Cothran v. Reliance Standard Insur. Co., 1999 U.S. App. LEXIS 31588 (4^th Cir. December 3, 1999) (unpublished)-This court upheld a summary judgment in favor of Millie Cothran, whose long-term disability payments from Reliance Standard were improperly terminated.  In its review of Cothran's claim, the district court properly applied a "modified abuse of discretion" standard of review since Reliance Standard, as Plan Administrator, was subject to a conflict of interest in its handling of Cothran's claim.  "This conflict existed because Reliance Standard acted in a fiduciary capacity as Plan Administrator, and was also the insurer whose financial interest was at stake under the Policy."

The district court did not abuse its discretion when it determined that Cothran provided ample evidence of long-term disability.  In 1996, Reliance approved Cothran’s long-term disability claim.  The approval documents "placed no limitation on the benefits coverage duration, nor did [they] attempt to narrow the bases that support Cothran's claim."  In 1997, Reliance Standard sought and received more documentation from Cothran and her doctors.  Those documents demonstrated Cothran's increased impairment, including additional physical problems as well as the physical and psychological conditions identified in 1996.  Also in 1997, an administrative law judge granted Cothran Social Security disability benefits based on her conditions.

In 1998, Reliance informed Cothran for the first time that it considered her impairments as "mental or nervous disorders."  The Plan covered mental or nervous disorders for no more than two years.  The district court concluded, as a matter of law, that the Policy's limitation based on its undefined term "mental or nervous disorders" was ambiguous as applied to Cothran's condition.  The court then construed the ambiguous terms of the Policy against its drafter, Reliance Standard.  This court found no reversible error.