ERISA-Fifth Circuit Upholds Summary Judgment For Plaintiff’s Claim For Disability Benefits, Based On Insurer’s Failure To Consider Social Security Administration’s Determination That Plaintiff Is Disabled

In Schexnayder v. Hartford Life and Accident Insurance Company, No. 08-30538 (5th Cir. 2010), the plaintiff, Kelvin Schexnayder, sued Hartford Life and Accident Insurance Company (“Hartford”) under ERISA for long terms disability benefits. The district court granted summary judgment to the plaintiff, holding that Hartford abused its discretion in denying the benefits.

The plaintiff had been a participant in his employer’s long term disability plan, which was funded by an insurance policy for which Hartford became responsible. Hartford had sole discretionary authority to determine eligibility for benefits under the plan, and to interpret its terms and provisions. After the plaintiff became disabled, he received long term disability benefits under the plan for two years. However, after this two year period, under the terms of the plan, the plaintiff would be entitled to disability benefits only if he was unable to engage in any occupation for which he was or became qualified. The Social Security Administration (the “SSA”) had determined that the plaintiff was totally disabled, meaning that he could not perform any work, and the SSA authorized him to receive disability benefits from Social Security. Nevertheless, Hartford notified the plaintiff that the information it had received from plaintiff’s doctors did not support a finding that he was unable to work in any occupation, so that the disability benefits from the plan would end after being paid for two years. After unsuccessfully appealing Hartford’s determination under its internal procedures, the plaintiff filed this case in federal court.

The Fifth Circuit reviewed Hartford’s decision to end the plaintiff’s disability benefits, using the abuse of discretion standard. In doing so, the Court noted that it would apply the Supreme Court’s holding in Metro. Life Ins. Co. v. Glenn by giving increased weight to the conflict of interest present in the case due to Hartford’s being both the payer and determiner of benefits. In so applying Glenn, the Court felt that Hartford’s decision to stop the disability benefits suggests procedural unreasonableness. Further, the Court noted that Hartford had failed to even acknowledge the determination of disability made by the SSA, in its benefit denial letters or anywhere else. This led the Court to believe that Hartford’s decision to end the benefits was procedurally unreasonable, and suggests that Harford failed to consider all relevant evidence. The Court said that, although substantial evidence supported Hartford’s decision to end the benefits, the method by which it made the decision was unreasonable, and the conflict of interest present here acts as a tiebreaker for the Court to conclude that Hartford abused its discretion. Accordingly, the Court upheld the District Court’s summary judgment for the plaintiff.

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