Eleventh Circuit Blocks Attorney with Parkinson’s Disease from Collecting Benefits Under Two Disability Insurance Policies

Today’s decision in Stewart v. Hartford Life and Accident Insurance Company, No. 21-11919, __F.4th__, 2022 WL 3221296 (11th Cir. Aug. 10, 2022) presents a somewhat novel claim made by a law firm partner to recover disability benefits under two disability insurance policies which funded her law firm’s health and welfare benefit plan (“the Plan”). Plaintiff-Appellant Carol Stewart worked as an attorney for Burr Forman LLP when she became disabled because of Parkinson’s disease. At the time of her disability in 2007, the Plan was funded by a Sun Life disability policy. Sun Life paid her partial, and then later, total disability benefits. In 2010, while Sun Life continued to pay Stewart’s claim, Burr Forman canceled its policy with Sun Life and switched the administration of the Plan to Hartford. Stewart applied for benefits under the Hartford policy, but Hartford denied her claim based on an exclusion for any employee who was receiving “benefits for a Disability under a prior disability plan that: 1) was sponsored by [her] Employer; and 2) was terminated before the Effective Date of The Policy.” Hartford reasoned that since Sun Life was still paying Stewart’s disability benefits, she was “receiving benefits for [a] Disability under a prior disability plan” that had been “terminated” before the Hartford policy went into effect. Stewart also applied for life insurance waiver of premium benefits with Hartford, which Hartford denied on the basis that she was not unable to perform any work for which she is qualified by education, training or experience. The district court granted summary judgment to Hartford and Stewart appealed.

The Eleventh Circuit noted its six-step analysis for reviewing an ERISA administrator’s determination. First, the court decides whether the decision is “de novo” wrong. If it is not, that ends the inquiry. If it is de novo wrong, then the court determines whether the administrator has discretionary authority. If there is such authority, the court moves to step three to determine whether the administrator had “reasonable” grounds to support the decision. If there are no reasonable grounds, then the claimant wins, but if there are reasonable grounds, then the court moves to step five to determine if there is a conflict. If there is no conflict, then the court affirms the administrator’s decision. If there is a conflict, at step six, the court determines whether the administrator’s decision was arbitrary and capricious with the conflict taken into account as one factor.

At step one, on a de novo interpretation, the court found that Stewart had the better reading of the exclusion. The phrase “prior disability plan” refers to Burr Forman’s ERISA plan. The term “Policy” refers to the insurance contract that services the plan. The Hartford policy used the term Policy and Plan differently and knew how to draw the plan-policy distinction. (The policy here was clearly sloppy.) Burr Forman’s Plan was never “terminated” so the disability-benefits exclusion does not apply to Stewart. But, because Hartford has discretionary authority, the court looked at whether Hartford’s interpretation was reasonable. The court found that Hartford’s interpretation was reasonable even if it wasn’t the best reading of the policy exclusion. It was reasonable for Hartford to interpret “prior disability plan” as referring to the Sun Life policy. “[A]s a matter of common sense, it was reasonable for Hartford to interpret its policy to prevent an insured from receiving payments from two different sources for the same disability.” Because Hartford exercised its discretion reasonably, the court affirmed the district court’s decision rejecting Stewart’s claim to disability benefits.

On the life insurance waiver of premium claim, the court held that Hartford correctly denied her claim. To be entitled to benefits she must be unable to engage in any means of earning income for which she was competent based on her knowledge or skill acquired over time. The court concluded that Stewart could perform work for which she was qualified by her education, training, and experience. Even if she could not work as a lawyer, she could perform work requiring less specialized skills and cognitive ability, and she could sit for a couple of hours, stand for half an hour, and walk for half an hour. An ability to work part-time counts as “any work.” Because Hartford’s decision was not de novo wrong, the court affirmed the decision. But it also explained that Hartford’s decision was not arbitrary and capricious.