United States District Court, E.D. Kentucky, Central Division, Lexington
FREDDIE L. SWANN, Plaintiff,
RYDER SYSTEM, INC., et al., Defendants.
MEMORANDUM OPINION & ORDER
M. Hood Senior U.S. District Judge
Plaintiff Freddie Swann got hurt off the job, he could no
longer work. Under an employer-sponsored insurance plan,
Swann was entitled to disability benefits. No. doubt about
that. Indeed, he received both short-term and long-term
benefits. But upon receiving his long-term benefits, Swann
noticed that the payments were substantially less than what
he expected. The claim administrator, Defendant Liberty Life
Assurance Company of Boston (“Liberty”) explained
that the amount reflected 60 percent of Swann39;s
“base pay, ” as calculated by Liberty and
Defendant Ryder Systems, Inc. (“Ryder”),
Swann39;s employer, in compliance with the plan.
disputes Defendants39; calculation of his base pay. Swann,
a truck driver, argues his base pay includes money for stops,
down time, and mileage, which Defendants left out. The
difference is thousands of dollars per month. But because the
plan grants broad discretion to Defendants to determine
Swann39;s long-term benefits, this Court is limited to
narrow review of Liberty39;s decision under the Employee
Retirement Income Security Act (“ERISA”). See
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,
115 (1989). And upon examination, the Court finds
Defendants39; determination was not arbitrary or
capricious. Thus, for the reasons stated herein,
Plaintiff39;s Motion for Judgment [DE 22');">22');">22');">22');">22');">22');">22');">22] is
DENIED and Defendants39; Motions [DE 25,
26] are GRANTED.
drove truck for Ryder. [DE 1-3]. He began work in September
2015. [Id. at p. 6]. Four months later, Swann got
hurt off the job. [Id. at p. 7]. His injuries
prevented him from engaging in any gainful full-time work.
[Id.]. So Swann applied for disability benefits
under his employer-sponsored group disability insurance plan.
things went smoothly. Swann received short-term disability
benefits for six months-the cap allowed by the plan.
[Id.]. Once six months were up, Swann had to apply
for long-term disability benefits. He did so, and Liberty
began paying long-term benefits in July 2016. [Id.].
But the new benefit checks were substantially less than the
short-term benefits. Swann wondered why, so checked with
Liberty and Ryder.
confusion stemmed from the calculation of Swann39;s
“base pay.” The plan documents relevant here
comprise two documents:
Ryder System, Inc. Summary Plan Description and Benefit
Programs (the “Plan”) and (2) the Liberty Group
Disability Income Policy (the
“Policy”). [Ryder R. 5, 22');">22');">22');">22');">22');">22');">22');">22, 63]. The official plan
documents include the Plan and “contracts between Ryder
System, Inc. and the benefit administrators” (in this
case, Liberty). [Id. at 22');">22');">22');">22');">22');">22');">22');">22]. When an employee has a
question about his plan, the plan documents-meaning both the
Plan and Policy-govern the issue. [Id.].
But to the extent the Plan and Policy conflict, language of
the Policy controls. [Ryder R. 5]. Understanding Swann39;s
claim requires the Court to look at the Plan and Policy in
start with the Plan, which names Ryder as the Plan
Administrator and grants the administrator broad discretion
to determine “administer, apply and interpret all
plans” and to “decide all factual and legal
matters arising in connection with the operation of
administration of the plans.” [Ryder R. 21]. In
particular, the Plan grants the administrator “absolute
discretional authority to . . . make all decisions (including
factual decisions) with respect to . . . the amount of,
benefits payable under the plans to employees or participants
or their beneficiaries.” [Id.]. The discretion
also extends to decisions about “legal or factual
questions, relating to the calculation and payment of
benefits, and all other determinations made under the
plans” and resolving and clarifying “any factual
or other ambiguities, inconsistences and omissions.”
[Id.]. Such discretion is given to Ryder “or,
where applicable, any duly authorized delegee of the plan
Plan names Liberty as the benefits administrator for the
long-term disability benefits plan. [Id. at 22');">22');">22');">22');">22');">22');">22');">22, 63].
And when describing long-term disability benefits, the Plan
continually informs employees that the “insurance
carrier”-i.e., Liberty-will be making the decisions.
[Id. at 66, 68, 69, 70, 71, 72]. Indeed, in a
section titled “Who to Send Your Claims and Appeals To,
” Ryder instructs employees to contact Liberty.
[Id. at 55].
the Plan outlines pay for the purposes of disability
benefits. The Plan first notes that “each benefit plan
provides a slightly different definition” of earnings
and that “earnings for any given benefit plan shall be
defined under the portion of the SPD describing that
plan.” [Id. at 76]. The Plan then lists
“examples” including base pay, weekly base pay,
and monthly base pay, “for the purposes of the
STD plan.” [Id.] (emphasis in
original). The Plan does not define base pay for the
purposes of the long-term benefits plan. But it does define
“pre-disability earnings” for the purposes of the
long-term plan as “your monthly rate of average
earnings in effect on the day before you became disabled.
Average earnings means the greater of your base pay or the
average of the previous 2 years of total earnings as of
August 31, rounded to the next higher thousand.”
turn to the Policy. This first uses the term “base
pay” in its definition of “basic monthly
earnings” as the “greater of the average of the
previous two years of frozen pensionable earnings as of
August 31 or frozen base pay established at each annual
enrollment, rounded to the next higher thousand.”
[Liberty R. 7]. The Policy then provides that an
employee39;s monthly benefit under the plan is based on the
person39;s basic monthly earnings. [Id. at 21].
And like the Plan, the Policy provides broad discretion to
the administrator: “Liberty shall possess the
authority, in its sole discretion, to construe the term so
this policy and to determine benefit eligibility hereunder.
Liberty39;s decision regarding construction of the terms of
this policy and benefit eligibility shall be conclusive and
binding.” [Id. at 42].
Swann disputed the calculation of base pay, he continued to
receive benefits for five months. [DE 22');">22');">22');">22');">22');">22');">22');">22, p. 2]. Liberty then
terminated the benefits. [Id.]. Three months later,
however, Liberty reinstated the benefits and paid benefits
retroactively. [Id.]. But Liberty did not change its
base pay calculation.
nature of Swann's employment agreement was the source of
the “base pay” dispute. As a truck driver, Swann
earned 26 center per mile and $18 per hour for “down
time, ” as well as a fixed amount for
“stops.” [DE 1-3, p. 3]. In the final
three-and-a-half months of 2015 (before getting injured),
Swann earned $19, 644.06. [Id.]. Only 18 percent of