STD Denial Was 'Arbitrary and Capricious'

August 3, 2004 ( - A short-term disability (STD) plan administrator's denial of a request for benefits was arbitrary and capricious and in violation of the Employee Retirement Income Security Act (ERISA).

Granting summary judgment in favor ofthe plaintiff, US District Court Judge Larry McKinney of the US District Court for the Southern District of Indiana found United Parcel Service (UPS) relied too heavily on a medical reviewer’s opinion that failed to considerevidence of a suicide attempt in making a determination of the participant’s mental state.

McKinney found the medical reviewer failed to ask “the questions that a reasonable plan administrator would ask” in making their determination.   Those questions included, “How often does the employee have emotional outbursts and to what degree? Can these outbursts be constrained by medication? What is the risk to co-employees?”   Thus, the plaintiff’s request was improperly denied and the court ordered the plaintiff to ” file his motion for an award of benefits within thirty days.”

Case History

Charles Paterson worked for UPS as a PC support specialist in September 2002.   Paterson participated in the company’s Service Flexible Benefits Plan, which providedSTD coverage that would take effect if he was “unable to perform the material and substantial duties of [his] regular occupation because of an illness or injury.”   That September, Paterson filed a claim for STD claim in he was he was disabled because he was depressed and was worried about losing his temper at work.  

UPS denied Paterson first, and subsequent, claim for STD benefits.   With each request, the company found his psychological problems did not impair his ability to work.   In December 2002, before he was to undergo his third and final claim review, Paterson drank about a half-bottle of wine at home and then slashed his left wrist with a pocket knife. He was taken to Wishard Memorial Hospital where he told staff that he had been denied disability benefits.   Later, while still at the hospital, Paterson said he no longer wanted to kill himself, telling the staff at the hospital, “I made a dumb decision.”

After his discharge from the hospital, Paterson underwent his third review for STD benefits.   For the third review, the medical information about Paterson’s alleged suicide attempt was submitted to UPS, which submitted the information to a medical reviewer who again found that Paterson was not disabled.   Patterson filed suit.

Court Review

The district court turned to the US 7 th Circuit Court of Appeals that set out five factors for evaluating the reasonableness of an administrator’s benefit decision under the arbitrary and capricious standard:   the impartiality of the decision-making, the complexity of the issues, the process afforded the parties, the extent of involvement by experts when needed, and “the soundness of the fiduciary’s ratiocination.”   For this case, Paterson claims the administrator was unreasonable and in conflict with the first and last factors.  

While the district court rejected Paterson’s first argument for “lack of evidence,” it agreed with Paterson that the medical reviewer did not fully consider all the evidence in flat out rejecting his claim for STD benefits.

The court turned to Paterson’s third review for STD benefits in which the doctor that evaluated Paterson submitted “documents indicating a history of violent destructive behavior, records of a reported suicide, attempt and test results showing ‘severe depression’ and some memory difficulties.”

“Either the Plan overlooked the extent of Paterson’s latest evidence or it failed to appreciate the significance,” the court said, ultimately ruling “the Plan’s denial of short term disability benefits to Paterson on his third appeal was arbitrary and capricious.”

The case is Paterson v. United Parcel Service Flexible Benefits Plan , Southern District of Indiana, No. 1:03-cv-592-LJM-WTL.