In Raybourne v. Cigna Life Insurance Company of New York, 11-1295 (7th Cir. 2012), Cigna was appealing the district court’s ruling that the plaintiff, Edward Raybourne (“Raybourne”), was disabled under the terms of his employer’s welfare benefits plan (the “Plan”), which provided long-term disability (“LTD”) benefits, and which was insured and administered by Cigna.
In this case, Raybourne was receiving LTD benefits under the Plan, due to a degenerative joint disease in his right foot. However, after several years of receiving these benefits , Cigna terminated the benefits, on the grounds that Raybourne did not meet the then applicable definition of disability under the Plan (that is, the inability to perform all of the material duties of any occupation for which the claimant is reasonably qualified based on his education, training and experience). Raybourne exhausted all administrative remedies to have the benefits resume, and then sued the Plan for benefits under
section 502(a)(1)(B) of ERISA.
In analyzing the case, the Seventh Circuit Court of Appeals (the “Court”) said that Cigna had a conflict of interest, since it was both the claims decider and benefits payor. The Court concluded that this conflict of interest, rather than the facts and terms of the Plan, led Cigna to terminate the LTD benefits. As indication of this conflict, Cigna did not adequately explain why: (1) the Social Security Administration granted Raybourne disability benefits, but Cigna determined that Raybourne was not disabled, despite functionally equivalent definitions of disability in the Plan and for Social Security purposes, or (2) in deciding to terminate the benefits, Cigna had relied on the report of a nontreating physician, instead of the reports of Raybourne’s treating physician. As such, the Court affirmed the district court’s ruling, thereby overturning Cigna’s termination of Raybourne’s LTD benefits.