Here's a case that involved the wrongful termination of a disabled worker's long-term disabiilty (LTD) benefits.
Miller vs. American Airlines
In Robert T. Miller v. American Airlines, Inc. et. al., United States Court of Appeals for the Third Circuit, No. 10-1784, filed January 25, 2011, the Court examined a plan administrator’s reversal of a previous grant of long-term disability benefits.
Mr. Miller, a 10-year pilot with American Airlines, had been collecting long-term disability benefits under American Airlines' LTD policy, which was an "own occupation" plan. This means the policy considers you disabled if you can no longer do your own occupation, even if you could do a less demanding type of job.
In this case, the award of benefits was based on Mr. Miller's diagnosis of brief reactive psychosis and anxiety disorder. After collecting benefits for approximately five years, American notified Mr. Miller that the company was "unable to verify either the existence of continuing medical disability or your continued substantial progress towards attaining your FAA medical certification."
Mr. Miller’s doctor had furnished regular reports to the carrier that confirmed the diagnosis of anxiety disorder and reactive psychosis. Although Mr. Miller was not on any medication, the doctor rendered the opinion that ..."no medical treatment has the capacity to neither revert, undo, nor cure such a condition." However, the LTD policy did not set forth the requirement that a disabled pilot apply for an FAA medical certification.
Mr. Miller filed suit in the District Court, which dismissed the suit, finding that American properly terminated benefits. Mr. Miller appealed to the Third Circuit Court of Appeals.
Examining Wrongful Termination of LTD Benefits
The Third Circuit Court of Appeals set forth the following analysis in reversing the District Court and reinstating Miller’s benefits.
- A conflict of interest must be weighed when the denial of benefits will save the employer money from its contribution to the plan.
- American’s notice of termination of benefits was not proper because it did not set forth the specific reasons for the denial and the manner in which the beneficiary could perfect his claim through the submission of new evidence.
- American’s administrator cannot ignore certain diagnoses and must address all the beneficiary’s diagnoses when deciding to terminate the plan.
- American’s administrator must consider the specific job requirements and explain how a beneficiary with certain specific diagnoses can do the job, and
- American cannot demand additional requirements, such as the FAA medical certification, when they are not set forth in the plan.
In the Miller case, it appears that the plan did not have a limitation for psychiatric claims. However, many LTD claims do have a limitation on benefits, such as two years, for psychiatric disabilities.