In Lucas v. Liberty Life Assurance Company of Boston, No. 11-6056 (10th Cir. 2011), the plaintiff, Steven Lucas (“Lucas”), filed suit against Liberty Life Assurance Company of Boston (“Liberty”), on the grounds that Liberty had violated ERISA by terminating his long-term disability (“LTD”) benefits.
Lucas had been an employee of the Coca-Cola Company, and was covered by its LTD plan (the “Plan”). Liberty was the insurer and administrator of the Plan. As administrator, Liberty had discretionary authority to determine eligibility for benefits. Lucas had suffered a work-related injury requiring spinal surgery and, after a short period back on the job, stopped working. He filed a claim for LTD benefits under Plan. Lucas was awarded LTD benefits under the Plan for 24 months. To be considered disabled and eligible to receive benefits after 24 months, the Plan requires that the participant be “unable to perform, with reasonable continuity, the Material and Substantial Duties of Any Occupation.” Liberty decided to terminate Lucas’ benefits after the 24 months, on the grounds that he was capable of performing some occupation. At the time this decision was made, Lucas was working as a teacher at a university. Lucas then filed this suit against Liberty. The question for the Tenth Circuit Court of Appeals (the “Court”): Was Liberty correct in terminating Lucas’s LTD benefits after 24 months, based on the Plan’s “any occupation” rule?
In answering this question, the Court noted that, since Liberty had discretionary authority under the Plan to determine benefit eligibility, Liberty’s decision to terminate the LTD benefits will be overturned only if it is arbitrary and capricious. The Court concluded that Liberty’s decision was not arbitrary and capricious, and therefore must be upheld. The Court found that Liberty’s decision had a reasoned basis, which was supported by substantial evidence. In rendering its decision, Liberty had written three letters, which included extensive citation to medical records and reports, as well as to its own investigative surveillance. The Court said that the cited facts in the letters adequately support Liberty’s position that Lucas was able to engage in other full-time work despite his impairment. The Court noted that Liberty had acknowledged that Lucas had been approved for Social Security disability income benefits and indicated that it had fully considered that ruling. But, as Liberty explained, the Social Security decision does not determine entitlement to benefits under the terms and conditions of the Plan. Liberty had also noted Lucas’ job as a teacher in concluding that he was able to work. Finally, even though Liberty had a conflict of interest (under the Supreme Court’s decision in the Glenn case), being both the administrator and insurer of the Plan , the Court found that Liberty undertook extensive measures to investigate whether Lucas was able to perform the duties of a gainful occupation for which he was reasonably suited. Thus, the conflict of interest has little weight.