Sixth Circuit: Denial of LTD Benefits, Attorneys Fees and Remand

This morning, the Sixth Circuit Court of Appeals affirmed a trial court decision that the denial of LTD and 401(k) benefits were arbitrary and capricious and that the plaintiff was entitled to attorney fees as a prevailing party under ERISA. However, the remedy for the denial of benefits was not the award of benefits, but rather, remand to the plan administrator to re-evaluate its prior invalid decision. Burge v. Republic Engineered Products, Inc., No. 10-3124 (6th Cir. 8/3/11). The plaintiff injured her wrist in a fall, subsequently became depressed and left work in mid-January 2006. A variety of physicians and psychiatrists issued conflicting decisions about the existence, extent, and scope of her medical and emotional condition. There was some evidence of malingering and exaggeration of symptoms. The employer terminated receipt of LTD on the grounds that there was no evidence of “total disability.” Her position was then eliminated in August 2006. Problem was, the employer’s LTD plan did not require evidence of total disability and there was no discussion in the decision about the plaintiff’s ability to perform any work. Accordingly, the trial court concluded on appeal that even though the plan vested discretion in the plan administrator, the decision had been arbitrary and capricious for relying on requirements that were not contained in the LTD plan, by not following a methodical appeal process, by reverting between the LTD and STD plans, by refusing to consider all evidence of her wrist condition and by considering only her medical status without also considering her ability to perform any gainful employment. The court also awarded attorney fees to the plaintiff as a prevailing party. On appeal, the Sixth Circuit affirmed the trial court on the merits and award of attorney fees, but found that the proper remedy for the benefit claims was to remand to the employer to make a proper decision.

“Generally, when a plan administrator chooses to rely upon the medical opinion of one doctor over that of another in determining whether a claimant is entitled to ERISA benefits, the plan administrator’s decision cannot be said to have been arbitrary and capricious because it would be possible to offer a reasoned explanation, based upon the evidence, for the plan administrator’s decision.” The employer was not required to consider evidence of vocational experts and the plaintiff’s receipt of SSA benefits was only one factor to be considered.

Nonetheless, the employer made an arbitrary decision when it failed to follow a methodical appeal process:

Specifically, Republic (1) failed to follow a stated, methodical appeal process and inconsistently applied and reverted between the STD and LTD Plans; (2) applied a standard of “total disability” that did not appear in the Plan; and (3) failed to consider evidence of Burge’s actual wrist condition. . . . [The employer] never “reasoned from [the plaintiff’s] condition to her ability to perform her occupation. There is no statement or discussion of [plaintiff’s] occupational duties or her ability, or inability, to perform them.”

In Elliot, we held that “medical data, without reasoning, cannot produce a logical judgment about a claimant’s work ability.” Id. at 618. There, as here, we noted that the plan administrator’s two denial letters contained “mere recitation[s] of medical terminology employed by various physicians in their diagnoses of [the claimant’s] condition, without any reasoning as to why those diagnoses would permit her to function in the workplace. A court’s decision that merely said ‘affirmed’ or reversed’ could not be considered ‘reasoned.’ Similarly, [the plan administrator] cannot be said to have given a reasoned denial of the [claimant’s] claim . . . .” Id. at 619. Even assuming that the appropriate definition of disability is that used in the STD Plan, which requires the claimant to be unable to engage in her regular occupation, rather than the LTD Plan, which is broader, none of [the employer's] benefits denial letters analyzed whether [the employee] would be able to perform her regular occupation in light of the restrictions imposed on her by the physicians who examined or treated her and in view of her complaints that [the employer] did not accommodate these restrictions.

A trial court is empowered to either award benefits or to remand to the plan administrator to make a proper determination following a flawed decisionmaking process. In light of the question in this case about the plaintiff’s malingering and exaggeration of symptoms, the Sixth Circuit found remand to be a more appropriate remedy than simply awarding the plaintiff LTD benefits.

Even though the plaintiff ultimately may not be entitled to LTD benefits, she would still be entitled to attorney fees as a prevailing party under ERISA. The trial court was not arbitrary in awarding her fees after ruling on the merits of her claim in that the employer’s underlying decision was flawed.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.