Joyce Ann Pitts worked for one of the SCANA Corporation companies. The Corporation Health and Welfare Plan provides SCANA employees certain benefits through its health insurance plan, including long-term disability (LTD) benefits. Reed Group Ltd. acts as the third-party administrator of the plan, which is governed by the Employee Retirement Income Security Act of 1974 (ERISA). Pitts elected to participate in the plan and was therefore eligible for benefits if she met the criteria set out in the plan documents.
Because eligibility for benefits is very fact-specific, let's take a detailed look at the facts. To qualify for LTD benefits under the terms of the plan, a covered employee must be under the care of a physician, who must certify that the employee's medical condition has rendered her disabled, and the employee must apply and be approved for LTD benefits. The term "disabled" means the employee is receiving appropriate care and treatment from a physician for a medical condition related to an illness, injury, or accident that permanently prevents her from performing one or more of the material and substantial duties of her own occupation.
Readers should note that an employee's eligibility for coverage turns on being able to perform her own occupation. Also, the term "permanently" isn't defined by the plan. The plan also provides that employees may be asked to recertify that they continue to be eligible for LTD benefits as often as the plan administrator deems necessary, and at least every two years.
The plan grants the SCANA Corporation LTD Plan Initial Review Committee and its appeals committee discretionary authority to interpret the plan's terms and make benefits determinations. SCANA entered into an administrative services agreement under which Reed Group provides case management and administrative services for LTD benefits under the plan.
Pitts initially applied for short-term disability (STD) benefits based on lower back and elbow pain. On July 12, 2012, SCANA approved her claim with an onset date of June 25, 2012, and extended her STD benefits until December 26, 2012. The approval of the STD benefits was based largely on the following medical evidence.
On July 9, Pitts was examined by her primary physician, Dr. Benjamin C. Pinner, and diagnosed with "low back pain" and "tennis elbow." In response to a question on the exam form that asked, "Has the patient been totally unable to work?" Pinner checked "yes." He wrote that Pitts was "unable to work" from June 25 to August 6 and estimated that she would return to work on August 8.
On July 31, Pinner completed the first of three his-tory and physical reports for Pitts, noting that he would need to determine whether she should be given stronger pain medication. On August 2, Pinner noted in his second report that Pitts' condition was persistent and had actually progressed, she had felt no relief from her first injection, and she was still unable to work. On August 13, in his third report, Pinner noted that Pitts was improving and he would have to taper her pain medication before she could return to work. He identified a return-to-work date of September 10.
In response to a questionnaire from Reed Group sent to him on August 8, Pinner stated that Pitts had been diagnosed with lumbago and lumbosacral disk disease, she was absent from work from June 25 to September 10, and her estimated return-to-work date was September 10.
In August, Pitts made four visits to physicians at Moore Orthopaedics, which resulted in several brief medical reports focusing on her lower back pain. In response to a questionnaire from Reed Group sent to him on August 24, Dr. Michael W. Peelle stated that Pitts had been diagnosed with sacroiliitis and facet syndrome. In response to questions about whether she had been absent from work, the dates of any absences, an expected return-to-work date, and the need for any restrictions or accommodations, Peelle stated, "N/A."
On September 10, Pinner completed a return-to-work form and submitted it to Reed Group. He stated that Pitts was medically fit to return to work on Septem-ber 10, but her medical condition would continue to affect her ability to perform the essential functions of her job. He also stated that she was restricted to sedentary work; frequently sitting; occasionally standing, walking, driving, grasping, and reaching; and never bending, twisting, squatting, climbing, pushing, or pulling.
In October, Pinner completed three more medical history and physical exam reports based on Pitts' visits to his office. In an October 4 report, he noted that her condition was unchanged, she had returned to physical therapy, she hadn't returned to work because no light duty was available, and he might need to consider a functional assessment for her. In an October 23 report, he noted that Pitts still couldn't return to work, he anticipated that she might return to work in a month, and if she didn't improve in a month, he would contact SCANA about a functional assessment test.
In response to another questionnaire, Pinner in-formed Reed Group that Pitts would be absent from work until November 23, which was his new estimate for her return-to-work date. In another statement apparently submitted to Reed Group around the same time, he reiterated his estimation that she could return to work on November 23.
Reed Group also sent Peelle a questionnaire regard-ing Pitts' status in October. After examining her on October 1 and October 24, Peelle and his colleague Dr. David B. Fulton noted that her symptoms hadn't improved despite treatment. In a statement submitted to Reed Group on October 24, Peelle estimated that she could return to work on November 2.
In November and December, Pinner completed an-other set of medical history and physical exam reports based on Pitts' visits. In his November 23 report, he noted that she had improved only minimally despite therapy and he would contact Reed Group to discuss functional capacity testing. In his December 6 report, he noted that he would arrange functional assessment testing with MedFit, extend her STD excuse until January 4, 2013, and determine her disability based on MedFit's functional assessment testing.
In a statement submitted to Reed Group on Decem-ber 11, Pinner noted that Pitts was totally unable to work from June 25, 2012, to January 4, 2013, and he expected her to be able to return to work on January 4. On the same day, he submitted a form from Reed Group regarding her potential long-term disability. He didn't provide all of the requested information because Pitts was scheduled for testing and he would be able to determine the extent of her disability once he received the results. On December 28, Pitts submitted an application for LTD benefits to Reed Group.
MedFit completed its functional assessment testing on December 28. After numerous tests, MedFit con-cluded that Pitts' "return-to-work status" was to receive "further treatment." In its summary, MedFit stated that (1) Pitts had a decrease in functional status, (2) as part of her physical therapy goals, she would be able to perform work-related tasks with no more than minimum difficulty and return to work within 10 weeks, and (3) her potential to reach that goal was good. After reviewing the MedFit report, Pinner stated that he had no revisions to the plan of care and Pitts' prognosis was excellent.
On January 4, 2013, Pinner completed another Reed Group LTD statement, marking boxes indicating that Pitts was now totally disabled, he expected a fundamental or marked change in the future, she would recover sufficiently to perform her duties in one to three months after 10 weeks of therapy, and she was not "permanently disabled." He again stated that Pitts was scheduled for functional testing and he would determine the extent of her disability after he received the results.
On January 7, Pinner completed yet another form sent to him by Reed Group. Asked whether Pitts was "permanently disabled," he wrote "yes." Asked whether she had reached "maximum medical improvement" (MMI), he wrote "no" and indicated that he would be able to make a determination by February 19. He also stated that she might be able to return to work with no limitations on February 19.
Asked whether Pitts could perform no work, sedentary work, light work, medium work, or heavy work, Pinner replied that she could perform no work and was not capable of gainful employment at that time. He stated that the duration of that restriction was 10 weeks and would be complete on February 19.
On February 20, Donna Cruz, a licensed practical nurse, completed an initial LTD case review, in which she noted that, according to Pinner, Pitts was permanently disabled, but he also expected her to be able to return to work on February 19. Cruz explained that her attempts to have Pinner clarify his opinion were ineffective. She concluded that although the evidence supported the finding that Pitts was currently incapable of performing her job duties, it did not indicate that her condition would permanently prevent her from performing her job. Accordingly, Cruz recommended that Reed Group deny her LTD claim.
On February 20, the LTD committee denied Pitts' claim for LTD benefits. In its explanation of that decision, the committee stated that although the documentation supported the finding that she was currently incapable of performing her job duties, it didn't suggest that her condition would permanently prevent her from performing her job. While her treating physician indicated she that had a permanent disability, he also stated that he anticipated she would be able to resume work activities. Pitts appealed the LTD committee's decision on March 11.
On May 9, the appeals committee upheld the LTD committee's decision. In its explanation, the appeals committee noted that no additional information was provided during the appeals process and the permanency of Pitts' condition hadn't been es-tablished because Pinner was of the opinion that she could return to work in February 2013. Pitts filed a lawsuit challenging that decision under ERISA on April 9, 2015.
The court initially noted that Pitts and SCANA agreed that SCANA's denial of her claim should be reviewed for abuse of discretion because the plan grants the LTD and appeals committees the right to interpret and apply the plan's terms and provides that decisions about whether to grant or deny claims are within the committees' discretion. However, the parties disputed what the standard of review required.
SCANA argued that the court should ask whether its decision was arbitrary or capricious. Pitts, on the other hand, sought a less deferential standard, arguing that the court should ask whether the decision was reasonable, meaning it was the result of a deliberate, principled reasoning process and was supported by substantial evidence. The court declined to decide the standard-of-review question because it believed that even under the standard Pitts proposed, the denial of LTD benefits should be affirmed.
The court focused on the factors that should be applied to determine the reasonableness of an administrator's discretionary decision. The nonexhaustive list of factors that may be considered include:
(1) The language of the plan;
(2) The purposes and goals of the plan;
(3) The adequacy of the materials considered to make the decision and the degree to which they support the decision;
(4) Whether the fiduciary's interpretation is consistent with other provisions in the plan and with previous interpretations of the plan;
(5) Whether the decision-making process is reasoned and principled;
(6) Whether the decision is consistent with the procedural and substantive requirements of ERISA;
(7) Any external standard relevant to the exercise of discretion; and
(8) The fiduciary's motives and any conflict of interest it may have.
Based on the extensive facts set out in the first section of this article, the court decided that only four factors needed to be addressed.
In addressing the plain language of the plan, the court looked at whether certain terms were defined, and if so, whether they applied to the plan's definition. The court also looked for undefined terms, noting that the word "permanent" wasn't defined in the plan. When a term "is undefined in the plan, it must be accorded its plain and ordinary meaning and must be examined in the context in which it is used." Importantly, if the meaning of the undefined term is doubtful or ambiguous, the plan administrator's interpretation will not be disturbed if reasonable. And it was certainly reasonable to interpret that a medical condition cannot be understood to permanently prevent an employee from performing her duties if the physician determines that the employee will be able to return to work within several months of the LTD application. SCANA's interpretation, which requires that an employee's preclusion from work be continuing and lasting rather than subject to change and short-lived, is not an unreasonable interpretation, given the meaning ordinarily ascribed to the word.
The next factor reviewed by the court-the degree to which the materials considered to make the decision support it-was similarly resolved in SCANA's favor. As the court pointed out, its conclusion that SCANA's interpretation of "permanently" wasn't unreasonable compelled it to also conclude that the materials the company considered sufficiently supported its decision to deny Pitts' LTD claim.
With regard to the third and fourth factors-whether the fiduciary's interpretation was consistent with other provisions in the plan and whether the decision-making process was reasoned and principled-the court rejected Pitts' arguments that SCANA's decision making was unreasonable and unprincipled. The medical evidence showed that she was totally disabled, Pinner stated that she was permanently disabled, a separate plan provision permitted SCANA to make a post hoc determination about whether her disability was permanent, and SCANA's decision makers conceded that she was unable to perform her job duties. Consequently, SCANA's decisions were not an unreasonable application of the plan provisions at issue in this case.
The court concluded that SCANA's decision was the result of a deliberate, principled reasoning process and was supported by substantial evidence. Therefore, it was not an abuse of discretion, and the denial of Pitts' LTD claim was upheld.
Lessons for employers
As we have pointed out over the years, words do matter. You should spend sufficient time deciding what you want to cover in your benefits plans, how you want to cover it, and then draft your plans to accomplish those goals. The case also points out that every word has meaning, and care should be taken in drafting your plan.
For more information on the BLR, click here. For more information on the South Carolina Employment Law Letter, click here.