After suffering a back injury as the result of a car accident in 2000, Sonya Pettaway, an employee of the National Academy of Sciences, filed for and received disability benefits from Teachers Insurance and Annuity Association (TIAA). However, 24 months later, the policy definition of disability changed. Instead of disability being defined as the inability to perform her own occupation, the definition became more stringent and required that Pettaway be unable to perform the duties of any occupation.
TIAA determined that the results of an independent medical examination and assessment of the record showed that Pettaway no longer met that standard. Although an initial appeal was unsuccessful, Pettaway submitted a second appeal that included evidence that she had resumed treatment for her back as the result of two subsequent injuries that aggravated the initial spinal injury. Benefits were subsequently reinstated but terminated again in 2004. Pettaway appealed that decision and agreed to attend a functional capacity evaluation (FCE) during the appeal.
The FCE concluded that Pettaway had sedentary work capacity, but the test findings could not determine whether she could sustain work over an eight-hour day due to her self-limiting behavior during the testing. Nonetheless, as a result of inconsistencies in the test findings, the therapist concluded that Pettaway had greater ability than what she demonstrated. An independent medical examination performed during the appeal came to the same conclusion, as that doctor also found inconsistencies. A subsequent file review performed by Dr. Ronald Fraback, however, found Pettaway incapable of performing sedentary work on a full-time basis.
However, TIAA determined from that report that Pettaway did not meet the plan’s standards because the plan only covered total disability and her partial disability did not qualify. Litigation ensued and after losing in the district court, an appeal was filed that resulted in a ruling entitled Pettaway v. Teachers Insurance and Annuity Assn. Pettaway 644 F.3d 427 (D.C. Cir. July 15, 2011).
The court began its discussion of the merits by addressing Pettaway’s argument that the standard of review should be de novo because the policy contained no discretionary language sufficient to trigger a deferential standard of review and because the governing plan limited the academy’s discretionary authority and contained no statement permitting a delegation of discretion. The court disagreed. The court found that it needed to look at a variety of “plan documents,” including the summary plan description. Surveying a number of other circuits, the court concluded that a grant of discretion in the summary plan description (SPD) was adequate to trigger an arbitrary and capricious standard of review.
Applying that standard, which the court characterized as one of “reasonableness,” the court determined that even though there was conflicting evidence in the record, medical findings that Pettaway could return to part-time employment were adequate to support the decision. The court also rejected the plaintiff’s challenge that she was denied a full and fair review, holding the plan was not obligated to give her a right to challenge adverse evidence it had generated and citing rulings from the 8th, 10th and 11th circuit court of appeals which held the plan gets the last word.
The rulings on each of the three main issues decided in Pettaway are controversial. First, on the issue of standard of review, finding that discretionary language in the SPD but not elsewhere triggers a deferential standard of review has been rejected by other courts. The 7th Circuit remarked in Schwartz v. Prudential Ins. Co. 450 F.3d 697, 699-700 (7th Cir. 2006):
“The SPD is a document which the administrator must provide to participants pursuant to 29 U.S.C. §§ 1022 and 1024. It is not the subject of negotiation. Information in the SPD must be provided in a manner “calculated to be understood by the average participant.” § 1022. Without casting aspersions on Prudential, we note that the implication of § 1022 is that the SPD will be an accurate summary, not an unnegotiated enlargement of the administrator’s authority. Were we to say the SPD controlled in this situation, we would be- use an apropos cliche- allowing the tail to wag the dog.”
Also see, Shaw v. Connecticut General Life Ins. Co. 353 F.3d 1276 (11th Cir. 2003); Jobe v. Medical Life Ins. Co. 598 F.3d 478 (8th Cir. 2010); and Ringwald v. Prudential Ins. Co. of Am. 609 F.3d 946, 948-949 (8th Cir. 2010). In addition, there are a host of rulings questioning whether discretion can be exercised by a party not properly been delegated discretionary authority. See, e.g., Madden v. ITT Long Term Disability Plan. 914 F.2d 1279, 1283-84 (9th Cir. 1990); Sanford v. Harvard Industries, Inc. 262 F.3d 590, 596 (6th Cir. 2001); Sharkey v. Ultramar Energy Ltd. 70 F.3d 226, 229 (2d Cir.1995);and Rodriguez-Abreu v. Chase Manhattan Bank. 986 F.2d 580, 584 (1st Cir.1993). Hence, the finding that the summary plan description dictated the standard of review is not consistent with the weight of authority.
As for the disability finding itself, since the plan was unable to show Pettaway could work on a full-time basis, her limitation to part-time work capacity would, according to several courts, entitle her to benefits for total disability. According to Seitz v. Metropolitan Life Ins. Co. 433 F.3d 647, 651 (8th Cir. 2006), “being able to perform some job duties is insufficient to deny benefits.” (emphasis in original). Although Seitz was decided in relation to the plaintiff’s ability to perform his own occupation, every occupation listed in the U.S. Department of Labor’s Dictionary of Occupational Titles(4th ed. 1991) is a full-time occupation. Here, since there was apparently no partial disability classification in the policy, Pettaway’s inability to work on a full-time basis should have entitled her to benefits. However, the result reached in Pettaway is consistent with Bond v. Cerner, 309 F.3d 1064 (8th Cir. 2002), where the court held that under an “any occupation” standard, the ability to work part time precluded a disability award.
Finally, while the weight of authority supports the D.C. Circuit’s conclusion that the plan gets the last word, earlier Employee Retirement Income Security Act (ERISA) cases defined the concept of what is meant by a “full and fair review” in a different manner:
“[T]he persistent core requirements of review intended to be full and fair include knowing what evidence the decision maker relied upon, having an opportunity to address the accuracy and reliability of that evidence and having the decision maker consider the evidence presented by both parties prior to reaching and rendering his decision.”
Grossmuller v. International Union, United Auto., Aerospace & Agric. Implement Workers of Am, UAW.715 F.2d 853, 858 n. 5 (3d Cir.1983). Based on that common sense statement, a claimant can hardly be said to be afforded a full and fair review when the plan is allowed to sandbag evidence and then refuse to give the claimant an opportunity to offer a rebuttal.
Indeed, in a recent U.S. District Court ruling from California, Prado v. Allied Domecq Spirits and Wine Group Disability Income Policy, 2011 U.S.Dist.LEXIS 80049 (N.D.Cal. July 22, 2011), the court questioned the insurer’s reliance on surveillance performed after a claim appeal had been submitted. The court remarked, “[A]n administrator that adds, in its final decision, a new reason for denial, a maneuver that has the effect of insulating the rationale from review, contravenes the purpose of ERISA.” (citing Abatie v. Alta Health & Life Ins. Co. 421 F.3d 1053 (9th Cir. 2005)).
Thus, the court’s refusal in Pettaway to give the claimant the last word contravenes the entire underpinning of the concept of a “full and fair review” guaranteed by § 503 of ERISA.
Note: I represented the plaintiff in the Seitz case referenced in this article and my office represented the plaintiff in the Schwartz case, which is also cited above.