A case heard recently before the U.S. District Court in the District of Massachusetts highlights the fact that a long-term disability plan administrator can choose to deny a claim even though the person making the claim may not be able to find employment. The plan administrator does not claim to offer unemployment benefits, so if the long-term disability plan finds that the claimant can work, the plan may refuse to extend benefits.
This is what happened to Andrew Gross, an employee of Federal Express Corporation (FedEx) until he suffered a heart attack in October 2003. He had been a full-time checker/sorter since 1989. In order to fulfill the duties of his job, he had to be able to lift up to 75 lbs. When his doctor checked him out of the hospital, it was with clear instructions to lift no more than 25 lbs. His doctor also ordered a leave from work.
Gross applied for short-term disability benefits under the FedEx Long-term Disability Plan, a trust fund that FedEx self-insured based on statistical insurance risks.
Gross was approved for short-term disability benefits for six months. He also applied for long-term occupational disability benefits, which were approved up until Gross reached the two-year mark after his short-term disability expired, May 2006.
Disability attorney essential for proving client’s total disability.
Gross then applied for long-term total disability. The FedEx Benefits Review Committee (Committee) denied his claim. Gross appealed the Committee’s decision with the assistance of a disability attorney.
As part of his appeal, Gross provided medical records. His treating cardiologist, Dr. Laham, noted that Gross had made significant improvement in April 2004, but noted that he still could not lift more than 20 lbs.
Another medical report from psychotherapist Dr. Clayman indicated that Gross had an IQ of 58. This meant that Gross exhibited signs of mild mental retardation. Dr. Clayman concluded that this was a life-long condition that rendered Gross totally disabled.
Gross’ disability attorney also gathered information from the U.S. Department of Labor’s O*NET database (“O*NET”). His goal was to demonstrate that a skills search only listed occupations that were beyond Gross’ mental ability. He also secured a vocational assessment from James Parker, who as a vocational consultant concluded that Gross continued to be disabled from any and all occupations based on the combination of his physical and cognitive disabilities.
FedEx orders peer physician reviews to consider total disability claim.
Gross’s medical information was sent to three different cardiologists. All three reached the same conclusion. Gross was not totally disabled because he could still work a job that didn’t require him to lift more than 20 lbs.
FedEx also sent Gross’ file to Dr. Elana Mendelssohn, a clinical/neuro-psychologist. She interviewed Gross and reached the conclusion that he was indeed mildly retarded, but she disagreed that this disabled him for he still lived independently, cared for himself, did his own shopping, and drove a car. He had held down other jobs as well as his FedEx position. She determined that he could still perform some work – thus he was not totally disabled.
There were four committee members that considered Gross’ appeal. They were given strict instructions to read all the documents in his file, then to vote by secret ballot to confirm or deny Gross’ long-term disability application. Voting took place on February 28, 2006. The committee voted to uphold the denial of long-term permanent disability. The final decision, drafted by someone outside of the committee, was issued on April 4, 2007.
Disability attorney files complaint in Federal Court.
Gross’ disability attorney filed suit against FedEx on February 11, 2008. Two years later, the Court finally heard the case on February 1, 2010. Both sides asked the Court to issue summary judgment for their side (cross-motions). Both sides also generally agreed upon the relevant facts. This meant that the deputy clerk could offer the option of the Court treating Gross’ case as a “case stated.”
Gross’ disability attorney agreed that the Court could treat the undisputed facts as the established record and draw reasonable inferences from that record without having to draw adverse conclusions against either side. FedEx likewise agreed. This meant that instead of each side only having 10 minutes to argue for their cross motion, they would have 30 minutes per side for final arguments.
Court determines that FedEx denial requires review under arbitrary and capricious standard.
Because FedEx’s long-term disability plan fell under ERISA jurisdiction, and FedEx had the authority to determine who was eligible for benefits and who was not, the Court need only consider whether the FedEx Committee’s benefits denial was reasonable and “supported by substantial evidence.” If the decision was arbitrary and/or capricious, it fell upon Gross’ disability attorney to prove it.
Disability attorney asks Court to investigate conflict of interest.
The four members of the Committee were all managers of FedEx, eligible for compensation linked to financial performance of the company. Gross’ disability insurance attorney claimed that this created a conflict of interest. The Court recognized its obligation to evaluate the impact that this might have had on the Committee’s decision to deny Gross his long-term total disability benefits. What efforts had the insurance plan made to prevent financial motivation?
The Court found that FedEx did not pay for disability benefits out of its general assets. All benefits were paid from a Trust Fund that received annual irrevocable payments based on statistics that an independent insurance specialist presented to the company. This meant that profits that the managers participated in had no impact on the Trust Fund. The number of employees participating in the plan determined the inflow of money. The Court could did not find a conflict of interest.
Gross’ disability attorney argued that the Committee’s practice of voting by secret ballot and letting someone who wasn’t even present at the Committee’s meeting draft the decision also demonstrated a conflict of interest. The Court found no merit in the argument. FedEx provided records that confirmed the appeal had been discussed before the vote and that all the members had been charged to read all the documents in Gross’ file.
Court considers whether Committee made reasonable decision.
The policy language stipulated that “total disability” had to be proven by objective findings. Without confirmation of disability through observable test results, an employee plan participant could not continue to receive disability benefits. The plan also included a requirement that an employee had to be unable to engage in any compensable employment for 25 hours per week. Employment could include any job for which Gross was “reasonably qualified (or could reasonably become qualified) on the basis of his ability, education, training or experience.”
The FedEx Committee reviewed all the evidence that Gross submitted as well as the reports prepared by the three peer physicians. Despite the fact that Gross had a permanent restriction on lifting more than 20 pounds and limited mental capacity to learn a new job that didn’t require physical strength, the Committee found that these limitations were insufficient to prevent Gross from finding a job where he could work 25 or more hours per week.
Disability attorney argues that Committee decision was arbitrary and capricious.
Gross’ disability insurance attorney agreed that Gross could perform some light work that didn’t require significant intellectual skill. The disability attorney asked the Court to consider that while FedEx claimed that Gross could fill such a job, FedEx could not demonstrate that any work existed that fit this description. The Committee’s decision was arbitrary and capricious because it considered Gross’ limitations separately, instead of as a combination of impairments that made him unemployable.
Gross’ disability attorney argued that the FedEx Committee should have evaluated the impact of his “ability, education, training or experience” in combination with his physical limitations before determining that he could work. FedEx argued that the policy did not require the Committee to consider whether there were any jobs available, just whether his physical limitations created total disability.
FedEx referred the Court to Jestings v. New England Tel. & Telegraph Co. In this case, the Court had upheld the right of a disability insurance plan to deny disability benefits if the claimant was capable of working in some job, even if the particular job was not available in the local economy. As long as the disability insurance plan could show that there were specific jobs in the national economy which the claimant could perform, the disability insurance plan had fulfilled its duties.
Court determines that FedEx failed the requirement to demonstrate that employment exists in national economy.
While the Court agreed that FedEx did not have to prove that there were any actual jobs available for Gross, the Committee still had an obligation to determine that there were jobs in the national economy that Gross could do when his abilities, education, training and experience were considered. In Jestings, there was no dispute that jobs existed.
Disability attorney argues that Committee ignored vocational information.
Gross’ disability attorney pointed to the O*Net database printouts Gross had submitted with his appeal. The attorney claimed that these printouts demonstrated that there were no jobs available in the national economy for which Gross now qualified. In addition, the vocational expert’s report concluded that Gross was most likely disabled from all the occupations the expert had considered. Even the Social Security Administration had determined that Gross was totally disabled and eligible for Social Security disability benefits.
The FedEx Committee argued that the policy did not base its eligibility for benefits on whether or not there are occupations “within Mr. Gross’ job zone as determined by the U.S. Department of Labor’s O*Net database.” The Committee also claimed that Social Security used different criteria to define “total disability.”
The Court finds that FedEx failed to demonstrate reasonable decision.
FedEx argued that it is just common sense that jobs exist for people like Gross. The Court held that if such jobs did exist, FedEx needed to give examples of such jobs in its denial of benefits decision. The Court ruled that the Committee’s assumption that it did not need to determine whether any jobs existed for Gross was an error.
The Court found that neither the FedEx plan nor Social Security’s definition of disability required an employability assessment. In addition, FedEx failed to show where the two plans were actually different.
Based upon these two factors, the Court found that the Committee’s failure to address Gross’ combination of conditions and the evidence he provided to support his total disability was unreasonable. The Court denied FedEx’s motion for summary judgment.
The disability attorney had asked the Court for summary judgment for his client. The Court chose instead to send Gross’ claim back to the FedEx Committee for proper analysis. It will be interesting to see if either Mr. Gross finds himself back in court, or if FedEx will agree to reinstate benefits.