In Leipzig v. Principal Life Insurance Company, No. 10-10394 (5th Cir. 2010), the plaintiff, Bruce Leipzig (“Leipzig”), brought suit against the defendant, Principal Life Insurance Co. (“Principal”), alleging that Principal had stopped the payment of his disability benefits in violation of ERISA. The district court granted summary judgment against Leipzig on this ERISA claim, and he appealed.
Leipzig was a surgical “ear, nose and throat” doctor, or ENT, who was maintaining a medical practice in Brownwood, Texas. Leipzig had purchased a disability insurance policy (the “Plan”) from Principal, which both administers and pays claims on the policy. Principal retained full discretion to interpret the Plan. Under the Plan, after the first two years for which disability benefits are payable, a participant would continue to receive disability benefits only if, solely and directly because of sickness, injury, or pregnancy, either: (a) the participant cannot work at any occupation for which he or she qualifies based on education, training, or experience, or (b) the participant is working and is unable to earn more than 66 2/3% of his or her pre-disability earnings.
In 2005, Leipzig had been diagnosed with diplopia (double vision) and extropia (crossed eyes). By April 2006, he had ceased performing surgery and sold his medical practice. Principal approved Leipzig’s disability claim, effective June 15, 2006, and began paying him monthly benefits. However, in 2007, Leipzig underwent eye surgery and resumed a non-surgical ENT practice in Brownwood. He was physically capable of working a full schedule, but he worked no more than two days per week, since he could see all of his patients during those two days. Principal stopped the disability benefit payments after June 14, 2008, based on the foregoing definition of disability.
In analyzing this case, the Fifth Circuit Court said that it would review Principal’s decision to stop the benefit payments using the abuse-of-discretion standard. This obtains because Principal was the Plan’s administrator and had discretion to interpret the Plan. The question, in this case, was whether Principal’s interpretation of the Plan reflects a fair reading. There is one part of the Plan’s definition of disability that Leipzig does not satisfy, namely, that his inability to work must occur “solely and directly because of [the claimant’s] sickness, injury or pregnancy.” In this case, Leipzig was physically capable of working full-time, and his practice was limited to two days a week only because of market conditions in his city of residence. Therefore, his post-disability earnings-which were less than 2/3 of his pre-disability earnings since he worked only two days per week- were not “solely and directly” caused by his medical condition. The Court concluded that Principal’s termination of Leipzig’s disability benefits is based on a fair reading of the Plan. Accordingly, the Court affirmed the district court’s grant of summary judgment against Leipzig on his ERISA claim.