain board certification.
In 2004, Defendant Unum notified Plaintiff that its accounting department had "calculated an overpayment on Dr. Riddell's claim in the amount of $38,014.77 for the period of November 1, 2002 through December 31, 2003," and that it would withhold $2,670 monthly from his benefit payments. Plaintiff appealed this determination by letter on September 27, 2004 arguing that Unum erroneously included his certified physician pay in its calculation of disability benefits because the Policy excludes from "monthly earnings" any income derived from bonuses. Defendant Unum denied Plaintiff's appeal on October 12, 2004 stating: "The monthly earnings definition that you described is the definition per the contract with the employer, which is defined by the Policyholder. Once an insured seeks employment with another employer, the earnings are defined differently than they were with the Policyholder, and all return to work earnings are included when calculating the monthly benefit." (AR1226-27).
District courts review an ERISA plan administrator's decision to terminate benefits de novo,unless the benefits plan vests the administrator with the discretionary authority to determine benefits eligibility or to interpret the terms of the plan. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 957-58 (1989). Where the plan administrator has such discretionary powers, courts review a denial-of-benefits claim with a deferential eye, overturning the administrator's decision only if it was "arbitrary and capricious". See, e.g., Lickteig v. Business Men's Assur. Co. of America, 61 F.3d 579, 583 (8th Cir. 1995).
It is undisputed that the Policy here vests Defendant Unum with the discretionary authority to determine eligibility of benefits and to interpret the terms of the Policy. Accordingly, the Court will apply the "arbitrary and capricious" standard to the issues at bar.
The "arbitrary and capricious" standard examines "whether the decision to deny  benefits was supported by substantial evidence, meaning more than a scintilla but less than a preponderance." Schatz v. Mutual of Omaha Ins. Co., 220 F.3d 944, 949 (8th Cir. 2000). The Eighth Circuit Court emphasized that "[p]rovided the decision 'is supported by a reasonable explanation, it should not be disturbed, even though a different reasonable interpretation could have been made.'" Id. (quoting Cash v. Wal-Mart Group Health Plan, 107 F.3d 637, 641 (8th Cir. 1997)).
The parties do not dispute that Plaintiff is disabled and is entitled to disability payments. The issue in dispute is whether Plaintiff's "certified physician pay" should be included in the calculation of Plaintiff's monthly benefits payments. The Court will review the formula set out in the Policy for calculating benefits.
The Policy first determines the amount of the employee's "monthly payment" as follows:
1. Multiply your monthly earnings by 66.6667%
2. The maximum monthly benefit is $13,333.
3. Compare the answer from Item 1 with the maximum monthly benefit. The lesser of these two amounts is ...