The Ninth Circuit Court of Appeals, in Kay v. Hartford Life and Accident Insurance Company, has reversed a lower court’s decision upholding an insurer’s termination of long-term disability (“LTD”) benefits after concluding that the “district court abused its discretion” by denying the plaintiff-employee’s motion to augment the administrative record with additional evidence. The Ninth Circuit also concluded that the defendant-insurer did not do enough to fully investigate the employee’s actual job duties.
Background. The employee worked as a Clinical Specialist and was covered for LTD benefits under an ERISA-governed plan administered by the insurer. In this job position, the employee was required to travel up to 80% of the time, to work over 40 hours per week, and to move equipment that weighed up to 270 pounds. In August 2015, the employee stopped working due to increasing back pain, and subsequently began receiving LTD benefits.
In July 2016, the insurer terminated the employee’s LTD benefits. In its July 2016 termination letter, the insurer concluded that the medical evidence no longer demonstrated that the employee could not perform the essential functions of her job, which included sales support and travel, the ability to sit or stand for up to eight hours, push or pull 270 pounds, lift 25 pounds, and carry 20 pounds.
The employee appealed the insurer’s denial of benefits, and when the insurer issued its final determination, it in part relied on an occupational report that included a new definition of the employee’s job. The new definition was based on a combination of two definitions from the Department of Labor’s Dictionary of Occupational Titles (“DOT”), which conveniently managed to exclude the travel and lifting requirements of the employee’s job. The occupational report containing this new definition was not made available to the employee before the insurer denied her appeal.
District Court. The employee sued the insurer in federal court to challenge its decision to terminate her LTD benefits. At trial, the district court denied the employee’s motion to augment the administrative record with additional evidence to respond to the insurer’s new occupation definition. The district court ultimately sided with the insurer, finding that there was nothing in the record to show that the employee’s back pain prevented her from performing any of the essential job duties described in the insurer’s occupational report. The employee appealed the district court’s decision to the Ninth Circuit.
Ninth Circuit. As an initial matter, the Ninth Circuit determined that the district court abused its discretion by denying the employee’s motion to augment the record with additional evidence to refute the insurer’s rationale for denial. Specifically, the Ninth Circuit explained that “because ERISA guarantees plan participants a statutory right to a ‘full and fair review’ of a disability claim…additional evidence is necessary ‘[w]hen an administrator tacks on a new reason for denying benefits in a final decision[.]’” The Ninth Circuit further noted that, “By denying [the employee’s] motion to augment the record with evidence intended to refute [the insurer’s] new rationale, the district court effectively insulated the insurer’s decision from ‘full and fair review.’”
The Ninth Circuit also concluded that both the insurer and the district court erroneously redefined the employee’s own occupation to omit the 80% travel and 270-pound equipment-moving requirements that were the basis for her disability claim. The court noted that although the insurer’s policy defined occupation to include the employee’s job as it is recognized in the general workplace (rather than the specific job the employee was performing for a specific employer), the insurer was nonetheless required to evaluate what the employee actually did before it determined the essential duties of her occupation. Here, the record reflected that the insurer’s occupational specialist defined the employee’s occupation by matching DOT titles to generic job descriptions from Indeed.com and failed to select DOT titles that approximated her actual responsibilities with the employer.
Based on the foregoing, the Ninth Circuit reversed the district court’s dismissal of the employee’s LTD claim against the insurer and remanded the matter back to the lower court.