Earlier this year, the Third Circuit considered whether American Airlines properly terminated a commercial airline pilot’s claim for long-term disability (“LTD”) benefits, where the pilot’s putative disability claim arose from a psychotic episode.
In Miller v. American Airlines, 632 F.3d 837 (3d Cir. 2011), the Third Circuit reversed the decision of the United States District Court for the Middle District of Pennsylvania, which had granted summary judgment for American Airlines, the benefits plan and the plan administration committee. In reaching its decision, the Third Circuit parsed through the contents of the termination letter that was sent to the pilot and weighed the impact of its contents in determining whether the decision to terminate the pilot’s LTD benefits was arbitrary and capricious.
As the Third Circuit noted, Section 503 of ERISA and the related regulations (29 C.F.R. § 2560.503-1) set forth the requirements for the written notification that a plan administrator must provide a participant regarding any adverse benefit determination. The Third Circuit found the letter notifying the pilot of the termination of his LTD benefits was faulty for several reasons.
First, the Court found that the letter did not provide “specific reasons for [the] denial, written in a manner calculated to be understood by the participant.” Specifically, the Court pointed to the fact that the termination letter made no mention of the pilot’s specific diagnoses or the information that was apparently lacking from his claim file.
Second, the Third Circuit determined that the termination letter failed to provide adequate information to advise the pilot regarding how he could perfect his claim. Here, the termination letter stated that the pilot was required to demonstrate that he was actively pursuing FAA medical certification, something which was not actually required by the terms of the plan.
These deficiencies in the termination letter, along with other issues that arose from, inter alia, the failure to consider all of the pilot’s relevant diagnoses, led the Third Circuit to determine that the decision to terminate the pilot’s LTD benefits was arbitrary and capricious. The Third Circuit ordered retroactive reinstatement of the pilot’s LTD benefits, rather than a remand to the plan administrator.
The lesson to be gleaned from the Third Circuit’s decision in Miller v. American Airlines is that certain procedural deficiencies in termination letters just won’t fly. According to the Third Circuit, termination letters must contain sufficient specifics (and correct information regarding what the plan requires to support a finding of a disability) to comply with the requirements of ERISA Section 503 and the related regulations.
To access a copy of the slip opinion for this case, please click here.