ERISA-Tenth Circuit Rules That Insurer’s Decision To Terminate Long-Term Disability Benefits Was Arbitrary and Capricious

In Van Steen  v. Life Insurance Company N.A., No. 16-1405 (10th Cir. 2018), the appeal arose out of the termination by Life Insurance Company of North America (“LINA”) of Carl Van Steen’s long-term disability benefits under Lockheed Martin’s benefit plan, which is subject to ERISA.  LINA appeals the district court’s finding that its decision to terminate Mr. Van Steen’s benefits was arbitrary and capricious, so that the district court overturned LINA’s decision.  Upon reviewing the case, the Tenth Circuit Court of Appeals (the “Court”) affirmed the district court’s ruling.

In this case, Van Steen was employed as a Systems Integration Business Analyst at Lockheed Martin Corporation.  As such, he was a participant in the Lockheed Martin Group Benefits Plan (the “Plan”), which is administered and insured by LINA.  In October 2011, Van Steen was physically assaulted during an altercation while walking his dog.  The assault resulted in a mild traumatic brain injury (“mTBI”) that impacted Mr. Van Steen’s cognitive abilities.  This cognitive dysfunction ultimately prevented him from functioning in his job.

Van Steen applied for and an initially began to receive long-term disability benefits from the Plan.  However, LINA later decided to terminate the benefits, on the grounds that the medical documentation does not show that Van Steen’s condition  precludes him from resuming his work.  Van Steen then filed suit, challenging the termination of his benefits. The case wound up before the Court.

In affirming the district court’s decision, the Court noted that the parties agree that the Court should review LINA’s benefits termination decision under the arbitrary and capricious standard.  Under this standard, said the Court, we will uphold LINA’s decision so long as it was made on a reasoned basis and supported by substantial evidence.  Considering the terms of the Plan, in order for this Court to uphold LINA’s decision, there must be substantial evidence in the record supporting the determination that Mr. Van Steen is able to perform each and every material duty of a Systems Analyst for eight hours a day. However, a thorough review of the record reveals no such evidence. Thus, LINA’s decision to terminate the benefits is arbitrary and capricious.

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