ERISA- Ninth Circuit Rules That Case Must Be Remanded So The District Court Can Reconsider Whether The Administrator Abused Its Discretion In Denying A Claim For Long-Term Disability Benefits

In Kluda v. Quest Disability Plan, No. 10-16035 (9th Cir. 2011) (Unpublished Memorandum), the plaintiff, Richard Kluda (“Kluda”), was appealing the summary judgment granted by the district court to the defendant, the Qwest Disability Plan (the “Plan”), concerning Kluda’s long-term disability (“LTD”) benefits. The Plan’s administrator is Qwest Disability Services (“QDS”). QDS had denied Kluda’s claim for the LTD benefits.

In analyzing the case, the Ninth Circuit Court of Appeals (the “Court”) found that QDS committed two procedural errors when it denied Kludka’s claim. First, it failed to comply with 29 C.F.R. § 2560.503-1(g)(1)(iii), which requires that it describe “any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary.” QDS’s generic reproduction of the Plan’s terms in its denial letter did not explain to Kludka what specific information was needed and why. Second, although QDS had notice that Kludka was receiving Social Security benefits, it failed to request the relevant records or “explain why it reached a different conclusion than” the Social Security Administration.

Further, QDS had notified Kludka by letter that it denied his claim based on its conclusion that he was not disabled within the meaning of the Plan. The district court misread this letter, and had concluded-in support of the finding of no disability- that Kludka would be reinstated to his previous employment position with accommodations. This conclusion is erroneous. The Plan conceded that the previous employer has not offered to reinstate Kludka to his prior position. Instead, Kludka will have to search for a job on the open market. Also, a doctor who had interviewed Kludka concluded that he could work part-time, gradually increasing his work hours to full-time. If the district court had analyzed Kludka’s situation under these conditions, instead of under the assumption that Kludka had a standing offer to return to his previous job with accommodations, the court may well have determined that he is “unable to engage” in meaningful employment (that is, he could not find a job due to his current inability to work full-time) and is thus disabled under the terms of the Plan.

Accordingly, the Court determined that the case should be remanded, so that the district court could reevaluate whether QDS abused its discretion in denying Kluda’s claim for the LTD benefits, taking into account the procedural errors and the fact that the former employer had not offered to reinstate Kludka to his previous job with accommodations.

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