Employer’s Improper Termination of ERISA Benefits Warrants Retroactive Reinstatement of Benefits

Miller v. American Airlines, Inc., 2011 WL 208291 (3d Cir., January 25, 2011) – The Third Circuit Court of Appeals recently held that a plan administrator’s abuse of discretion in terminating an employee’s long-term disability (LTD) benefits necessitates a retroactive reinstatement of benefits. The plaintiff, a pilot, began receiving LTD benefits following a psychotic episode that left him unable to work. Several years later, the airline terminated the plaintiff’s benefits after his treating physician stated that he was asymptomatic and not taking any medication. The court found that the termination of the plaintiff’s benefits was arbitrary and capricious because, among other reasons, it was not based on any new information and it imposed requirements outside of the plan (i.e., that the plaintiff failed to obtain his FAA medical certification). In an issue of first impression, the court then declared that the appropriate remedy for an improper termination of benefits is a retroactive reinstatement of benefits, as opposed to a remand to the plan administrator, which is the appropriate remedy in an initial denial.