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Non-Compliance with Claim Manual Does Not Require Reversal of Reasonable Decision

Non-Compliance with Claim Manual Does Not Require Reversal of Reasonable Decision

ERISA and Life Insurance News
(October 17, 2011)

Mullins v. AT&T Corp.,
2011 U.S. App. LEXIS 9266 (4th Cir. Apr. 20, 2011)

Mullins submitted a claim for disability benefits under an ERISA plan sponsored by her employer, AT&T. Connecticut General Life Insurance Company, the plan’s claim administrator, denied the claim and upheld that decision on administrative appeal after consulting an independent physician, referring Mullins for a functional capacity evaluation, and obtaining both a transferable skills analysis and a labor market study.

Mullins sued to recover benefits, and also to have statutory penalties imposed against AT&T for its failure to timely produce a copy of the summary plan description upon request.

The federal district court granted summary judgment against Mullins on her claim for benefits, noting that the medical opinions of her treating physicians were in conflict, both as to her specific diagnosis and her functional capacity to perform her sedentary job duties. The court granted summary judgment in favor of Mullins, however, on her claim for a penalty, but awarded only $25 per day against AT&T, rather than the maximum penalty authorized by the statute.

Mullins’s case had been remanded twice with instructions that she be provided copies of any claims-processing documents used by Connecticut General, such as claims manuals, protocols, and other internal guidelines relating to the processing of LTD claims and appeals. After receiving those documents, Mullins argued that Connecticut General failed to comply with its internal procedures.

The Fourth Circuit ruled, however, that "strict compliance is not a prerequisite to finding that the plan administrator’s overall decision was principled and reasonable." Such standards are but one factor to weigh, along with other factors and the administrative record. Based on the entire record, the Fourth Circuit found that Connecticut General’s denial of benefits "was clearly supported by substantial evidence in the administrative record."

With regard to the statutory penalty imposed against AT&T, Mullins had requested "a copy of all other plan documents concerning [the LTD] policy" – which the Fourth Circuit found sufficient to notify AT&T that it should provide the summary plan description. In considering AT&T’s delayed production of the SPD, the Fourth Circuit weighed the prejudice to Mullins and the employer’s conduct in responding to her request for plan documents.

Because Mullins ultimately was not prejudiced by the delay in obtaining the SPD, the district court imposed a fine of only $25 per day. Noting that a finding of bad faith was not necessary to impose a penalty, the Fourth Circuit upheld the fine as an incentive for plan administrators to comply with requests for plan documents in a timely fashion.

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