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Court Clarifies Meaning of ERISA Long-Term Disability (LTD) Plan and Remands for Further Consideration

On May 9, 2018, the United States District Court for the District of Kansas remanded a long-term disability (“LTD”) claim back to the claims administrator for further consideration after it interpreted an ambiguous plan provision.  A copy of the Court’s opinion in Derichs v. AT&T Services, Inc., Case No. 16-2346-JWL, can be found here.

The Derichs plaintiff was a participant in an employer-sponsored long-term disability benefits plan governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”).  (ERISA governs most employer-sponsored employee benefit plans).  Sedgwick administered claims for LTD benefits under the plan.  Sedgwick is a third party administrator that administers a number of ERISA long-term disability plans.

In order to receive LTD benefits, the plaintiff had to satisfy the following definition of disabled: “You are considered Totally Disabled when, because of illness or injury, you are unable to perform all of the essential functions of your job. . .”  The plaintiff made a claim for LTD benefits that was denied.  He submitted an internal appeal that was also denied.  After exhausting his appeals under the plan, he filed suit against the plan under section 502(a) of ERISA, 29 U.S.C. § 1132(a).

The Court recognized that plan’s definition of disability had two possible meanings.  First, it could mean that to show a participant is disabled he or she must show that he or she cannot perform any one of the job’s essential functions.  Alternatively, the plan provision could mean that a claimant must show that he or she cannot perform all of the job’s essential functions in order to show that he or she is disabled.  The Court found, and the defendant conceded, that Sedgwick had not applied any particular interpretation of the plan.  Thus, Sedgwick’s interpretation of the plan was not entitled to any form of deference under the Firestone line of cases.

The Court interpreted the plan as a matter of law and found that to be disabled a participant must show that he or she could not perform any one of the essential functions of the participant’s position in order to receive long-term disability benefits.  The Court reasoned that if an employee cannot perform an “essential function” of the job, then he or she cannot perform the job and would be subject to dismissal by his or her employer.   It further noted that the plan’s reliance on the inability to perform an essential function of the job negated any risk that individuals could claim disability for the inability to perform trivial job functions.   This interpretation was “more reasonable [than the alternative] and is more in keeping with the plan’s clear purpose of providing benefits to those who can no longer perform their jobs.”  The Court also utilized the doctrine of contra proferentem, under which ambiguities in the plan are construed against the drafter and in favor of the plan participant. Having supplied the proper interpretation of the plan, the Court remanded the claim to the long-term disability plan’s administrator, Sedgwick, for it to reconsider the plaintiff’s claim for LTD benefits.

If you are an ERISA long-term disability claimant whose claim has been denied, please contact us today for a free consultation.  Adam H. Garner, the founder of The Garner Firm, is an experienced ERISA long-term disability lawyer.  We may be able to help you receive and recover the long-term disability benefits you are entitled to.

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Mr. Garner is an ERISA employee benefits and employment attorney with over a decade of experience. The laws governing employee benefits, the employment relationship, and the workplace are complex.

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