831 F.3d 445
7th Cir.2016Background
- Carole Cheney, a Kirkland & Ellis partner since 1997, suffered progressive cervical spine disease and stopped recording work hours after December 19, 2011; she was paid through January 3, 2012 and had an approved leave set to begin January 3, 2012 and run six months.
- Cheney submitted a long-term disability (LTD) claim to Standard Insurance on July 17, 2012 (before surgery) after conservative care failed and she later underwent cervical fusion on August 27, 2012.
- The group LTD policy covers a “Member” defined by being a “regular employee” or partner who is “Actively at Work” (performing material duties with reasonable continuity) and treats scheduled days off as Active Work only if the person is capable of Active Work on those days.
- The policy terminates insurance on the earliest of several events, including (3) termination of employment and (4) the day you cease to be a Member, but continues coverage for certain short, approved leaves (including the first 90 days of sick leave and other temporary leaves approved in advance and scheduled to last ≤9 months); a “period of Disability” is not an approved leave.
- The policy defines disability by inability to perform the material duties of One’s Own Occupation; for licensed professions the occupation is as broad as the license (i.e., any work as a lawyer). Benefits require a 180-day Benefit Waiting Period; Predisability Earnings for partners are based on the prior tax year.
- District court found Cheney covered through September 2012, concluded her leave was a non-disability approved leave and that she was disabled from the duties of a litigation partner; the Seventh Circuit vacated and remanded for a new trial, finding legal and factual errors by the district court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Cheney was insured when disability began (i.e., did coverage continue past Dec 19, 2011) | Cheney: payroll/approved leave and possible use of vacation/sick days mean she remained a Member/Actively at Work into Jan–Jul 2012, so coverage continued | Standard: Cheney ceased Active Work on Dec 20 and thus ceased being a Member; the two-week gap was not shown to be vacation or otherwise qualifying, and disability leave is excluded from the approved-leave exceptions | Vacated district court: factual finding that coverage extended was unsupported; coverage likely ended Dec 20 absent proof of qualifying approved leave — remand for retrial on coverage timing |
| Whether the January–July 2012 leave qualified as an approved temporary leave (so coverage continued) or as a "period of Disability" (which would terminate coverage) | Cheney: leave was a scheduled, six-month approved temporary leave (not claimed as “sick leave”) and therefore fits the approved-leave exception | Standard: leave was taken because of disability; policy carves out disability leaves (a period of Disability is not an approved leave), so coverage would end | Vacated: district court erred by treating the leave as non-disability approved leave without addressing the policy’s explicit carve-out; remand required to resolve whether the leave was a period of Disability |
| Scope of "Own Occupation" and whether inability to perform sitting/computer tasks made her disabled | Cheney: inability to perform key litigation-partner tasks (sitting at computer/in-court work) rendered her unable to perform her Own Occupation as a litigation partner | Standard: for licensed professions Own Occupation is as broad as the license — disability must be judged against all work a licensed lawyer could perform; inability to perform one task is insufficient unless that task is essential to all law work | Vacated: district court applied incorrect comparison scope and treated inability to perform a single task as dispositive; new trial needed using the full-license-scope standard and proper medical analysis |
| Proper measure of Predisability Earnings for a partner with significant unpaid-leave months in the prior tax year | Cheney: court used 2011 as prior tax year because it treated her as Active Work through Jan 3, 2012, producing a higher earnings base | Standard: if Active Work ended Dec 20, 2011 then the prior-tax-year should be 2010 (which reflected much less compensation), yielding lower benefits | Vacated: district court’s use of 2011 is untenable given errors in coverage/Active Work findings; remand required to calculate Predisability Earnings consistent with when Active Work ended and policy rules (and possibly counting only months actually paid in a prior tax year) |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (establishes de novo review where plan gives no discretionary authority)
- Ruttenberg v. U.S. Life Ins. Co., 413 F.3d 652 (insured bears burden to prove entitlement to benefits)
- McFarland v. Gen. Am. Ins. Co., 149 F.3d 583 (single-task inability not always sufficient for total occupational disability)
- Hawkins v. First Union, 326 F.3d 914 (no inherent incompatibility between working full time and being disabled from full-time work — inapplicable where claimant stopped working)
- Young v. Verizon’s Bell Atl. Cash Balance Plan, 615 F.3d 808 (ERISA’s reasonable-expectations considerations)
- Cent. Laborers’ Pension Fund v. Heinz, 541 U.S. 739 (ERISA protects employee expectations about benefits)
- Aeroground, Inc. v. CenterPoint Props. Trust, 738 F.3d 810 (contract ambiguity reviewed de novo)