ERISA- Fourth Circuit Rules That Plan Administrator Did Not Abuse Its Discretion In Revoking Long-Term Disability Benefits

In Scott v. Eaton Corporation Long Term Disability Plan, No. 10-2124 (4th Cir. 2011)(Unpublished), the plaintiff, Statia Scott (“Scott”), brought suit under ERISA against the defendant, the Eaton Corporation Long Term Disability Plan (the “Plan”), for revoking Scott’s long-term disability (“LTD”) benefits from the Plan. The district court reversed the Plan’s decision and awarded LTD benefits to Scott. The Plan appealed. The issue for the Fourth Circuit Court of Appeals: was the Plan’s decision to revoke the LTD benefits, made by the plan administrator of the Plan, an abuse of discretion? If not, the decision must stand.

In this case, the plan administrator of the Plan was the employer, Eaton Corporation (“Eaton”). Scott’s disability arose from right arm pain and rheumatism, coupled with anxiety and depression. After initially being awarded LTD benefits by the Plan, Scott’s LTD benefits were later revoked and terminated by Eaton as plan administrator. Eaton’s decision to revoke the benefits was based on the medical reports of seven physicians, solicited by the Plan, all of which concluded that Scott could work. Only Scott’s own physician-one Dr. Riley- had concluded that Scott was disabled. Eaton discounted Dr. Riley’s conclusions, based on the various inconsistencies among his diagnoses, his lack of objective findings, and his conclusions being contradicted by the Plan’s seven reviewing physicians.

In analyzing the case, the Court noted that Eaton had discretion to interpret and apply the Plan’s provisions, and to determine eligibility for benefits. As such, Eaton’s decision to revoke the LTD benefits must be reviewed under an abuse of discretion standard. The Court concluded that Eaton did not abuse its discretion, because its decision-making process was sound and its ultimate decision was supported by substantial evidence. The record is clear that Eaton thoughtfully considered but rejected the views of Dr. Riley. Eaton had also taken into account the side effects of Scott’s medicines. Also, the evidence in the record-primarily lack of objective evidence of disability-supports Eaton’s decision. As such, the Court ruled to uphold Eaton’s decision to revoke Scott’s LTD benefits, and reversed the district court’s judgment.

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