In Cathleen Kennedy v. The Lilly Extended Disability Plan, plaintiff Cathleen Kennedy, an executive Director of Human Resources, had a history fibromyalgia dating back many years. As an employee of Eli Lilly and Company, she was covered by The Lilly Extended Disability Plan (“the Plan”), which was administered initially by Anthem Life and Disability and later by Sedgwick Claims Management Services (“Sedgwick”).
Under the terms of the LTD Policy, the definition of disability changed after benefits were paid for 24 months. For the first 24 months, a claimant must be “unable to perform the material and substantial duties of her Own Occupation.” After 24 months, disability is defined as “the inability of an Employee to engage, for remuneration or profit, in any occupation commensurate with the Employee’s education, training, and experience, provided that the inability results from an illness or accidental bodily injury that requires the Employee to be under the regular care of a Licensed Physician.”
Initial Claim Approval and Subsequent Denial
Cathleen Kennedy was hired by 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. In January 2007, Kennedy began experiencing symptoms that continued to worsen and eventually led to a diagnosis of fibromyalgia in April 2008. By December 2007, her symptoms had become so severe that she determined she was no longer able to work. Kennedy eventually applied for long-term disability benefits under the Plan; those benefits were approved effective May 1, 2009, with a monthly benefit of $18,972.44. Three and a half years later, however, her benefits were terminated. The Lilly Employee Benefits Committee (“EBC”) concluded that “while the submitted medical documentation revealed that fibromyalgia is primarily the condition causing some restrictions and limitations for work, there is no clinical evidence to support that the severity of your conditions, either individually or in combination with one another, would preclude you from engaging in every occupation that is consistent with your education, training, and experience, including various non-executive positions in compensation, benefits, and other human resource fields.” As a result, Ms. Kennedy filed suit.
District Court’s Decision
In granting Kennedy’s motion for summary judgment, the District Court found that “[h]aving examined the evidence cited by Lilly as supporting the EBC’s decision and finding that none of it actually provides the necessary support, the Court is left to [conclude] the record contains nothing more than scraps to offset the evidence presented by Kennedy and by [her physician] and, accordingly, the EBC’s decision fails to satisfy even the deferential arbitrary and capricious standard.” Lilly appealed the District Court decision.
7th Circuit’s Decision
In affirming the District Court’s decision, the 7th Circuit began its opinion with an extended description of the history of Fibromyalgia, its symptoms and the debilitating effect it has on patients. It also noted that “[t]here used to be considerable skepticism that fibromyalgia was a real disease…[n]o more.” The Court then examined of the medical evidence relied on by Sedgwick and Lilly to deny Kennedy which, in the Court’s view, “turned out to be a hodgepodge.” What’s more, the Court noted that “[a]ll deficiencies in its [medical] evidence to one side, Lilly has failed to indicate what job or kind of job, and at what level, Kennedy would be capable of performing if the company is permitted to cancel her benefits.” More specifically, the Court concluded that given the unpredictable “flares” characteristic in fibromyalgia patients, “Kennedy wouldn’t be able to work any regular schedule.” And finally, the Court noted that another questionable aspect of Lilly’s case is the company’s conflict of interest, by reason of its being both the initial adjudicator of an employee’s benefits claim and the payor of those benefits. “By cutting off Kennedy’s benefits the company has saved itself about $2.5 million. Big as Lilly is, that’s not a trivial loss.”