ERISA-Tenth Circuit Holds That Plan Administrator Did Not Abuse Its Discretion When Deciding To Stop Disability Benefits

In Fite v. Bayer Corporation, No. 13-7027 (10th Cir. 2014), the plaintiff, Margie Fite (“Fite”), appeals the district court’s grant of summary judgment to the defendants (collectively, “Bayer”) on her ERISA claim for denial of short-term disability (“STD”) benefits under Bayer’s Disability Plan (the “Plan”). The district court determined that Bayer did not abuse its discretion when it concluded that Fite’s depression and anxiety were excluded from coverage under the Plan as employment-related mental or emotional disabilities.

In this case, Fite had worked as a pharmaceutical representative for Bayer for several years when, based on a psychologist’s diagnosis of major depressive disorder and generalized anxiety disorder, she took leave and applied for STD benefits under Bayer’s Plan. After receiving the benefits for a while, Bayer determined that Fite was ineligible for the benefits and cut them off. This suit ensued.

In analyzing the case, the Tenth Circuit Court of Appeals (the “Court”) first said that Bayer’s decision to stop the STD benefits will be reviewed under the arbitrary and capricious standard, since the Plan gave Bayer discretionary authority to determine the eligibility for benefits and to construe the terms of the Plan. The Court then said that Bayer has an inherent conflict of interest (as plan administrator and payer), so that the Court must weigh the conflict as a factor in determining whether there was an abuse of discretion, according it more or less weight depending on its seriousness. Here, the Court said that Bayer took active steps to reduce any potential bias and to promote accuracy: it sought an independent review of Fite’s medical records by 4 different psychiatrists . Therefore, the Court said that it must give the conflict-of-interest factor limited weight in determining whether Bayer abused its discretion.

The Court concluded that -under the foregoing standard of review-Fite did not raise any arguments which show that Bayer abused its discretion in stopping the STD benefits. Therefore, the Court affirmed the district court’s decision.

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