ERISA-Seventh Circuit Affirms District Court Grant Of Disability Benefits

In Kennedy v. The Lilly Extended Disability Plan, No. 16-2314 (7th Cir. 2017), the following occurred.

Cathleen Kennedy (“Kennedy”) was hired by Eli Lilly and Company (“Lilly”) in 1982 and rose rapidly, eventually becoming an executive director in the company’s human resources division, with a monthly salary of $25,011.  But at the beginning of 2008, she was forced to quit work because of disabling symptoms of fibromyalgia.  As a participant in the Lilly Extended Disability Plan (the “Plan”), a self-funded employee benefit plan, she requested benefits upon ceasing to work, and effective May 1, 2009, was approved for monthly benefits of $18,972.44.  Three and a half years later, however, her benefits were terminated by the Plan’s plan administrator, on the grounds that fibromyalgia is not disabling within the meaning of the Plan, precipitating this suit by her against the Plan.

The Plan states that an employee has a “disability” if unable to engage, for remuneration or profit, in any occupation commensurate with the employee’s education, training, and experience.  The district court judge granted summary judgment in favor of Kennedy, granting her past benefits of $537,843.81 and reinstating benefit payments retroactively to December 2012.  The Plan appeals.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) concluded that the Plan has failed to indicate what job or kind of job, and at what level, Kennedy would be capable of performing.  Accordingly the Plan failed to establish that Kennedy is not “disabled”.  Another questionable aspect of the Plan’s case, noted the Court, is Lilly’s conflict of interest, by reason of its being both the initial adjudicator of an employee’s benefits claim (it’s committee being the plan administrator) and the payor of those benefits (as the Plan is self-funded).  Based on the foregoing, the Court affirmed the district court’s judgment.

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