Less than a month ago, the Sixth Circuit reaffirmed that the arbitrary and capricious standard of review under ERISA is "extremely deferential," pushing back on attempts by plaintiffs to erode the level of deference given to plan administrators ( see our January 31, 2014 review of McClain v. Eaton Corporation Disability Plan, et al.). On February 13, 2014, in Kennard v. Means Industries, Inc., a panel of the Sixth Circuit concluded that even extreme deference has its limits, reversing a ruling by the Eastern District of Michigan in favor of an employer's disability retirement plan.
Kyle Kennard worked for Means Industries as a machine operator until 1990, when he inhaled chemical fumes and severely injured his lungs, rendering him "ultra-sensitive" to various fumes and able to work only in a "clean-air environment." He performed clerical work for Means until 2006, apparently because Means could not provide him with a complete "clean-air" work environment. Kennard applied for, and was granted, Social Security disability benefits after the Social Security Administration concluded that "there are no jobs in the national economy that [Kennard] could perform." Kennard next applied for disability retirement benefits under Means' ERISA-governed plan. The applicable plan required Kennard to demonstrate that he was unable to perform "any occupation." Means sent Kennard to two physicians, including a physician who examined Kennard's lungs and concluded that he could work in a clerical position "as long as he could be guaranteed that he would be placed in an absolute clean air environment with absolutely no noxious fumes or inhalants...." Based almost exclusively on this conclusion, the plan administrator concluded that Kennard was not permanently disabled within the meaning of the plan, because he could work provided that the strict "clean air" restriction was met, and denied his disability retirement claim.
The Sixth Circuit acknowledged the "high burden" a plaintiff bears under arbitrary and capricious review, but then wasted no time concluding that Kennard met this burden. At the crux of its opinion, the Sixth Circuit concluded that it wasn't enough for the plan administrator to deny Kennard's claim based on a theoretical "clean air" position in which he could work – it needed to describe what jobs he could actually perform "in terms of a real American workplace." In order for the denial on this basis to be considered valid, it should have included "evidence of the existence of absolute-clean-air jobs available to Kennard." The Sixth Circuit's skepticism that such a job actually exists is confirmed by its decision to grant Kennard benefits (with one dissent) rather than remand to the plan administrator.
This case is a reminder that, although the Sixth Circuit is loathe to disturb administrative decisions that are rationally based on the administrative record and the plan, there are still limits, and benefits denials based solely on theoretical jobs that do not appear on their face to reflect the "real American workplace" may be insufficient in the Sixth Circuit's view to satisfy even the highly deferential bar under ERISA. What's the upshot for plan administrators? When considering denying a claim based on a finding that a claimant can actually perform some occupation, identify a reasonably available "real life" job that the claimant could perform.
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