926 F.3d 432
7th Cir.2019Background
- Plaintiff Shirley Lacko worked as Senior Manager in BKD’s Audit Department and stopped working on September 25, 2015; she applied for short-term (STD) and long-term (LTD) disability under group policies issued by United of Omaha.
- United approved several short STD periods but denied STD benefits beyond November 22, 2015, reasoning there was no change in Lacko’s functional capacity when she stopped work; it denied LTD benefits altogether.
- Lacko’s medical record documented multiple chronic conditions (e.g., gastroparesis, diabetes, degenerative spine disease, arthritis, CHF, anxiety) and objective testing; SSA granted her Social Security disability benefits after an MRFC by Dr. Fritz finding moderate limitations in understanding/remembering detailed instructions and in adapting to change.
- United relied on non‑examining physician reviewers and a vocational consultant who classified Lacko’s occupation under a generic DOT title (Manager, Department) and concluded she could perform sedentary work; United did not meaningfully address Dr. Fritz’s cognitive findings or SSA’s MRFC-based limitation to unskilled work.
- District court granted summary judgment to United; Seventh Circuit reviewed under the arbitrary-and-capricious standard (plan gives administrator discretionary authority) but remanded, finding United’s decision selectively characterized the record and failed to reasonably address SSA findings, DOT classification, and combination of impairments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether STD denial was reasonable given plan’s requirement of a change in functional capacity | Lacko: chronic conditions can worsen and produce a qualifying change; United ignored combined effects and meds | United: STD requires a demonstrable change; records showed long-standing conditions and no new change when she stopped work | Court: Remand. Plan’s “change” requirement does not preclude degenerative conditions; United failed to assess combined impairments and medication effects |
| Whether United used an appropriate occupational classification under the DOT for LTD eligibility | Lacko: her Senior Manager role required specialized auditor/accountant skills (CPA, technical duties) and aligns with SSA’s Auditor/Accountant DOT title | United: Used broad DOT title (Manager, Department) as allowed by plan; vocational expert supported sedentary classification | Court: Remand. United’s vocational analysis omitted essential specialized duties, licensing/experience requirements, and failed to reconcile SSA’s DOT classification |
| Whether United properly considered SSA decision and Dr. Fritz’s MRFC (cognitive limits) | Lacko: United mischaracterized Dr. Fritz, ignored moderate limits that reduced her to unskilled work and conflicted with its LTD denial | United: Social Security standards differ (age/step‑5 factors); Dr. Fritz’s findings do not show inability to work | Court: Remand. United mischaracterized and failed to address MRFC findings that precluded skilled work; mere citation that standards "may differ" was insufficient |
| Whether United’s reliance on non‑examining reviewers and selective evidence review was arbitrary given conflict of interest | Lacko: United selectively emphasized favorable records, ignored treating physicians’ relevant findings and combined effects; conflict of interest increases scrutiny | United: Used independent third‑party reviewers and standard procedures to reduce bias | Held: Remand. Selective consideration rendered decision arbitrary; conflict of interest is a factor that weighs against United though remand is required regardless |
Key Cases Cited
- Hennen v. Metro. Life Ins. Co., 904 F.3d 532 (7th Cir. 2018) (standard of review and conflict‑of‑interest framework)
- Holmstrom v. Metropolitan Life Ins. Co., 615 F.3d 758 (7th Cir. 2010) (administrator must consider Social Security findings and not selectively ignore evidence)
- Jenkins v. Price Waterhouse Long Term Disability Plan, 564 F.3d 856 (7th Cir. 2009) (weighing structural conflict when administrator both decides and pays claims)
- Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) (conflict of interest as a factor in arbitrary‑and‑capricious review)
- Dragus v. Reliance Standard Life Ins. Co., 882 F.3d 667 (7th Cir. 2018) (use of third‑party reviewers can mitigate but not necessarily eliminate conflict concerns)
- Raybourne v. Cigna Life Ins. Co. of New York, 700 F.3d 1076 (7th Cir. 2012) (insurance conduct around SSA proceedings and selective evidence weighing can signal bias)
- Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003) (no special ERISA deference required for treating‑physician opinions)