Harlan Ten Pas v. Lincoln National Life Insuran ( 2022 )

In the
United States Court of Appeals
for the Seventh Circuit
____________________
No. 20-1259
HARLAN TEN PAS,
Plaintiff-Appellee,
v.
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 18 C 3694 — Sara L. Ellis, Judge.
____________________
ARGUED DECEMBER 1, 2020 — DECIDED APRIL 11, 2022
____________________
Before SYKES, Chief Judge, and BRENNAN and SCUDDER,
Circuit Judges.
SYKES, Chief Judge. Harlan Ten Pas worked as a tax part-
ner at the accounting firm McGladrey LLP until he suffered
a cluster of cardiovascular events in 2014.1 He receives total-
1 McGladrey has since changed its name to “RSM US LLP.” We will refer
to the firm as “McGladrey.”
2 No. 20-1259
disability benefits under McGladrey’s group long-term
disability insurance policy, which The Lincoln National Life
Insurance Company administers.
Ten Pas contends that he is entitled to a larger monthly
benefit under the terms of the policy, so he filed suit against
Lincoln National under the Employee Retirement Income
Security Act (“ERISA”), 29 U.S.C. § 1132(a)(1)(B). The policy
calculates benefits based on a percentage of an employee’s
salary on his “Determination Date”—“the last day worked
just prior to the date the Disability begins.” Lincoln National
used Ten Pas’s salary as of August 31, 2014, the date of his
heart attack and the first of several consecutive hospital
stays. Ten Pas argues that his determination date came on or
after September 1. The short difference matters because Ten
Pas received a substantial raise from McGladrey on that
date. The district judge agreed with Ten Pas and entered
summary judgment in his favor.
We reverse. Lincoln National’s benefits determination
cannot be disturbed unless Ten Pas can show that it was
arbitrary or capricious. See Hennen v. Metro. Life Ins. Co.,
904 F.3d 532, 539 (7th Cir. 2018). He has not met this de-
manding standard. Because Lincoln National’s decision rests
on a reasonable construction of the contract and an evalua-
tion of Ten Pas’s medical records, the company is entitled to
summary judgment.
I. Background
The events underlying Ten Pas’s disability claim began
over Labor Day weekend in 2014. After working a half day at
McGladrey’s Chicago office on Sunday, August 31, Ten Pas
traveled to his lake home in Wisconsin. Shortly after arriv-
ing, he was rushed to the emergency room of a local hospital
No. 20-1259 3
after experiencing chest pains and shortness of breath.
Doctors determined that he had suffered a heart attack and
admitted him to the intensive-care unit.
The next day (Labor Day) Ten Pas underwent an angio-
plasty and doctors implanted a stent. He remained in the
hospital for a second night. As he later explained in an
affidavit, he reviewed and drafted a handful of emails to
clients and coworkers while recuperating that evening. For
instance, in one email Ten Pas informed several colleagues of
his medical condition and instructed them to “[k]eep the
ship upright for a day or two.”
Ten Pas left the hospital on Tuesday, September 2, and
returned home to the Chicago area. But he was not out of the
hospital for long. After briefly returning to the office for a
time on Wednesday, Ten Pas left after feeling unwell and
was admitted to the hospital that evening and diagnosed
with an ischemic stroke. He remained hospitalized for two
nights. As with his first hospital stay, he reviewed and sent
some emails while recuperating. Ten Pas returned home on
Friday, September 5, but was rushed to the hospital the next
day after suffering a serious complication known as a hem-
orrhagic conversion of infarct—bleeding on the brain sec-
ondary to the ischemic stroke. He has not worked for
McGladrey in any meaningful capacity since. He remained
in the hospital for another week and then was transferred to
the Rehabilitation Institute of Chicago for a lengthy period
of inpatient rehabilitation therapy. He was discharged to his
home on October 24.
In January 2015 McGladrey submitted a total-disability
claim to Lincoln National on Ten Pas’s behalf. There were
several layers to Lincoln National’s benefits determination,
4 No. 20-1259
but we need only detail the process by which it determined
the amount of Ten Pas’s monthly benefit. Ten Pas is a
“Class 1 Insured Employee” under the policy, so the amount
is set at 60% of his “Basic Monthly Earnings” on his “deter-
mination date.” As mentioned, a claimant’s determination
date is defined as “the last day worked just prior to the date
the Disability begins.” Because Ten Pas received a raise of
several thousand dollars per month on September 1, 2014, a
determination date on or after that date would result in a
significantly larger monthly benefit.
McGladrey’s initial submission listed September 5 as Ten
Pas’s last day of work. But some statements from his treating
physicians prompted further investigation, with one doctor
indicating that he was unable to work as early as August 31.
In the months that followed, Lincoln National worked to
resolve the discrepancy and sought to pin down a timeline
of when Ten Pas last worked and became disabled. To that
end, Lincoln National requested documentation from
McGladrey on Ten Pas’s work during the first week of
September. McGladrey could not produce any, though it
noted anecdotally that Ten Pas was physically in the office
on September 3 and worked remotely for the rest of that
week. Still, Lincoln National remained skeptical that Ten
Pas’s determination date fell in September because he had
not worked a full day after his August 31 heart attack.
As part of its investigation, Lincoln National also gath-
ered information from McGladrey on the scope of Ten Pas’s
job responsibilities as a “Lead Tax Partner.” This was im-
portant because the plan defines the terms “Total Disability”
and “Totally Disabled” as follows: “due to an Injury or
Sickness[,] the Insured Employee is unable to perform each
of the Main Duties of his or her Own Occupation.”
No. 20-1259 5
McGladrey explained that Ten Pas’s job required, among
other things, that he supervise other tax accountants, review
tax returns and research memoranda, and win new business
by pitching work to prospective clients.
After completing its investigation, Lincoln National noti-
fied Ten Pas that it would use his pre-raise basic monthly
earnings as of August 31, 2014, to calculate his monthly
benefit. Acknowledging Ten Pas’s limited work during and
immediately after his first hospital stay, Lincoln National
emphasized that Ten Pas was “inpatient for some portion of
every day that week.” And because of his hospitalization,
Lincoln National explained that Ten Pas was “not able to
perform the full duties of [his] occupation” after his heart
attack on August 31.
In November 2015 Ten Pas filed an administrative appeal
with Lincoln National. He disputed Lincoln National’s
finding that he was unable to work after August 31 and
submitted additional evidence to shore up his position. His
primary argument, however, was that his determination
date could not have been earlier than September 1 because
he was still “Actively at Work” as defined by the policy.
The terms “Active Work” and “Actively at Work” are de-
fined 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 adds a
qualifier that takes certain out-of-office time into account. In
pertinent part, the definition provides: “Unless disabled on
the prior workday or on the day of absence, an Employee
will be considered Actively at Work on … a Saturday,
Sunday or holiday that is not a scheduled workday … .”
Importantly, however, the terms “active work” and “actively
6 No. 20-1259
at work” appear only in the policy provisions pertaining to
eligibility for coverage—i.e., the date on which an employ-
ee’s coverage first becomes effective and the requirements
for continuation of coverage during interruptions in service.
The terms do not appear in the policy provisions governing
the determination of the amount of a claimant’s benefits.
Even so, Ten Pas seized on the qualifier because
August 31 fell on a Sunday and September 1 was a holiday.
He argued that because he was “actively at work” (as the
policy defines that term) throughout Labor Day weekend, he
could not have been disabled until the next business day—
September 2—at the earliest.
Lincoln National rejected Ten Pas’s administrative appeal
and upheld its decision to use the August 31 salary to calcu-
late his benefit. It reiterated that although Ten Pas may have
performed some limited work during his hospital stays, he
did not “return to full-time performance of all main duties of
his own occupation[] for the regularly scheduled number of
hours.” And it rejected Ten Pas’s theory about the applicabil-
ity of the “active work” definition, finding instead that “he
was disabled as of 08/31/2014.”
Ten Pas sought a second-level appeal on the same
grounds in May 2016. Lincoln National again affirmed its
initial determination, essentially echoing the reasoning from
the first-level appeal but adding an acknowledgment that
Ten Pas was actively at work until his August 31 heart
attack.
Having exhausted the administrative-appeal process, Ten
Pas filed suit under § 1132(a)(1)(B) of ERISA seeking a
declaratory judgment that Lincoln National erred by using
his August 31 salary for his benefits determination. As in his
No. 20-1259 7
administrative appeals, Ten Pas argued that (1) he was not
disabled on August 31 because he continued to work during
the first week of September; and (2) even if his post-
August 31 work did not suffice, he remained actively at
work as defined in the policy until at least September 2.
The case was submitted on cross-motions for summary
judgment, with Ten Pas limiting his motion to the argument
about the active-work definition. The judge endorsed that
theory and held that Lincoln National unreasonably used his
pre-raise basic monthly earnings to calculate his benefit. She
thought that the definition of “active work” was relevant to
identifying the date on which Ten Pas’s disability began for
purposes of the benefits determination. In other words, she
concluded that the phrase “last day worked” in the defini-
tion of “determination date” must be read in conjunction
with the active-work definition. Based on that interpretation
of the policy, the judge concluded that because Ten Pas was
considered to be “actively at work” (as the policy defines
that term) through Labor Day weekend, he could not have
become disabled until September 2. Accordingly, the judge
found that Ten Pas’s “last day worked”—and thus his
determination date—came no earlier than September 1. She
granted his motion, denied Lincoln National’s, and entered
judgment for Ten Pas.
II. Discussion
We review the judge’s summary-judgment order de no-
vo. Lacko v. United of Omaha Life Ins. Co., 926 F.3d 432, 439
(7th Cir. 2019). Where, as here, the case was resolved on
cross-motions for summary judgment, “our review of the
record requires that we construe all inferences in favor of the
party against whom the motion under consideration [was]
8 No. 20-1259
made.” Hess v. Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 658
(7th Cir. 2005) (quotation marks omitted).
Though we review the judge’s ruling without deference,
the same is not true of the underlying benefits determina-
tion. When an employee-benefits plan “grants to the admin-
istrator the discretionary authority to determine benefits, we
review the decision of that administrator under the more
stringent arbitrary and capricious standard.” Lacko, 926 F.3d
at 439. The plan at issue here clearly grants discretionary
authority to the claim administrator, triggering deferential
review. Dragus v. Reliance Standard Life Ins. Co., 882 F.3d 667,
672 (7th Cir. 2018) (explaining that the arbitrary-and-
capricious standard applies only when the plan language
clearly and unequivocally grants discretionary authority to
the plan administrator). Accordingly, we cannot disturb
Lincoln National’s benefits determination unless it flunks
arbitrary-and-capricious review. 2
That creates a high hurdle for Ten Pas. A plan adminis-
trator’s decision survives arbitrary-and-capricious review if
(1) it is possible to offer a reasoned explana-
tion, based on the evidence, for a particular
outcome, (2) the decision is based on a reason-
able explanation of relevant plan documents,
or (3) the administrator has based its decision
2 Despite the policy’s language, Ten Pas maintains that we should
instead review Lincoln National’s decision de novo because Lincoln
National failed to meet the deadline requirements for his first adminis-
trative appeal and because Lincoln National’s obligation to pay benefits
creates a conflict of interest for determining what those benefits should
be. Ten Pas has waived these arguments, however, because he failed to
raise them in the district court. See Allen v. City of Chicago, 865 F.3d 936,
943 (7th Cir. 2017).
No. 20-1259 9
on a consideration of the relevant factors that
encompass the important aspects of the prob-
lem.
Estate of Jones v. Child.’s Hosp. & Health Sys. Inc. Pension Plan,
892 F.3d 919, 923 (7th Cir. 2018) (quotation marks omitted).
This deference likewise extends to matters of contract in-
terpretation. Where policy terms are ambiguous, we may not
“set aside a denial of benefits based on any reasonable
interpretation of the plan,” even if we would be inclined to
reach a different result on plenary review. Hess, 423 F.3d at
658. Put differently, we defer to an administrator’s construc-
tion “if it falls within the range of reasonable interpreta-
tions” or if it is “compatible with the language and the
structure of the plan document.” Bator v. Dist. Council 4,
972 F.3d 924, 929 (7th Cir. 2020) (quotation marks omitted).
That’s not to say this deference is simply a rubber stamp; if
the administrator’s construction “defies [the] plan’s plain
language” or is otherwise patently unreasonable, its decision
has “fail[ed] the arbitrary-and-capricious standard.” Jones,
892 F.3d at 923.
This dispute largely involves an interpretive question
under the policy: Did Ten Pas’s determination date come at
the end of August or in the first week of September? The
judge concluded that it was arbitrary and capricious for
Lincoln National to choose the former. That was error. To
explain why, we’ll unpack the terms that are—and just as
importantly, are not—relevant to the determination-date
decision.
A. The Active-Work Definition Is Not Relevant
As explained, the determination date is “the last day
worked just prior to the date the Disability begins.” By its
10 No. 20-1259
terms just two factors are relevant: the date Ten Pas’s disabil-
ity began and “the last day worked just prior” to that date.
Rather than zeroing in on these two variables, the judge
injected a third—the “active work” definition—into the
equation. Ten Pas insists that the judge’s reading of the
policy was sound when the determination-date provision is
read in the context of the entire agreement.
The active-work definition is a red herring. It’s true that
the relevant policy provisions must be situated in their
proper context rather than read in isolation. See id. (“Plan
language is … given its plain and ordinary meaning, and the
plan must be read as a whole, considering separate provi-
sions in light of one another and in the context of the entire
agreement.” (quotation marks omitted)). But context makes
clear that the policy’s definition of “active work” does not
carry the weight that Ten Pas says it does. The active-work
provision appears in an upfront section that defines a list of
terms “[a]s [they are] used throughout the [p]olicy.” But the
term “active work” is not “used” anywhere in the definition
of “determination date” or in any other provision that bears
on the benefits amount. Frankly, the only connection be-
tween the active-work and determination-date provisions is
their proximity in a set of definitions listed in alphabetical
order.
More to the point, the term “active work” is “used” only
in the policy provisions that govern a matter not in dispute:
Ten Pas’s eligibility for coverage. For example, the “Effective
Date” provision, which sets forth when an “Employee’s
initial amount of coverage becomes effective,” lists “the date
the Employee resumes Active Work, if not Actively at Work
on the day he or she becomes eligible,” as one of four possi-
ble triggers for when an employee’s initial coverage begins.
No. 20-1259 11
On the other side of the ledger, “[c]easing Active Work”
renders an employee ineligible for insurance, though cover-
age may continue if the employee is “absent due to Total
Disability.” These provisions pertain to eligibility for and
continuation of coverage. They have no effect on the determi-
nation of the amount of the benefit Ten Pas is entitled to
receive.
Simply put, we see no role for the active-work definition
in either of the constituent parts of the determination-date
definition. Ten Pas’s argument to the contrary simply mis-
reads the policy. Or at the very least, Lincoln National
reasonably rejected his argument, which at best was based
on a strained reading of the policy.
B. Lincoln National Reasonably Identified Ten Pas’s
Determination Date
Because the active-work provision is irrelevant, resolu-
tion of this case is straightforward. Lincoln National reason-
ably settled on a determination date.
As noted, the policy terms “Total Disability” and “Total-
ly Disabled” mean that “due to an Injury or Sickness[,] the
Insured Employee is unable to perform each of the Main
Duties of his or her Own Occupation.” We see no reason to
second-guess Lincoln National’s finding that Ten Pas was
totally disabled as of his heart attack and first hospitalization
on August 31. It’s true that Ten Pas continued to perform a
limited amount of work up until his September 6 hemor-
rhagic conversion, but this consisted mostly of reviewing
and sending a small amount of email correspondence from
his hospital bed. He has not shown, either as an interpretive
or evidentiary matter, that it was unreasonable for Lincoln
12 No. 20-1259
National to conclude that he did not perform the full duties
of his occupation.
And because Ten Pas’s disability began on August 31, his
“last day worked just prior” to August 31 could not have
been September 1 or later. To be sure, Lincoln National has
been somewhat inconsistent on the date that Ten Pas last
worked, at times wavering between his last full day in the
office on August 29 on the one hand and either of his partial
days on August 30 or 31 on the other. But the critical point is
that “the last day worked just prior to the date the Disability
begins” cannot be plausibly understood to be forward-
looking.
Accordingly, it was not arbitrary or capricious for Lincoln
National to reject Ten Pas’s argument that his September 1
raise must be included in its benefits calculation. Seeing no
other basis to displace the administrator’s determination, we
reverse and remand with instructions to enter judgment for
Lincoln National. See State Auto Prop. & Cas. Ins. Co. v. Brumit
Servs., Inc., 877 F.3d 355, 357 (7th Cir. 2017) (“Where facts are
not disputed, if a district court grants one party’s motion for
summary judgment and denies the other party’s cross-
motion, this court can reverse and award summary judg-
ment to the losing party below.” (quotation marks omitted)).
REVERSED AND REMANDED WITH INSTRUCTIONS