Disability plan administrator cannot use theoretical job as basis to deny claim

In an unpublished opinion summarizing a decision of the Sixth Circuit Court of Appeals the court awarded benefits to a Michigan machine operator finding the plan administrator’s decision that the claimant could perform a job, which the court described as “[existing] only in theory,” to be arbitrary and capricious.

Mr. Kennard operated machines for Means Industries, Inc. until 1990 when he inhaled fumes from a chemical spill, severely injuring his lungs and rendering him ultra-sensitive to fumes. As a result, his treating physician imposed a lifelong restriction that he work only in a clean-air environment.

Mr. Kennard was fortunate to have an employer that provided him with a clean-air environment to perform clerical work from March 1992 until 2006. Needless to say, his employer could only do so much; though it warned other employees in Mr. Kennard’s work area against wearing perfume or lighting candles, various fumes would cause Mr. Kennard to suffer shortness of breath requiring him to leave work.

Social Security Administrative Law Judge finds Kennard unable to engage in any substantial gainful activity and there are no jobs in the national economy that he can perform

In 2006 Kennard stopped working and the same year successfully applied for Social Security Disability Benefits. According to the SSA’s decision, medical evidence showed that “even extremely low levels of airborne dusts, mists, fumes, vapors, perfumes, cleaning fluids, etc.” gave Mr. Kennard “severe cough variant asthma and angioedema.” More importantly, a vocational expert testified that, based on Mr. Kennard’s pulmonary restrictions and age, education, and work experience, “there are no jobs in the national economy that he could perform.”

Kennard Seeks Disability Retirement Benefits Under His Employer’s ERISA-Governed Group Insurance Policy

As an eligible employee under his employer sponsored group disability plan Mr. Kennard was entitled to benefits if “he has been totally disabled by bodily injury or disease so as to be prevented from engaging in any occupation or employment for [pay] and which condition constitutes total disability under the federal Social Security Act.”

The disability plan further conditioned benefits on an assessment by physicians chosen by the employer that the disability be permanent.

Plan Administrator denies Mr. Kennard’s Request for Benefits

After having Mr. Kennard examined by two physicians, the Plan Administrator denied Mr. Kennard’s claim concluding, without discussion, that Mr. Kennard was “not permanently disabled within the meaning of the plan”. The denial cited an opinion by one of the hired physicians that: “Kennard is employable as long as he could be guaranteed that he would be placed in an absolute clean air environment with absolutely no noxious fumes or inhalants, as he is extremely sensitive to this.”

Kennard’s ERISA lawsuit

Mr. Kennard filed a lawsuit in federal court seeking to enforce his rights under the Plan. Although the district court sided with the administrator, the U.S. Court of Appeals for the Sixth Circuit, reviewing the district court’s decision, ultimately awarded Mr. Kennard benefits.

The Court of Appeals rejected the district court’s conclusion that the doctors’ reports support the administrator’s decision that Kennard can “engage in any occupation or employment” explaining that “bare recitations of medical data, without reasoning, cannot produce a logical judgment about a claimant’s work ability.”

As the court further explained:

“A valid denial of benefits premised on Dr. Levinson’s opinion would need to include evidence of the existence of absolute-clean air jobs available to Kennard.”

The court pointed out that the SSA found that there are no jobs in the national economy that Kennard could perform. Although the plan administrator is not required to seek out vocational evidence it does need to ground its decision on a reasoned explanation and in failing to tackle the implicit non-existence of jobs compliant with the strict condition of being “guaranteed that he would be placed in an absolute clean air environment” the plan administrator’s decision was not “the result of a detailed, principled reasoning process and… supported by substantial evidence.”

Finding no evidence in the record to support a denial of benefits, the court awarded benefits to Mr. Kennard.

Why does this decision matter?

This case discussed the standard employed in the sixth circuit when courts review ERISA governed disability plan denials. While the claimant generally faces the high burden of convincing the court to disturb the administrator’s decision by showing that the administrator’s judgment was “arbitrary and capricious” the court explains in this case that a reviewing court nevertheless must ensure that the administrator can offer a reasoned explanation for its judgment that a claimant was not “disabled” within the plan’s terms. The court therefore focused on what the administrator is required to do.

This decision will encourage ERISA plan administrators to offer more reasoned explanations for their decisions. It may also cause administrators to perform more careful vocational analyses when reviewing claims.

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