ERISA-Sixth Circuit Rules That Plan Administrator’s Denial Of Disability Benefits Must Be Overturned

In Kennard v. Means Industries, Incorporated, Case No. 13-1911 (6th Cir. 2014) (Unpublished), the plaintiff, Kyle Kennard (“Kennard”), was appealing the district court’s adverse judgment on his claim for disability retirement benefits from his former employer under ERISA.

In this case, Kennard had operated machines for his employer, Means Industries, Inc. (“Means”) until 1990 when he inhaled fumes from a chemical spill, severely injuring his lungs and rendering him ultra-sensitive to noxious fumes. As a result, his treating physician imposed a lifelong restriction that he work only in a clean-air environment. Means provided Kennard a clean-air environment to perform clerical work from March 1992 until 2006. However, fumes from perfume and candles in that area would shorten Kennard’s breath and require him to leave work. Kennard stopped working at Means in 2006.

That same year, Kennard successfully applied for disability benefits from the Social Security Administration (“SSA”). SSA’s written decision detailed his disability. SSA decision in hand, Kennard next sought disability retirement benefits under Means’s ERISA-governed group insurance policy (the “Plan”). The Plan entitles an employee to benefits “if he has been totally disabled by bodily injury or disease so as to be prevented thereby from engaging in any occupation or employment for remuneration or profit, and which condition constitutes total disability under the federal Social Security Act.” Means’s plan further conditions benefits on an assessment by its chosen physician that the disability be permanent. Based on its physician’s reports, Means’s Plan Administrator denied Kennard’s request for benefits in a February 2010 letter and this suit ensued The district court granted Mean’s motion to affirm the Plan Administrator’s decision. Kennard appeals.

In analyzing the case, the Sixth Circuit Court of Appeals (the “Court”) found the employer’s decision to deny the benefits to be arbitrary and capricious, and reversed the district court’s decision. Why? The Court concluded that, upon a close reading of the medical reports, it rejected the district court’s conclusion that those reports support the Plan Administrator’s decision that Kennard can “engag[e] in any occupation or employment.” A valid denial of benefits premised on those reports would need to include evidence of the existence of absolute-clean-air jobs available to Kennard. The SSA found (and Means does not dispute) that “there are no jobs in the national economy that Kennard could perform.” Though the Plan Administrator was not required to seek out vocational evidence, or to apply the SSA’s legal standard for disability, Means’s Plan Administrator needed to ground its decision on a reasoned explanation, which it did not. The Court remanded the case back to the district court, with instructions to award Kennard his disability retirement benefit.

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