DeBofsky Law won a victory in the U.S. Court of Appeals for the Seventh Circuit in a case entitled Lacko v. United of Omaha Life Ins. Co., 2019 WL 2439786 (7th Cir. June 12, 2019). The plaintiff, Shirley Lacko, stopped working as a senior auditing manager for an accounting firm when the effects of multiple chronic impairments cumulatively rendered her unable to continue working.  Among other conditions, Lacko suffered from gastroparesis, diabetes, rheumatoid arthritis, congestive heart failure, breathing difficulties, anxiety, musculoskeletal impairments, and cognitive difficulties related in part to the medication needed to manage the other conditions.  Although Lacko’s short-term disability claim was initially approved and found to be ongoing on two review periods that followed, the STD benefits were terminated before the maximum STD period was reached, and long-term disability benefits were denied altogether.  After unsuccessfully challenging both the STD and LTD denials, Lacko filed suit, but lost on summary judgment in the district court.  She won on appeal, though.

The issue presented was whether Lacko “was capable of fulfilling the material duties of her regular occupation.” The main focus of the appeal was whether United of Omaha “used an appropriate occupational classification in determining her eligibility for benefits.” The insurer classified Lacko’s occupation as “Department Manager” under the Dictionary of Occupational Titles.  However, Lacko maintained that the occupation of Auditor or Accountant under the DOT was more appropriate.  Those titles were utilized by the Social Security Administration when it awarded Lacko benefits under a more stringent definition of disability.  Although United acknowledged that Lacko suffered impairments that limited her to sedentary work and the insurer was also aware of the Social Security award, it dismissed SSA’s findings by stating, “[e]ligibility requirements for Social Security Disability may differ from the eligibility requirements under this policy.”

The district court upheld United’s determination because it found that Lacko failed to show a change in her condition that caused her to cease working and because it concluded she could perform the “Department Manager” position it deemed representative of her regular occupation.  The district court also took into consideration that the Social Security Administration deemed Lacko capable of performing work in the “light” exertional capacity. Although Lacko noted she had cognitive difficulties in additional to her physical limitations, the court interpreted the records as showing a lack of limitations that would preclude her from working.  The district court also found that United sufficiently took the SSA determination into consideration.  The court of appeals systematically rejected all of the district court’s conclusions.

 First, the court examined the issue of United’s structural conflict of interest that “exists when the administrator has both the discretionary authority to determine eligibility for benefits and the obligation to pay benefits when due.” (citing Jenkins v. Price Waterhouse Long Term Disability Plan, 564 F.3d 856, 861 (7th Cir. 2009); Metro. Life Ins. v. Glenn, 554 U.S. 105, 112, 114, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008); Hennen [v. Metro. Life Ins. Co., 904 F.3d 532, 539 (7th Cir. 2018)]; Dragus v. Reliance Standard Life Ins. Co., 882 F.3d 667, 673 (7th Cir. 2018)). United fulfilled both roles and was therefore conflicted.  However, the presence of a conflict standing alone is not decisive – how the conflict is considered is a key consideration.  The court observed, “a conflict is weighed as a factor in determining whether there is an abuse of discretion, and can act as a tiebreaker when the other factors are closely balanced.” (citing Glenn, 554 U.S. at 117, 128 S.Ct. 2343; Hennen, 904 F.3d at 539; Dragus, 882 F.3d at 673).

The court identified a number of factors that can impact the weight a conflict is given, emphasizing that “Courts must consider all surrounding circumstances in determining whether that conflict of interest could have impacted the disability determination.”  Once such circumstance is “where the administrator engages in only a selective presentation of the evidence in the record, focusing on the portions that will support a denial of the claim and ignoring or misrepresenting the facts that could demonstrate the disability.” (citing Holmstrom [v. Metropolitan Life Ins. Co., 615 F.3d 758, 767 (7th Cir. 2010).; Raybourne[v. Cigna Life Ins. Co.  of N.Y., 700 F.3d 1076, 1082 (7thCir. 2012)]; Glenn, 554 U.S. at 118, 128 S.Ct. 2343).  The court zeroed in on that factor. 

The court next turned to the Social Security issue.  Social Security based its determination on Lacko’s physical impairments, and also determined that she had understanding and memory limitations.  She also had limitations in remembering detailed instructions an in maintaining sustained concentration and limitation, as well as the ability to adapt to changes in the work setting.  SSA determined that Lacko’s limitations rendered her unable to perform his past relevant work because her skill level was reduced, and she was limited to unskilled, light work.  However, the court pointed out: 

Neither United nor the district court acknowledged or addressed the determination that she was limited to unskilled work based on the MRFC [Mental Residual Functional Capacity evaluation completed by a Social Security physician]. In fact, the decisions by United and the district court mischaracterized the SSA decision. United characterized Dr. Fritz’s evaluation as finding no evidence of memory impairment or cognitive impairment, but that is unsupportable. The SSA decision, and specifically the MRFC within it, found her moderately limited in her ability to understand and remember detailed instructions, carry out detailed instructions, and respond appropriately to changes in the work setting, and based on that MRFC she was deemed limited to unskilled work and therefore unable to perform her past work which was skilled work. United never acknowledged those memory and cognitive limitations found by Dr. Fritz, nor the limitation to unskilled work that followed from that MRFC.

Nor did United make any effort to reconcile its decision with the SSA determination.  The insurer dismissed the SSA finding by stating, “Eligibility requirements for Social Security Disability may differ from the eligibility requirements under this policy.”  The court of appeals commented, 

That trite statement is of no value in any analysis. That something “may differ” from the Plan requirements says nothing, as it is noncommittal as to whether there is any actual difference. It failed to identify any difference, and to explain how that difference would impact the disability determination.

United argued on appeal that Lacko’s age was a factor in the Social Security decision, but the court responded by pointing out that age was not a factor in SSA’s determination that Lacko could not perform her past work.  The court looked at SSA’s five-step sequential evaluation process and observed:

The question at step four of the SSA evaluation process was whether Lacko was capable of performing her past work as it is performed in the national economy, and the Plan under which United denied benefits similarly considers whether she was prevented from performing the material duties of her regular occupation. There is no apparent basis for determining that the SSA determination of her ability to perform past work is materially different from the disability eligibility requirements for United. That discussion by United is insufficient to constitute a reasoned consideration of Dr. Fritz’s evaluation or the SSA decision as a whole.

Since there was no evidence disputing the Social Security finding that cognitive limitations precluded Lacko from performing more than unskilled work, the court concluded, 

There is no basis whatsoever in the record to conclude that a job of Senior Manager for the Audit Department is anything less than skilled work. Therefore, because United failed to recognize and address the cognitive limitations set forth in the SSA decision, there is no reasoned basis in the decision to support the determination that Lacko was ineligible for disability benefits.

The court then remarked, “The district court failed to address that deficiency in United’s analysis.”  Instead, the district court accepted United’s argument that even with cognitive limitations, Lacko was found capable of working – at an unskilled job.  The court added,

Her limitations were not so severe as to preclude unskilled work. But it determined that she lacked the ability to perform her past relevant work because it was skilled work. The district court, like United, failed to recognize and address that significant distinction, which is controlling for the purposes here of determining her ability to perform the job of Senior Manager. Moreover, the district court held that United accepted the findings of Dr. Fritz. If, as the district court states, United accepted the determination of Dr. Fritz, then it would have to accept that Lacko possessed mental limitations that rendered her incapable of work other than unskilled work.

The court then turned to United’s misclassification of Lacko’s occupation under the Dictionary of Occupational Titles.  The LTD plan required United to evaluate Lacko’s claim based on whether she could perform her regulation occupation, which it defined as not limited to her specific position, but “instead will be considered to be a similar position or activity based on job descriptions included in the [DOT].”   The court then recounted:

In denying benefits, United characterized her job as one of “189.167-022 Manager, Department,” a generic classification under the DOT that falls under the general catchall category of “189 Miscellaneous Managers and Officials, NEC.” According to the DOT, “[t]his group includes miscellaneous managers and officials, not elsewhere classified.” DOT defines this position as applying to one who “[d]irects and coordinates, through subordinate supervisors, department activities in commercial, industrial, or service establishment,” and the only reference to financial work is that it can include one who “[m]onitors and analyzes costs and prepares budget, using computer.” Dictionary of Occupational Titles 189 (4th ed. 1991)

However, in contrast, the SSA classified Lacko’s job as falling under “160 Accountants, Auditors, and Related Occupations,” which falls under category 16 that “includes occupations concerned with specialized administrative and managerial functions which are common to many types of organizations,” and specifically “160.167-038 Auditor, Tax” and “160.162-018 Accountant.” The DOT provides that:

This group includes occupations concerned with examining, analyzing, and interpreting accounting records for the purpose of giving advice or preparing statements. It also includes occupations involved in devising or installing accounting systems and advising on cost-recording systems or other financial and budgetary data.

Dictionary of Occupational Titles 160 (4th ed. 1991).The titles used by SSA therefore apply to the audit and accounting managerial functions common to many organizations. Those appear more directly related to the Senior Manager position at issue here.

The court further pointed out that the DOT descriptions align with Lacko’s job description provider by her employer, which states: 

The Senior Manager supervises Seniors, Associates, and Interns. He or she is responsible for audit program approval, personnel scheduling, audit working papers review, financial statement disclosure footnote approval, day to day client relationships, determination of billings for engagements, and evaluation of Interns, Associates, and Seniors.

As the court noted, “That description indicates that the position requires the specialized skills of an auditor rather than solely managerial skills.”  The detail provided in the portion of the job description listing “Essential Duties and Responsibilities” also “included duties beyond the common supervisory duties of a manager, such as the duty to conduct technical research and apply research to findings within complex accounting areas.”

Although United utilized a vocational expert, that individual ignored Lacko’s accounting duties and also disregarded that the position required “seven years of public accounting experience or its equivalent, that she have certification as a Certified Public Accountant (CPA), and that she maintain a current CPA license.” None of those requirements were even mentioned in United’s vocational report; and the vocational assessor also “never examined the mental characteristics of the occupation, which would have identified the skill level needed for the position.”

Such deficiencies were characterized by the court as “selective consideration of only the evidence that supports one outcome.” Moreover, since United’s vocational expert disregarded the duties that required Lacko’s auditing and accounting skills and also ignored the educational and licensure requirements of the occupation, the court determined that United’s “failure to acknowledge and reconcile the alternative DOT title applied by SSA is even more egregious.” The court added, “At a minimum, United should have addressed the DOT classification used by the SSA. Moreover, United should have reconciled its choice of the more general DOT title in relation to all of the job requirements, including the requirement that Lacko maintain a current CPA license.” Accordingly, the court ruled that United’s decision could not be sustained and remanded the case with instructions to United to 

address the combination of all [of Lacko’s] impairments, including the impact of medication and treatment for those ailments, on her ability to perform the material duties of her regular occupation. That failure to consider the combination of impairments, including the mental limitations, on her ability to perform her job is fatal to the denial of STD benefits as well. Moreover, we would note that the Plan’s requirement of a “change” in a person’s physical or mental capacity in order to qualify for benefits does not by its terms preclude a degenerative condition from qualifying a claimant for benefits. A condition can exist for years, and only prevent a person from performing her job at a later point in time when the worsening condition proves unmanageable. The deterioration can be sufficient to constitute a change in conditions under the plain language.

Discussion:    There is a lot to unpack in this decision.  Although the court extensively discussed United’s conflict of interest, that issue turned out to be rather immaterial.  Instead, the court focused on United’s failure to address Lacko’s actual job requirements and its disregard of Lacko’s actual occupation and its selective consideration of the evidence.  Both United and the district court came under criticism for not addressing all of the evidence in a meaningfully way and for issuing a determination that failed to reconcile itself with the Social Security determination and the reasons why Social Security found in Lacko’s favor.  

The decision here was not unique, though.  A quartet of federal appellate rulings have firmly established that a disregard of the claimant’s actual occupational duties is arbitrary and capricious; and that the insured’s actual occupation needs to be analyzed when conducting an own-occupation assessment of disability. See, e.g., Doe v. Standard Ins. Co.,852 F.3d 118, 123-4 (1st Cir. 2017) (“Although a generic DOT “position description” may suffice if it involves duties equivalent to those of the claimant’s own occupation, 381 (citing Tsoulasv. Liberty Life Assurance Co. of Bos., 454 F.3d 69, 78 (1st Cir. 2006)), that is not the case here’); McDonough v. Aetna Life Ins. Co.,783 F.3d 374, 381 (1st Cir. 2015) (“To assess a claimant’s ability to perform his own occupation, a decisionmaker must be aware of, and apply, the requirements of the occupation.”); Miller v. Am. Airlines, Inc.,632 F.3d 837, 855 (3d Cir. 2011) (ruling that an ERISA plan administrator must “consider whether the claimant can actually perform the specific job requirements of a position.”); Elliott v. Metro. Life Ins. Co., 473 F.3d 613, 619 (6th Cir. 2006) (determining that plan administrator’s decision could not be considered “reasoned” when there was no discussion of claimant’s duties or her ability to complete them in light of diagnoses).  United’s vocational assessment and use of a generic DOT title violated those standards and was thus deemed arbitrary.

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