KELLY v. RELIANCE STANDARD LIFE INSURANCE COMPANY et al
OPINION. Signed by Judge Katharine S. Hayden on 5/28/2015. (nr, )
Not for Publication
United States District Court
for the District of New Jersey
THOMAS P. KELLY, JR.,
Civil No: 09-2478 (KSH)
RELIANCE STANDARD LIFE INSURANCE
THE PENN MUTUAL LIFE INSURANCE
Katharine S. Hayden, U.S.D.J.
Before the Court is defendant Reliance Standard Life Insurance Company’s motion to
remand Thomas Kelly’s claim for long-term disability to the plan administrator and Kelly’s crossmotion for civil contempt sanctions. Central to the Court’s resolution of these motions is a
determination as to what has or has not already been considered by Reliance in its denial of Kelly’s
application for benefits—namely, whether Reliance only determined that Kelly was unable to
perform his own “regular” occupation, or whether it also found that Kelly was unable to perform
“any” occupation that his education, training and experience would otherwise allow. For the
reasons that follow, Reliance’s motion to remand is granted and Kelly’s cross-motion for civil
contempt sanctions is denied.
Following a car accident that took place on November 7, 2005, Kelly applied for long-term
disability (“LTD”) benefits under a plan sponsored by his employer, Penn Mutual Life Insurance
Company (“Penn Mutual”). Reliance processed the claim, and determined in a letter dated October
23, 2006 that Kelly was capable of performing the duties of his “regular occupation” and therefore
not entitled to benefits under the policy. After the determination was upheld on final appeal, Kelly
filed suit in this Court against both Reliance and his employer, Penn Mutual, claiming in part that
Reliance’s denial of benefits was arbitrary and capricious and that Penn Mutual had breached its
fiduciary duties as co-fiduciary of the plan. The Court concluded on December 14, 2010 that the
administrative record was deficient, that Reliance had relied on an incorrect definition of Kelly’s
occupation, that Penn Mutual provided an incorrect job description, and that Kelly had not been
helpful in providing information during the claim processing. On that basis, the Court remanded
the claim to Reliance and permitted Kelly to offer additional information supporting his claim.
Kelly gave Reliance a supplemental certification regarding his job description and, for the
first time, claimed that his inability to perform the required duties of “any occupation [has] been
further exacerbated by the onset and increase of chronic cardiac symptoms.” (Kelly’s SJ Br., Ex.
B, Supplemental Cert. ¶ 51) (emphasis added). The difference between the modifiers, “regular”
as opposed to “any,” is significant. The “regular occupation” standard asks whether the claimant
is capable of “perform[ing] the substantial and material duties of [his] regular occupation” and
pays benefits for a period of 24 months. By contrast, disability benefits under the “any occupation”
standard are due only where the claimant is incapable of performing the material duties of “any
This case has a long history before the Court. A full recitation of the facts underlying Kelly’s claim for
coverage appears in the written opinion dated December 22, 2011 [D.E. 106], which granted Kelly’s cross-motion
for summary judgment.
occupation …. that [his] education, training or experience will reasonably allow” and are paid to
the claimant after expiration of the first 24 month period.
After remand by this Court, Reliance again considered Kelly’s application and this time
made note of his new claim for “any occupation” benefits—it referenced Kelly’s contention that
he purportedly was “physically unable to work in ‘any occupation that [his] education, training
and experience would otherwise reasonably allow.” (Kelly Br., Ex. A at 1, hereinafter “February
Letter.”) But in defining “Total Disability” Reliance referred only to the extent to which Kelly
was capable of “perform[ing] the substantial and material duties of [his] regular occupation.”
Reliance then concluded that Kelly “fail[ed] to meet the Policy’s definition of ‘Total Disability’
(quoted above), and as such, no benefits [would be] payable.” (February Letter at 9.)
Kelly again challenged the denial before this Court. And in an opinion dated December
22, 2011, the Court concluded that Reliance “conducted an inappropriately selective review of the
evidence, placed unreasonable emphasis on the reports of consultants who never examined Kelly,
chose not to use an IME, and failed to engage in a meaningful analysis of Kelly’s material job
duties.” The Court found that, taken together, this amounted to an arbitrary and capricious exercise
of discretion in violation of ERISA and concluded that “Kelly [was] entitled to receive the LTD
benefits owed to him under the Plan.”
A dispute then arose about whether the Court intended for Kelly to receive LTD benefits
under the “regular” or “any” occupation standard. In a letter dated January 12, 2012, Reliance
took the position that “benefits have been awarded during the ‘own [or regular] occupation’ period
but Mr. Kelly’s ongoing disability under the more stringent ‘any occupation’ standard beyond 24
months must be further investigated by Reliance Standard.” (Reliance Reply Br., Ex. B.) Counsel
stated further that “[i]t is Mr. Kelly’s position that benefits are to be paid to the present (for 68
months) pursuant to [the Court’s order], despite the change in definition.” (Reliance Reply Br.,
Ex. B.) According to counsel, this dispute ultimately precipitated the collapse of a proposed
settlement of all claims, previously agreed to in principle on January 27, 2012. On September 26,
2014, approximately three months after the Court denied Kelly’s motion to enforce the proposed
settlement, Reliance paid to Kelly an amount equal to 24 months of benefits with pre- and postjudgment interest. (Reliance Reply Br., Ex. C (“Enclosed is Reliance Standard’s check in the
amount of $180,127.53 representing twenty-four (24) months of benefits with pre-judgment and
post-judgment interest.”)) The transmittal letter described how those benefits were calculated and
advised Kelly of his right to appeal the decision. On November 7, 2014, Reliance filed the present
motion to remand Kelly’s claim for benefits for further consideration [D.E. 179]. Kelly filed his
opposition and moved for civil contempt sanctions [D.E. 184] on December 6, 2014, contending
that Reliance has failed to pay the benefits he believes were ordered by this Court’s December 22,
Kelly takes the position that: (1) the Court has already, in its December 22, 2011 decision,
determined he was entitled to LTD benefits under the “any occupation” standard; and (2) the
amount of benefits already paid is insufficient even under the “regular occupation” definition.
Reliance now moves to remand the “any occupation” issue for its review, arguing that Kelly failed
to exhaust his administrative remedies. The Court agrees.
Reliance noted in the February Letter that Kelly claimed entitlement to “any occupation”
benefits but, quite clearly, found only that he was not “Totally Disabled” as defined therein—i.e.
that he was not incapable of “perform[ing] the substantial and material duties of [his] regular
occupation.” The Court subsequently considered this decision and found it to be arbitrary and
capricious, but did not—as Kelly suggests—rule that Kelly was entitled to LTD benefits under the
“any occupation” standard. The Court held only that Kelly was “entitled to receive the LTD
benefits owed to him under the Plan.” Read together with the remainder of the Court’s opinion
and the February Letter, it is beyond dispute that the Court’s holding extended only to those claims
Reliance had already considered—namely, Kelly’s claim for benefits on account of his inability
to perform the duties of his regular occupation.
Even if the Court had wished to go further and opine on Kelly’s claim for benefits under
the “any occupation” standard, it would have been powerless to do so. In Pakovich v. Broadspire
Services, Inc., 535 F.3d 601 (7th Cir. 2008), the district court considered the defendant insurer’s
denial of Pakovich’s claim for benefits under the “own occupation” standard. The district court
found that the insurer’s determination was arbitrary and capricious, and then went on to conclude
that Pakovich was not entitled to benefits under the “any occupation” standard. The Seventh
Circuit vacated this latter ruling on appeal and found that, because the insurer “did not issue any
decision on Pakovich’s eligibility for disability benefits under the ‘any occupation’ standard,” the
district court was left “with nothing to review.” Id. at 607. And although the district court “was
able to piece together its conclusion that Pakovich was physically capable, and had the ‘training,
education and experience’ to perform sedentary work, there was no decision by the Plan
Administrator for the Court to review” and the record therefore was “not fully developed on this
issue.” The Seventh Circuit then “order[ed] that the district court remand the case to the Plan
Administrator to determine whether Pakovich was eligible for disability benefits beyond [24
months] under the Plan’s ‘any occupation’ standard.” Id. at 607.
As in Pakovich, Reliance considered only the “regular” or “own occupation” standard of
disability, and never determined whether Kelly was entitled to LTD benefits beyond 24 months
under the “any occupation” standard. No decision of this Court could have changed that. And
because “[Reliance] has not issued a decision on a claim for benefits that is now before the [Court],
the matter must be sent back to [Reliance] to address the issue in the first instance.” Id. at 607.
Reliance’s motion for remand is therefore granted.
Kelly’s cross-motion for civil contempt sanctions against Reliance is denied. To succeed,
Kelly must demonstrate—by clear and convincing evidence—that (1) a valid court order existed;
(2) defendant had knowledge of the order; and (3) defendant disobeyed the order. The Third
Circuit has described this showing as a “heavy burden,” and cautioned courts to hesitate in
awarding civil contempt sanctions “when there is ground to doubt the wrongfulness of the
conduct.” Quinter v. Volkswagen of Am., 676 F.2d 969, 974 (3d Cir. 1982).
The basis for Kelly’s motion is Reliance’s alleged failure to comply with the December 22,
2011 opinion and order of the Court, which found Kelly was “entitled to receive the LTD benefits
owed to him under the Plan.” However, Kelly fails entirely to show how Reliance disobeyed any
aspect of that decision and order. To the extent Kelly claims Reliance failed to comply in that it
refused to pay LTD benefits beyond 24 months under the “any occupation” standard, the Court
already has ruled herein that the December 22, 2011 order did not encompass such relief. And to
the extent that Kelly relies on Reliance’s alleged failure to pay the correct amount owed under the
“regular occupation” standard, he provides the Court with no evidentiary basis for a finding of
civil contempt. Kelly argues only that “[w]hen it finally did pay some of the benefits owed …,
[Reliance] miscalculated the amount due for the specified benefit period …. and applied incorrect
rates for pre and post-judgment interest that do not comply with the Court Rules.” (Kelly Br. at 5,
n.1) This falls well short of meeting Kelly’s “heavy burden” here. Kelly’s failure to support this
contention with competent, clear and convincing evidence—or any argument outside of a
footnote—is fatal to his motion for civil contempt.
For the foregoing reasons, defendant Reliance’s motion to remand is granted and Kelly’s
cross-motion for civil contempt sanctions is denied. An appropriate order will be entered.
/s/ Katharine S. Hayden
Katharine S. Hayden, U.S.D.J.
Date: May 28, 2015
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