Legal Opinions - U.S. 4th Circuit Court of Appeals: December 31,

Daily Record, The (Baltimore), Dec 31, 2007

Labor & Employment

Denial of long-term disability benefits

BOTTOM LINE: Failure of benefits administrator to consider all medical ailments in denying claim for long-term disability benefits denied applicant of a full and fair review and decision to deny benefits was not based on substantial evidence.

CASE: Guthrie v. National Rural Electric, No. 06-1410 (decided Dec. 11, 2007) (Judges King, GREGORY & Wilson (sitting by designation)).

COUNSEL: Andrew O. Whiteman, Hartzell & Whiteman, L.L.P., Raleigh, N.C., for Appellant. John Jay Range, Hunton & Williams, Washington, D.C., for Appellees.

FACTS: Callie D. Guthrie, age 57, worked as a custodian for Harkers Island Electric Membership Corporation (HIEMC) for 13 years. HIEMC is a member of the National Rural Electric Cooperative Association (NRECA).

NRECA, a non-profit corporation, is a national trade association for rural electric cooperatives, sponsors a Group Benefits Program which provides disability, life, accident, medical and other welfare benefits plans. HIEMC along with more than 1,000 other rural electric cooperatives participates in the Group Benefits Program. The Group Benefits Program is administered by NRECA's wholly-owned subsidiary, Cooperative Benefit Administrators, Inc. (CBA).

On March 23, 2002, Guthrie took disability leave from HIEMC. Shortly thereafter on May 6, 2002, she filed a claim for long-term disability benefits (LTD) benefits.

Guthrie claimed to have breathing problems which prevented her from working in an environment using cleaning products. She also claimed to suffer from carpal tunnel syndrome, arthritis in her knees, asthma, sores on her skin, depression and anxiety, unsteady gait, poor vision, obesity, high blood pressure, and high cholesterol.

Guthrie's primary care physician, Dr. T.L. Goodman, concluded that Guthrie was totally disabled because her breathing prevented her from working around dust, cleaners, and humidity. He noted, however, that Guthrie was not totally disabled from other employment.

HIEMC's Groups benefits program includes a long-term disability plan (LTD Plan) that provides benefits to employees. HIEMC contributes to a trust fund held by NRECA for the payment of administrative expenses, insurance company premiums, and benefits. On June 13, 2002, CBA approved Guthrie's claim for benefits under the LTD Plan's "own occupation" standard.

After receipt of benefits, Guthrie says her health continued to deteriorate. Although she underwent surgery for carpal tunnel, the surgery did not completely relieve her pain. She continued to experience problems with her knees, left wrist, hand, and cholesterol.

In support of her disability claim, Guthrie submitted medical records from her treating physicians to CBA, who all agreed that Guthrie could not work as a custodian due to exposure to fumes, solvents and dust. But none concluded that she lacked the capacity to perform other work.

Based on these medical reports, CBA referred Guthrie to Intracorp, an employability assessment company. After interviewing Guthrie and reviewing her medical files, Intracorp concluded that Guthrie would need to learn how to develop a resume and interview; but could perform sedentary or light duty jobs.

Intracorp provided a job list, with descriptions, to Guthrie's physicians and requested that they "indicate which positions would be physically and mentally appropriate." From February 2003 to June 2003, Intracorp says it provided Guthrie with numerous job leads.

However, according to Intracorp, Guthrie often unnecessarily and negatively explained her medical conditions to potential employers. During this same time, Guthrie says her health deteriorated even further.

On January 22, 2004, CBA informed Guthrie that her benefits would expire on June 22, 2004, and that it was reviewing her disability status. On May 24, 2004, CBA informed Guthrie that it would not renew her LTD benefits because her medical evidence demonstrated that she could obtain other gainful employment.

Guthrie petitioned CBA's Appeals Committee, which denied Guthrie's claim for LTD benefits. Guthrie then sued CBA in the district court under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. [section]1132(a)(1)(B).

The district court granted summary judgment for CBA. The 4th Circuit reversed and remanded.

LAW: The first issue to resolve was the proper standard of review. Courts review the denial of benefits under an ERISA policy for "abuse of discretion" if the policy grants the administrator or fiduciary final and conclusive discretionary authority. Carolina Care Plan Inc. v. McKenzie, 467 F.3d 383, 386 (4th Cir. 2006).

This standard is only modified when a beneficiary demonstrates that the plan administrator has a conflict of interest. Id. The LTD Plan at issue grants the administrator full authority. But Guthrie maintained that a conflict of interest exists because CBA is a subsidiary of NRECA and that, therefore, a less deferential standard of review should apply.

However, any "potential conflict" which Guthrie alluded to but failed to identify, did not establish a legally cognizable conflict of interest. Thus, the district court properly applied the abuse of discretion standard of review.