LTD Plan Loses Appeal for Failure to Consider Mental Capacity

June 14, 2007 ( - The 4th U.S. Circuit Court of Appeals ruled a long-term disability (LTD) plan administrator abused its discretion when it failed to consider evidence of a participant's mental capacity before denying benefits.

In affirming a lower court decision, the appellate court pointed out that, even after Sampson McKoy, Jr. presented new evidence of his mental functioning and capacity, the plan based its decision solely on the opinion of an orthopedic surgeon consulting for the plan. The court said in its opinion, “Her opinion, as well as International Paper’s decision, focused on McKoy’s physical disability and failed to take into account McKoy’s borderline retardation, as if his mental condition could not contribute to a finding of disability under the plan. Yet the plan defines “disability” as a ‘medically determinable physical or mental impairment.'”

While the court said the plan acted reasonably to reopen McKoy’s file when new information was received, it said the plan acted unreasonably after receiving the new information by doing nothing to evaluate McKoy’s mental capacity. The court pointed out that, even after reopening the file, the plan still only consulted an orthopedist and “the orthopedist’s response explicitly reflected an inability to evaluate the data on mental disability, a failure to understand that the plan’s definition of disability included mental disabilities, or both.”

McKoy worked for International Paper for 30 years and was provided short-term disability benefits in December 2002 when he became unable to perform his job because he had suffered a torn rotator cuff. After two surgeries, McKoy was still unable to perform his job, which involved heavy manual labor, and because International Paper could not find another position for him, he was discharged.

After twice being denied disability benefits under International Paper’s LTD plan based on the belief McKoy could do sedentary work, he submitted new evidence regarding his cognitive functioning. According to the opinion, the new information included a note from an internist concluding that the combination of McKoy’s low cognitive function, shoulder injury, high blood pressure, and diabetes rendered “Mr. McKoy 100% disabled and . . . unable to sustain gainful employment.” 

In addition, a certified vocational consultant evaluated McKoy’s relevant work skills – ability to learn, memory, judgment, endurance, motor speed, clerical skills, and hand and finger dexterity – as poor, with many in the bottom one percent, the opinion said. The consultant also found low cognitive ability – with skills in reading, spelling, and math between the first and third percentile.

After receiving the new information, the plan referred the case to a consulting orthopedist which reviewed McKoy’s medical history, categorized him as borderline retarded, and concluded he was not totally and permanently disabled. The plan denied McKoy’s request for benefits a third time. He then sued the plan under Section 502 of the Employee Retirement Income Security Act (ERISA).

A district court found in favor of McKoy and the plan appealed.

The opinion in McKoy v. International Paper Company is here .