Seventh Circuit: Raise Effective One Day After Lawyer’s Heart Attack Is Excluded from Disability Benefit Calculation

The Seventh Circuit recently resolved a dispute over long-term disability (“LTD”) benefits in Ten Pas v. Lincoln Nat’l Life Ins. Co., No. 20-1259, __F.4th__, 2022 WL 1074533 (7th Cir. Apr. 11, 2022). At the district court, Plaintiff-Appellee Harlan Ten Pas successfully challenged Defendant-Appellant Lincoln National Life Insurance Company’s determination that under his employer’s ERISA-governed long-term disability (“LTD”) plan, his monthly benefit should be calculated to include a raise he received starting the day after he experienced a heart attack that led to his ultimate disability from work. Ten Pas had a heart attack on Sunday, August 31, 2014, and performed some work thereafter, including reviewing and sending emails from his hospital bed. On September 1, 2014, he received a substantial raise in his salary. After September 6, he stopped all work after experiencing a hemorrhagic conversion. Why these dates are important is because under the Lincoln National LTD policy, the amount of Ten Pas’s benefit is calculated as a percentage of his salary in effect on the “Determination Date” which is defined as “the last day worked just prior to the date the Disability begins.” Lincoln National used Ten Pas’s salary as of August 31, 2014. Ten Pas argued that the Determination Date came on or after September 1. The district court agreed with Ten Pas, but the Seventh Circuit reversed. It held that Lincoln National’s benefit determination was not arbitrary and capricious and rests on a reasonable construction of the LTD plan terms.

As endorsed by the district court, Ten Pas argued that he remained actively at work as defined in the policy until at least September 2. For purposes of coverage eligibility, the terms “Active Work” and “Actively at Work” are defined by the policy as an employee’s “full-time performance of all Main Duties of his or her Own Occupation, for the regularly scheduled number of hours.” The definition also provides that an Employee will be considered Actively at Work on a Saturday or Sunday or a holiday that is not a scheduled workday. The district court believed that the definition of “active work” should be read in conjunction with the definition of “determination date.” According to the district court, because Ten Pas was considered “actively at work” through Labor Day weekend, he could not have become disabled until September 2.

The Seventh Circuit found error with the district court’s analysis. It explained that the terms “active work” and “actively at work” appear only in the policy provisions pertaining to eligibility for coverage. The “active work” definition is not relevant to the determination date, which is the last day worked just prior to the date the disability begins. Only two things are relevant, the date the disability began, and the last day worked just prior to that date. The district court impermissibly injected the “active work” definition into the equation. There is no dispute about Ten Pas’s eligibility for coverage. The court also found that Lincoln National reasonably determined that Ten Pas was disabled as of the first day he was hospitalized on August 31. He did perform some work, but he did not perform the full duties of his occupation. Because it was not arbitrary and capricious for Lincoln National to reject Ten Pas’s argument to include his September 1 raise, the court reversed the district court’s judgment and remanded with instructions to enter judgment for Lincoln National.