Ombrello v. Montgomery Ward Long Term Disability Trust, Docket No. 93735

• Decision Date: 24 November 1987
• Docket Number: Docket No. 93735
• Citation: 415 N.W.2d 658,163 Mich.App. 816
• Parties: Donald D. OMBRELLO, Plaintiff-Appellee and Cross-Appellant, v. MONTGOMERY WARD LONG TERM DISABILITY TRUST and Montgomery Ward and Company, Inc., a foreign corporation, jointly and severally, Defendants-Appellants and Cross-Appellees. 163 Mich.App. 816, 415 N.W.2d 658
• Court: Court of Appeal of Michigan — District of US

Page 658

415 N.W.2d 658

Donald D. OMBRELLO, Plaintiff-Appellee and Cross-Appellant, v. MONTGOMERY WARD LONG TERM DISABILITY TRUST and Montgomery Ward and Company, Inc., a foreign corporation jointly and severally Defendants-Appellants and Cross-Appellees.

Docket No. 93735.

163 Mich.App. 816, 415 N.W.2d 658

Court of Appeals of Michigan.

Submitted May 6, 1987.

Decided Oct. 20, 1987.

Released for Publication Nov. 24, 1987.

[163 MICHAPP 818] Shafer, Koch & Juidici, P.C. by Kevin Wm. Koch, Negaunee, for plaintiff-appellee and cross-appellant.

[163 MICHAPP 819] Crippen, Urquhart, Cmejrek & Weber, Ann Arbor, for defendants-appellants and cross-appellees.

Before J.H. GILLIS, P.J., and SULLIVAN and TALBOT, ^* JJ.

PER CURIAM.

Defendants Montgomery Ward Long Term Disability Trust (LTD Trust) and Montgomery Ward and Company, Inc., appeal as of right from a decision of the Marquette Circuit Court awarding plaintiff long-term disability benefits in accordance with an employment trust agreement. Plaintiff cross-appeals from the circuit court's decision denying plaintiff actual costs following defendants' rejection of a mediation award.

Plaintiff, who has only an eighth-grade education but has attained his GED certificate, began working for Montgomery Ward in 1963. In June of 1975, plaintiff suffered a neck injury when he fell while carrying a roll of carpeting or linoleum. Plaintiff was diagnosed as having minimal spondylitic (inflammation) changes with a tiny chip fracture of one vertebra. The injury caused a loss of sensation in plaintiff's lower extremities whenever he flexed his neck forward. As a result, plaintiff is unstable on his feet and has an increased risk of falling down.

Plaintiff was medically restricted from returning to his previous position as a heating and plumbing salesperson with Montgomery Ward because that position required him to go under basement rafters and into crawl spaces to inspect and install equipment. In September of 1975, plaintiff returned to work as an on-the-floor salesperson; however, he had to leave the position in the spring of 1977 due to work-related pressures and aggravation[163 MICHAPP 820] of the injury caused by lifting heavy merchandise. Plaintiff attempted to work as a salesperson in the automotive department in the fall of 1977, but was forced to leave that position after only one week because of his condition. Plaintiff has not worked for Montgomery Ward or any other employer since that time.

Plaintiff received workers' compensation during these periods of unemployment; however, plaintiff's benefits were terminated following his last departure from work. Plaintiff again petitioned the Bureau of Workers' Disability Compensation for benefits, and his claim was redeemed for $40,000 prior to instituting this action. Eight thousand dollars of the award was allocated for attorney fees and eighty percent of the remaining $32,000 was allocated for medical expenses, past, present and future. Plaintiff agreed to redeem his workers' compensation claim with the understanding that the amount allocated for medical expenses would not be offset against any benefits received from the long-term disability plan provided to Montgomery Ward employees and administered by the LTD Trust.

The long-term disability plan was an employee benefit plan within the meaning of Sec. 501(c)(9) of the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Sec. 1001 et seq. Under the plan, a participant's benefits were to be determined pursuant to a formula which deducted any monies received from other sources such as workers' compensation and social security. Disability for the first twenty-four-month period was defined as the inability to perform the duties of one's own occupation. After twenty-four months, disability was defined as the inability to engage in any substantially gainful occupation for which the participant is, or may reasonably become, qualified [163 MICHAPP 821] by reason of his education, experience or training. Plaintiff received benefits for the first twenty-four months, but was denied benefits beyond that time period. Plaintiff appealed the denial of benefits, and the LTD Trust's Benefits Committee ultimately affirmed the Medical Board's decision denying plaintiff long-term disability benefits.

Thereafter, plaintiff filed the instant action in circuit court. Following a bench trial, the circuit court held that LTD Trust's decision to terminate plaintiff's disability benefits was not supported by substantial evidence. Plaintiff was awarded benefits from November 2, 1979, when benefits were terminated, up to the date of trial. It was further ordered that plaintiff's benefits be offset by the amounts he received through workers' compensation and social security, excluding those amounts allocated for medical expenses. A judgment was entered in favor of plaintiff for $7,701 plus costs and interest. The trial court also held that plaintiff was not entitled to actual costs as a result of defendants' rejection of the mediation award. Defendants appeal as of right, raising several claims of error. Plaintiff has cross-appealed, asserting that the trial court erred in ruling that plaintiff was not entitled to actual costs.

First, defendants argue that the trial court erred in determining that LTD Trust's decision denying plaintiff's claim for long-term disability benefits was not supported by substantial evidence. We disagree.

Judicial review of a determination of eligibility of an employee for benefits under a pension plan is limited to determining whether a decision of the committee or trustees administering the plan was arbitrary or capricious, made in bad faith, not supported by substantial evidence, or erroneous as a matter of law. Sedman v. Michigan Bell Telephone[163 MICHAPP 822] Co, 125 Mich.App. 761, 767, 336 N.W.2d 868 (1983); Harris v. New Haven Foundry, Inc, 120 Mich.App. 629, 630-631, 327 N.W.2d 540 (1982); Wardle v. Central States, Southeast & Southwest Areas Pension Fund, 627 F.2d 820, 823-824 (CA 7, 1980), cert. den. 449 U.S. 1112, 101 S.Ct. 922, 66 L.Ed.2d 841 (1981); Bayles v. Central States, Southeast & Southwest Areas Pension Fund, 602 F.2d 97, 99 (CA 5, 1979).

In the instant case, plaintiff's eligibility for disability benefits after twenty-four months was based upon a determination whether plaintiff was able to engage in any substantially gainful occupation for which he is, or may reasonably become, qualified by reason of his education, experience or training. The trial court, in reviewing the decision of the LTD Trust to terminate plaintiff's benefits, found that the decision was not supported by substantial evidence. We agree with the trial court's determination.

The evidence indicated that plaintiff had only an eighth-grade education. Although plaintiff had obtained his GED certificate, he had only minimal work experience and training. Furthermore, a review of plaintiff's medical reports indicates that he is incapable of engaging in substantially gainful employment. The medical reports clearly indicate that plaintiff is severely restricted in the activities which he can perform. Plaintiff cannot lift heavy objects, bend his neck forward or look down, stand or drive for long periods of time, be in a position to strike the back of his head or neck, or work in a position of high stress or responsibility.

In addition, LTD Trust's reliance on the Equifax reports in deciding to terminate plaintiff's benefits was erroneous. The reports contained hearsay information which was gathered by an investigator. In addition, much of the information contained in [163 MICHAPP 823] the reports appears to be unreliable and unsubstantiated.

In light of the recommendations contained in the medical reports, and the deficiencies in the Equifax reports, we conclude that LTD Trust's decision to terminate plaintiff's disability benefits was not supported by substantial evidence. The trial court did not err in reversing the decision of the LTD Trust.

Next, defendants argue that the trial court erred by conducting a de novo hearing and acting as a factfinder in determining that LTD Trust's decision was not supported by substantial evidence. In Wardle, supra, the Seventh Circuit Court of Appeals held that, in an action under ERISA challenging a denial of benefits, a court must focus on the evidence before the pension fund trustees at the time of their final determination. The reviewing court cannot hold a de novo factual hearing on the question of eligibility. In general, a court should not resolve the eligibility question on the basis of evidence which was never considered by the pension fund trustees. Rather, the matter should be remanded for a new determination. Wardle, supra, p. 824. See also Phillips v....