In Ehrlich v. Hartford Life & Accident Ins. Co., the U.S. District Court for the Northern District of California has ruled that when the administrator of a long-term disability (“LTD”) plan abused its discretion in denying LTD benefits, the employee was entitled to a retroactive reinstatement of benefits from the time his benefits were terminated through the date of the court’s decision.
Facts. An employee had been receiving LTD benefits for a variety of physical conditions. However, after an examining physician opined that the employee’s physical impairments were caused by severe depression and not a physical condition, the insurer/claims administrator told him he would need to submit proof within 60 days that he was under the care of a psychiatrist for a mental health condition. When he failed to do so, his benefits were terminated.
The employee then sued for reinstatement of benefits in federal court. After reviewing the matter, the court ruled in the employee’s favor, finding that the insurer had abused its discretion because the insurer’s physician failed to provide adequate support for his opinion and had failed to take into account the employee’s evidence that his impairments were physical. In addition, the court found the insurer’s denial of LTD benefits had failed to sufficiently address a Social Security Administration decision awarding the employee disability benefits based on a variety of physical conditions. With regards to the appropriate legal remedy, the employee argued he should receive retroactive benefits from the date his benefits were terminated through the date of the judgment in this case.
The administrator contended that before a judgement on the appropriate remedy was issued, it should be allowed to consult with a mental health professional to “confirm or refute” the physician’s opinion that the employee’s physical impairments were caused by a mental illness. Further, the administrator contended that even if the court ruled in favor of the employee, the court should limit the benefits to the time when benefits were terminated through the date on which the plan issued its final denial letter, because there was no record of the employee’s disability status beyond that date.
Court Ruling. The court ruled in favor of the employee, stating that in these circumstances, “a plan administrator should not get a ‘second bite at the apple’ when its first decision was simply contrary to the facts.” The court noted that the administrator had the opportunity to “confirm or refute” the physician’s opinion that the employee’s physical impairments were caused by a mental illness during the administrative process, and, in fact, this was required under applicable ERISA regulations. It simply failed to do so.
The court concluded by stating that the administrator reached the wrong conclusion in terminating the employee’s LTD benefits. The court found that because the employee’s LTD benefits would have continued in the absence of the administrator’s arbitrary and capricious conduct, an order reinstating such benefits through the date of judgment was the appropriate remedy.