LTD Benefits ‘Capricious,’ U.S. Court
decision of a plan administrator to terminate a benificiary’s longterm
reached in an arbitrary and
capricious manner,” according to a ruling by the Seventh Circuit
of Appeals. As a result, the court ruled that steps should be taken to
reinstate the beneficiary’s benefits.
Appeals Case No. 014132 (Hackett v.
Xerox Corporation Long-Term Disability Income Plan) involved James J.
who working for Xerox in 1985 and began to suffer from emotional
following year. Hackett’s problems were caused by a personality
made it difficult for him to interact properly with others in the work
environment. As the problems grew worse Hackett was advised by a Xerox
physician to seek disability. In the process, Hackett was examined by a
psychiatrist who gave a diagnosis in support of benefits. As a result,
began receiving those benefits on March 2, 1987.
continued to be examined by experts over
the next ten years. All of them supported the initial
diagnosis. Then, in 1998, Xerox asked Hackett to be
examined by a doctor who said the employee had a personality disorder
despite the condition— was able to return to work without restriction. Xerox
then terminated Hackett’s benefits in January 1999, stating: “Continued
disability not clinically supported.”
As a result
of Xerox’s action, Hackett filed suit in the U.S. District Court for
Northern District of Illinois, seeking the reinstatement of his
disability benefits. The court ruled in favor of the plan and Hackett
to the Seventh Circuit which reversed the district court’s ruling.
its decision, the Seventh Court, in part, noted: “ERISA requires that
reasons for denial be communicated to the claimant and that the
afforded an opportunity for a ‘full and fair review’ by the
.the administrator must weigh the evidence for and against [termination
benefits] and within reasonable limits, the reasons for rejecting
be articulated if there is to be meaningful appellate review.”
that standard to the Hackett case “makes clear that the termination
were arbitrary and capricious,” the Seventh Court stated. “After 12
paying out disability benefits, Xerox terminated those benefits simply
basis of an examination by [a single doctor], whose conclusion that
able to work was contrary to numerous prior opinions.” Furthermore, the
Court noted that the doctor who provided the contrary diagnosis
explanation for his departure from the opinions of the previous