Opinion
CAUSE NO. IP02-0928-C-H/K
December 19, 2003
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This ERISA action was tried before the court on April 17, 2003. Pursuant to Rule 52 of the Federal Rules of Civil Procedure, the court now states its findings of fact and conclusions of law. Substance rather than labels shall control whether an item is treated as a finding of fact or conclusion of law. As explained below, the court finds that plaintiff Brian Denault is entitled to total and partial disability benefits, as well as attorney fees and prejudgment interest.
Findings of Fact
Plaintiff Brian Denault was employed by Harlan Sprague Dawley, Inc. ("HSD") as a customer service manager from March 17, 1992 to August 16, 1999. Defendant American United Life Insurance Co. ("AUL") contracted with HSD to provide a group long-term disability policy that covered certain employees of HSD. Denault was an eligible employee of HSD for purposes of coverage under the AUL disability policy (the "Policy"). Denault paid his own premiums for the Policy.
HSD handles and supplies laboratory animals to companies nationwide. As customer service manager, Denault supervised approximately 20 HSD employees. He managed inventory and had extensive telephone and personal contact with customers. Among other things, Denault was responsible for working with customers to resolve their problems, for training and evaluating employees, and for ensuring that customer orders were properly handled. Denault's job required the ability to manage multiple tasks simultaneously, and extensive written and verbal communication skills. Denault found his job stressful. As HSD's customer service manager, Denault earned $58,500 per year as of April 1999.
Beginning around January 1998, Denault began suffering from head rushes and dizzy spells four to five times per day. Denault also began experiencing memory problems around that time. Denault first reported these problems to his family physician, Terry Henderson, M.D., around March 4, 1998. Dr. Henderson referred Denault to Richard French, M.D., with Indiana Neurology Associates, whom Denault first visited on March 11, 1998. At the time of the March 11th visit, Dr. French did not believe Denault was having seizures and believed Denault's symptoms might be related to an anxiety disorder. Dr. French did note that "one spike wave complex" on an EEG taken on March 6, 1998 was "suspicious."
On April 1, 1998, Denault suffered a seizure in his sleep. The seizure awakened his wife, and it lasted approximately one minute. Denault lost consciousness, bit his tongue, and was bleeding from the mouth. After the seizure ended, Denault was combative. Mrs. Denault called for medical assistance, and Denault was taken by ambulance to the emergency room at St. Vincent's Hospital. Denault was treated by Dr. French and later released. Dr. French prescribed Tegretol, a seizure prevention medication. The cause of Denault's seizure was not determined, and Dr. French noted that his past head rushes "may well be some type of partial seizure, a vegetative-type symptom."
Denault returned to his job at HSD. Denault continued to have physical and mental problems, including memory and concentration problems, periods of prolonged vacant staring, trembling and shaking episodes, nonsensical speech, brief amnesia, fatigue, and disorientation. Denault had difficulties performing his job duties as a customer service manager. Denault's problems performing his duties were noted by his administrative assistant, Amy Malone, though they were not noted by those who supervised his work. Denault was advised by his physician not to drive and to take care working at heights or around open water.
Denault took a medical leave of absence from his job at HSD on September 22, 1998 as a result of his uncontrolled seizure disorder. Denault sought and received short-term disability pay during his medical leave, which ended upon his return to work at HSD on January 4, 1999.
Denault continued to treat with his physicians, including Drs. Henderson, Niebler, and Janicki. Denault had an EEG on September 28, 1998 that was, as noted by Dr. Janicki, "suspicious for a possibility of epileptogenic foci." Denault continued to take Tegretol. On October 30, 1998, Denault was seen by Indiana University's Vicenta Salanova, M.D., for an initial consultation. On November 9, 1998, Dr. Salanova gave Denault a twenty-four hour video EEG. Denault was admitted to the Indiana University Medical Center for a follow-up five-day video EEG from December 7 to 11, 1998. Dr. Salanova noted that the results of Denault's five-day EEG supported a "diagnosis of partial and secondarily generalized seizures." Following this EEG and diagnosis, Dr. Salanova continued Denault on Tegretol and recommended that he be given neuropsychiatric testing.
Denault was seen by neuropsychologist David Kareken, Ph.D., on December 17, 1998. After performing several tests, Dr. Kareken concluded that Denault had "mild memory impairment, worse for visual and spatial material," "[i]mpaired kinesthetic motor problem solving, worse on the non-dominant hand and during bilateral performance," and "[o]ccasional poor performance on other tests that require mental flexibility (verbal abstraction, reflex inhibition, letter fluency)." Dr. Kareken noted the possibility that a busy work environment would pose problems.
Denault returned to work at HSD on January 4, 1999. Denault continued to have the same difficulties performing his job, primarily because of his problems with memory and concentration. Denault's continued problems were noted by his administrative assistant at HSD, Amy Malone, though again, those who supervised Denault did not observe the problems.
Denault continued to seek medical treatment, seeing Dr. Salanova on January 26, 1999. Dr. Salanova continued him on Tegretol. On April 7, 1999, Denault saw Dr. Salanova again. Denault reported that he continued to suffer from head rushes and difficulties with memory and concentration. Denault reported that he felt unable to continue to perform his job. Dr. Salanova instructed him not to drive.
Denault again took a medical leave from his job at HSD beginning on April 7, 1999. He never returned to work at HSD. HSD terminated his employment effective August 16, 1999.
Denault applied for disability benefits pursuant to the AUL Policy on April 26, 1999. In Attending Physician's Statements requested by AUL prior to approval of Denault's disability benefits, both Dr. Henderson and Dr. Salanova opined that Denault was totally disabled. By letter dated August 12, 1999, AUL approved Denault for receipt of Total Disability benefits under the policy, effective December 21, 1998 to January 3, 1999, and then beginning again on April 7, 1999. AUL paid Denault a monthly benefit of $2,925.00.
Just a week after AUL approved the payment of total disability benefit, a private investigative agency hired by AUL conducted two days of surveillance on Denault. The investigators observed nothing that would have been inconsistent with Denault's claim for total disability benefits. Ex. 1 at 359-67.
Denault saw Dr. Salanova on August 11, 1999. He reported continued head rushes, memory deficits, and concentration difficulties. Dr. Salanova maintained his Tegretol prescription and driving restrictions. Denault saw Dr. Henderson on September 29, 1999 and reported dizziness and continued head rushes.
After awarding total disability benefits, AUL contracted with Crawford 85 Company to review Denault's file, interview Denault, and make recommendations. Holly Bogue, a registered nurse who reviewed the file and interviewed Denault, recommended that Denault be referred for an independent medical examination. Denault went to John Scott, M.D., with Hoosier Neurology, P.C., for an independent medical examination on October 21, 1999.
Dr. Scott diagnosed Denault with a seizure disorder and head rushes. Dr. Scott noted the problems with memory, concentration, and fatigue. Dr. Scott opined that he did not believe Denault was capable of performing his job at HSD or any other job at that time because of his problems with memory, concentration and fatigue. Dr. Scott could not give an estimate as to when Denault might have been able to return to work.
Denault saw Dr. Salanova again on November 17, 1999. He reported head rushes, and his wife reported staring episodes lasting a minute or two several times per month. Denault continued on Tegretol. At the request of AUL, Dr. Salanova submitted an Attending Physician's Supplemental Statement dated December 2, 1999 in which she stated that "Patient was continuously totally disabled (unable to work)" from April 1999 to the present.
Following the independent medical examination, Denault decided that he would treat with Dr. Scott. Denault saw Dr. Scott on January 20, 2000. Denault reported dizzy spells but no significant head rushes for several months. He reported that his short-term memory loss continued but was not getting worse and might have been getting a little better. Dr. Scott prescribed Neurontin, a seizure medication, and recommended that Denault return to neuropsychologist Dr. David Kareken for repeat testing.
In this court's experience, that is an unusual outcome of an independent medical examination arranged at the request of a party with adverse interests. The fact that AUL originally selected Dr. Scott to examine Denault also makes it difficult to credit AUL's criticisms of Dr. Scott's later opinions regarding Denault's degree of impairment.
On February 28, 2000, Denault saw Dr. Kareken, who reported: "Continued very mild impairment in constructional praxis" and "otherwise stable or mild interval improvement in cognitive function."
On April 10, 2000, Denault saw Allison Brashear, M.D., with the Indiana University Department of Neurology for treatment of abnormal mouth movements that had developed in approximately November 1999. No further details are available on this treatment, though the movements continued.
Denault saw Dr. Scott again on June 1, 2000. He reported continued abnormal lip movements and clicking noises from his mouth. His head rushes had significantly decreased. Denault reported continued problems with fatigue and short-term memory loss. Dr. Scott recommended stopping the Tegretol to determine the effect it would have on his continued problems. Dr. Scott prescribed Dilantin, another anti-convulsant, to replace it. Denault saw Dr. Scott again on September 20, 2000. Denault reported less frequent head rushes, but some dizzy spells. His memory problems remained. He was continued on Dilantin.
AUL notified Denault by letter dated September 15, 2000 that his disability benefits were being discontinued. In discontinuing the benefits, AUL concluded that Denault was not under the regular care of a physician and that he was not so impaired that he was unable to perform the material and substantial duties of his occupation as a customer service manager for HSD. AUL paid Denault two additional months of benefits, through and including November 7, 2000. Denault appealed the discontinuance of his benefits by letter dated October 30, 2000.
In this lawsuit, AUL has abandoned any reliance on the "regular care" requirement as a basis for its decision to discontinue benefits.
In considering Denault's appeal, AUL assigned registered nurse Karen Oxford to review the file in December 2000. The first thirteen pages of her review recite the contents of the various medical reports prepared by Denault's physicians. See Ex. 1 at 467-79. The last three pages contain a summary and Oxford's conclusion that there was a lack of objective medical evidence to support an impairment. Id. at 479-82. That conclusion fails to come to grips with the opinion of AUL's own independent medical examiner, Dr. Scott, who had opined in October 1999 that Denault was not capable of any employment. Ex. 1 at 342. Oxford mentioned Dr. Scott's opinion, Ex. 1 at 480, but her analysis does not identify any improvement in Denault's condition sufficient to remove those restrictions.
During the course of its review, AUL wrote Dr. Scott on January 2, 2001 and asked him to return Denault "to work full time as of February 26, 2001 in a sedentary work activity level." Dr. Scott responded to this request on January 18, 2001 by indicating that Denault could return to work as of that date in a sedentary position, but with the restriction that Denault "may not work more than 4 hours or in a stressful situation." These restrictions were sufficient to disable Denault from performing his old job at HSD, which was the applicable standard for total disability under the AUL Policy. AUL asked Dr. Scott for clarification for this restriction based upon its own assessment that "the objective medical evidence" did not support an impairment due to seizures or stress. Dr. Scott responded, "He tells me that he feels stressed 85 anxious 85 is to see a psychologist."
AUL denied Denault's appeal and notified him of that decision in a letter dated February 19, 2001. AUL concluded that "the current objective findings would indicated [sic] that your condition would be considered stable and that you would be able to perform a sedentary occupation which did not require you to work around heavy machinery, pools or other large bodies or water or where driving during the first year following a generalized seizure was considered a material and substantial duty of the job." This conclusion simply failed to address the issues of memory problems and the mental demands on Denault in his job at HSD.
On April 11, 2001, Denault submitted a second appeal of the discontinuance of his benefits. On June 8, 2001, AUL denied Denault's second appeal by letter from Steve Torrence, Vice President of Group Claims. Ex. 1 at 41. Torrence wrote, among other things, that AUL believed Denault was able to return to work because he had done so for a three-month period in early 1999, after his first leave of absence but before his second leave beginning on April 7, 1999:
It should be noted that Mr. Denault returned to work at Harlan Sprague Dawley approximately 18 days after the first neuropsychological exam. (Jan. 4, 1999) His return to work indicates Mr. Denault was able to perform the material and substantial duties of his occupation. The February 2000 examination revealed his condition had either remained stable or improved. This indicates Mr. Denault should be able to return to work like he did in January 1999.
This reasoning is not at all persuasive. The prior return to work had been treated by everyone, including AUL, as an unsuccessful effort to return to work. In fact, AUL had paid total disability benefits after it was clear that the effort had been unsuccessful, and AUL's chosen examiner, Dr. Scott, had later concluded that Denault was totally disabled. Torrence and AUL have not explained how an unsuccessful return to work and a stable condition showed that Denault was no longer disabled.
Denault visited Dr. Scott again on March 23, 2001. Denault reported having one or two head rushes per week, and continued problems with memory, fatigue, and involuntary tongue and mouth movements. Denault continued on Dilantin. Denault saw Dr. Henderson on May 23, 2001 and reported fatigue. Denault saw Dr. Scott again on September 11, 2001. He reported continued head rushes, tongue and mouth movements, and continued memory problems. Denault continued to take Dilantin. Denault saw Dr. Henderson on September 14, 2001 and reported fatigue and head rushes. Denault saw Dr. Scott on February 8, 2002. He reported facial movements, sporadic memory loss, and fatigue. Dr. Scott discussed taking him off of Dilantin following testing.
Denault had an EEG taken on February 18, 2002 that Dr. Scott felt was normal. Dr. Scott took Denault off of Dilantin. Dr. Scott believed that a follow-up EEG in August 2002 was normal.
During the period Denault received benefits from AUL, he also applied for Social Security Disability benefits, as required by the AUL policy. His claim for benefits was denied, but the Social Security Administration noted: "We realize your condition keeps you from doing any of your past jobs." The Social Security Administration stated this as recently as October 24, 2000.
AUL's Torrence addressed the Social Security findings in his letter denying Denault's second appeal: "We have several former SS disability examiners employed at AUL and they indicate it is not normal practice for SS to make judgments relevant to the claimant's disability using their pre-disability occupation as it has no bearing on the claimant's eligibility to SS disability benefits." Ex. 1 at 41-42. This is a curious statement. Step four of the ubiquitous five-step analysis of disability claims asks whether the claimant can still perform his or her past relevant work. See 20 C.F.R. § 404.1520.
Around February 19, 2001, Denault began working part-time as a video store clerk. This was his first return to work of any kind since April 7, 1999. Denault had some difficulties performing his duties as a video store clerk. Even after the usual learning period for a new employee, he made a disproportionate number of mistakes in such tasks as checking out videos and making sure signatures were obtained from customers. Denault's manager at the video store, owner Matthew Lutz, did not permit Denault to perform certain duties, including basic bookkeeping, that were normally performed by clerks. Lutz imposed these limits because of his concern about Denault's disproportionate number of mistakes on other, less critical tasks. During all of 2001, Denault earned a total of $7,372 at the video store.
In late 2001, Denault became self-employed as apart-time handyman. He earned approximately $4,000 from this work in 2001. In 2002, Denault earned approximately $28,000 as a self-employed handyman.
On November 2, 2001, Denault's attorney, William R. Groth, wrote to AUL. Groth inquired about Denault's eligibility for partial disability benefits and whether Denault needed to take any specific action to make a claim for benefits under the partial disability provisions of the policy. On December 21, 2001, Jonathan Becker, in-house counsel for AUL, responded to Groth's inquiries by attaching a copy of the September 15, 2000 letter in which AUL informed Denault of the discontinuance of his total disability benefits. Becker said nothing about Mr. Denault's eligibility for partial disability benefits. On May 20, 2002, Groth again wrote to Becker to inquire about Denault's eligibility for partial disability benefits under the policy and to ask what steps, if any, Denault needed to take to receive that benefit. AUL did not respond to this inquiry. This lawsuit followed.
Conclusions of Law
I. Jurisdiction and Procedural Matters
The Policy is an employee benefit plan within the meaning of Sections 3(1) and (3) of ERISA, 29 U.S.C. § 1002(1) and (3). This is an action brought pursuant to Section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B). The court has jurisdiction over the subject matter and the parties.
The parties agree that the proper standard of review for this court to apply to AUL's decision to discontinue Denault's benefits is de novo. The Policy does not grant AUL any discretionary authority in determining eligibility or in interpreting the Policy. See Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101 (1989).
Under the de novo standard, the court has discretion to consider evidence outside the administrative record where necessary to make an informed and independent judgment. Casey v. Uddeholm Corp., 32 F.3d 1094, 1099 (7th Cir. 1994). As the court ruled on April 16, 2003, additional evidence is needed to address the issue of partial disability because AUL never gave that issue serious consideration in its administrative processes. With respect to the issue of total disability, the court exercised its discretion to hear the additional evidence and reserved until after the trial a decision on whether to strike the evidence. That approach reduces the risk of a possible need for a second trial. Also, because AUL terminated the total disability benefits just three and a half months before they were due to expire under the Policy in any event, the larger part of this case is the claim for partial disability benefits, as to which the court needed to hear essentially the same evidence in any event.
After hearing the evidence, the court is satisfied that the final decision on the issue of total disability would be the same whether the evidence is limited to the administrative record or includes the additional evidence at trial. The administrative record shows that AUL simply failed to come to grips with important evidence showing Denault's disability, including the opinions of the independent medical examiner selected by AUL. The additional evidence at trial was relevant to both issues — total and partial disability. The additional evidence helped provide a much clearer picture of Denault, his condition, and its effects on his ability to hold his old job and his efforts to work in other capacities. The problems he experienced were real. They generated results in objective testing that showed impairments, even though the degree of impairment was not readily susceptible to confirmation by those tests. The problems Denault experienced were real enough and severe enough to lead a man who had a record of steady work at a demanding job to cut back to part-time work as a video clerk, where he had unusual difficulty handling simple video rental transactions. Then, after some further improvement, he moved on to more extensive work as a handyman making about half of his prior salary. The court denies AUL's motion to strike trial evidence beyond the administrative record.
II. Denault's Total Disability
Denault was totally disabled within the meaning of the Policy from November 7, 2000, the date that AUL last paid benefits, to February 19, 2001, the date Denault began working as a clerk at the video store.
Section 8 of the Policy provides in pertinent part:
When AUL receives proof that a Person is Disabled due to Sickness or Injury and requires the regular attendance of a legally qualified Physician, AUL will pay the Person a Monthly Benefit. . . . The Monthly Benefit will be paid as long as the Disability continues provided that proof of continued Disability is submitted to AUL upon request and the Person is under the regular attendance of a Physician.
The term "Disabled" or "Disability" is defined by the Policy to include both Total and Partial Disability. AUL necessarily concluded as of August 16, 1998, the date it approved Denault's claim for benefits, that he was "Totally Disabled" due to "Sickness or Injury," and that he was under the regular care of a physician.
The Policy defines the term "Totally Disabled":
TOTAL DISABILITY and TOTALLY DISABLED mean that because of Injury or Sickness:
1. the Person cannot perform the material and substantial duties of his regular occupation; and
2. after benefits have been paid for 24 months the Person cannot perform the material and substantial duties of any gainful occupation for which he is reasonably fitted by training, education or experience.
Under this provision, if a person is unable to return to his own occupation because of sickness, he is entitled to payment of monthly Total Disability benefits for the first 24 months that he is unable to perform his old job.
Denault suffered from a Sickness within the meaning of the Policy between November 7, 2000 and February 18, 2001. The term "Sickness" is defined in the Policy as "illness, bodily disorder, disease, Mental Illness, or pregnancy." Denault had been diagnosed with a seizure disorder for which he remained on anti-convulsant medication, Dilantin, during the entire period between the discontinuance of his benefits and his employment at the video store. Denault continued to suffer from a host of other problems, many of which are noted in the records of Dr. Scott dated September 20, 2000 and March 23, 2001. Denault reported continued problems with his memory as of September 20. He had been tested on February 28, 2000 by neuropsychologist Dr. Kareken, who had concluded that he still had some mild impairment. Denault continued to report memory and fatigue problems in March 2001, as well as one to two head rushes per week and abnormal tongue and mouth movements. These symptoms indicated an "illness" or "bodily disorder."
Denault remained under the regular attendance of a physician during the period between November 7, 2000 and February 18, 2001. The Seventh Circuit has interpreted language similar to the language within the AUL Policy as requiring that "the insured is obligated to periodically consult and be examined by his or her treating physician at intervals to be determined by the physician." Heller v. Equitable Life Assurance Soc'y, 833 F.2d 1253, 1257 (7th Cir. 1987). Denault continued to treat with Dr. Scott at regular intervals following the discontinuance of his benefits. Specifically, Denault was seen by Dr. Scott on June 1, 2000, September 20, 2000, and again on March 23, 2001. Denault remained on medication prescribed by Dr. Scott during the entire period.
Denault remained unable to perform the material and substantial duties of his job as a customer service manager for HSD during the period of November 7, 2000 to February 18, 2001 because of his problems with memory, concentration and fatigue. Under the terms of the AUL policy, it is necessary to show only that Denault could not perform one of the material and substantial duties of his former job during the first 24 months of his disability. See Lain v. UNUM Life Ins. Co., 279 F.3d 337, 345 (5th Cir. 2002). Denault's job included supervising a significant number of persons and handling customer complaints. The job required "extensive written and verbal communication skills" and "[a]ccuracy on all reports that are generated." The evidence shows that Denault's medical problems prevented him from performing these duties.
Denault's treating physician Dr. Scott (who was originally selected by AUL for the independent medical examination) agreed that Denault could not perform the duties of his customer service job. On January 18, 2001, Dr. Scott released Denault to return only to a part-time position working no more than 4 hours per day and not in a stressful situation. The judgment of a claimant's treating physician is not binding on the insurer, of course, but a plan administrator "may not arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of a treating physician." Black Decker Disability Plan v. Nord, 538 U.S. ___, ___, 123 S.Ct. 1965, 1972 (2003) (rejecting special "treating physician rule" for ERISA cases subject to "arbitrary and capricious" review). When no doctors expressed contradictory views, the plan administrator must have a good reason for disagreeing with the treating physician's conclusions. And in this case, of course, the fact that AUL itself originally chose Dr. Scott to perform an independent medical examination makes it difficult for AUL to argue that his views should not be given credit.
AUL's conclusion that there was no objective medical evidence to support Denault's impairment is not supported by the record. A number of physicians concluded that Denault had an identifiable seizure disorder and problems with memory based upon objective testing and examinations, including Drs. French, Janicki, Salanova, Scott, and Kareken. Those problems are corroborated by the testimony of those who saw Denault on the job at HSD (Amy Malone) and later at the video store (Matthew Lutz).
AUL's initial grant of benefits to Denault is significant here because it shows that AUL believed there was objective medical evidence to support the grant of benefits. AUL was not prohibited from changing its mind, of course, but it needed to have good reason to do so, supported by some evidence. It did not have such a reason or evidence in this case. Also, AUL's initial grant of benefits is difficult to reconcile with its position in the lawsuit, which is that Denault was never actually totally disabled and had no objective medical evidence to support a claim of total disability.
Even if there were no current objective medical evidence to support a conclusion that Denault was impaired, some medical conditions cannot be diagnosed by objective testing procedures. See, e.g., Cook v. Liberty Life Assurance Co., 320 F.3d 11, 21-22 (1st Cir. 2003); Walke v. Group Long Term Disability Ins., 256 F.3d 835, 841 (8th Cir. 2001). The fact that there is no objective medical evidence does not require denial of a claim, and to do so may well "defeat the legitimate expectations of the participants" in a plan. Cook, 320 F.3d at 21-22, quoting Mitchell v. Eastman Kodak Co., 113 F.3d 433, 443 (3d Cir. 1997).
III. Denault's Partial Disability
Denault was partially disabled under the policy from the time he began working at the video store until August 12, 2002. AUL never considered Denault's claim for partial disability benefits in the administrative proceeding. This failure can be attributed to AUL since Denault requested review in writing on two different occasions.
The Policy provides in Section 8 that:
The Monthly Benefit will be paid as long as Disability continues provided that proof of continued Disability is submitted to AUL upon request and the Person is under the regular attendance of a Physician.
The term "Disability" is defined by the Policy to included both Total and Partial Disability. Section 8 of the Policy also provides:
BENEFITS WHILE PARTIALLY DISABLED: When proof is received that a Person, while Partially Disabled, is earning or receiving income that is less than 80% of his Pre-Disability Earnings from his regular or another occupation, the Return to Work Benefit and Partial Disability Benefit provisions apply. The Partial Disability must be the direct result of the Injury or Sickness that caused the Disability immediately preceding it.
RETURN TO WORK BENEFIT: This Benefit applies during the 12 month period beginning on the first day that Monthly Benefits are payable for Partial Disability. Under this Return to Work Benefit, the Monthly Benefit for Partial Disability will not be reduced by earnings received, unless such earnings combined with income from all other sources, including the Monthly Benefit, exceeds 100% of the Pre-Disability Earnings. If it does, the Monthly Benefit will be reduced by the amount that is in excess of 100% of Pre-Disability Earnings.
The term "Partially Disabled" is defined by the Policy as follows:
PARTIAL DISABILITY and PARTIALLY DISABLED mean that because of Injury or Sickness the Person, while unable to perform every material and substantial duty of his regular occupation on a full-time basis, is:
1. performing at least one of the material and substantial duties of his regular occupation or another occupation on a part-time or full-time basis; and
2. is earning less than 80% of his Indexed Pre-Disability Earnings due to that same Injury or Sickness
Reading these provisions together, Denault was entitled to payment of a partial disability benefit during the time he worked for the video store and during the period of his subsequent self-employment as a handyman so long as: (1) he was suffering from a Sickness; (2) the Sickness was the same one that caused his Total Disability; (3) he was under the regular attendance of a physician; (4) he was unable to perform every material and substantial duty of his regular occupation at HSD on a full-time basis; (5) he was performing at least one material and substantial duty of some occupation, whether of his own or another occupation, on a part-time or full-time basis; and (6) he was earning less than 80 percent of his Indexed Pre-Disability Earnings as a result of the Sickness.
As of February 19, 2001, Denault was suffering from a Sickness and it was the same Sickness that resulted in his period of total disability. As of February 19, 2001 and continuing into 2002, Denault suffered from the same seizure disorder and related memory, concentration and fatigue problems that had been causing him difficulties since the beginning of 1998, albeit with less frequency and severity than in previous years. At his March 23, 2001 visit to Dr. Scott, Denault reported occasional head rushes, and continued problems with memory and fatigue. Denault reported fatigue to Dr. Henderson when visiting his family physician on May 23. Denault visited Dr. Scott on September 11, 2001 and reported head rushes and memory problems, and on September 14, 2001 in a visit with Dr. Henderson reported fatigue and head rushes. On February 8, 2002 Denault reported fatigue and sporadic memory loss to Dr. Scott. Denault continued to take Dilantin as prescribed by Dr. Scott until March of 2002. There is no indication that Dr. Scott ever lifted the part-time and no-stress work restrictions that he had stated were necessary in his January 18, 2001 note to AUL. Contrary to AUL's contention that there was a different disabling condition, there is no evidence that Denault was suffering from any condition other than the one that caused the original disability.
Denault remained under the regular attendance of a physician on February 19, 2001, and that treatment continued until August 2002, when he last saw Dr. Scott. Denault had seen Dr. Scott about every six months between February 2001 and August 2002.
Denault remained unable to perform every material and substantial duty of his customer service manager position as of February 19, 2001. He remained unable to perform those duties at least to the time of trial, and certainly through August 2002. This fact is supported by Dr. Scott's opinion of January 18, 2001 that Denault could not return to a stressful, full-time position, the past objective medical evidence of Denault's impairment, and Denault's own reported symptoms. This is further supported by the testimony of Denault and Matt Lutz, the owner of the video store and Denault's former supervisor, that Denault was unable to perform complex tasks.
Denault was performing at least one of the material and substantial duties of another occupation on a part-time basis when he worked as a video store clerk and later as a self-employed handyman.
Denault was earning less than 80 percent of his pre-disability earnings in these jobs. Denault earned less than $12,000 in 2001. He earned approximately $28,000 in 2002. Denault's pre-disability earnings were $58,500 per year.
Thus, Denault was Partially Disabled within the meaning of the Policy and entitled to payment of a monthly benefit for that partial disability beginning on February 19, 2001. The Return to Work benefit was payable during the first twelve months of partial disability. Denault remained partially disabled within the meaning of the Policy until August 12, 2002.
IV. The A mount of Benefits Due
The parties have agreed on the amount of benefits that would be due if the court concluded that Denault was totally and then partially disabled. The amount of benefits owed to Denault for Total Disability between November 7, 2000 and February 18, 2001 is $10,028.52. This is based upon a monthly benefit amount of $2,925.00. The amount of benefits owed to Denault for a Return to Work benefit from February 19, 2001 to February 18, 2002 is $35,100.00. This is based upon a monthly benefit amount of $2,925.00 which is not offset because Denault did not have high enough earnings. The amount of benefits owed to Denault for Partial Disability benefits from February 19, 2002 to August 12, 2002, is $10,163.80. This is based upon a monthly benefit of $1,780.00 for 5.71 months.
V. Attorney Fees and Costs
ERISA permits the award of a reasonable attorney's fee to parties in ERISA litigation. Hess v. Hartford Life Accident Ins. Co., 274 F.3d 456, 464 (7th Cir. 2001). There is a modest presumption that the prevailing party in an ERISA case is entitled to an award of fees. Id.
For at least the past 20 years, the Seventh Circuit has recognized two tests for analyzing whether attorney's fees should be awarded to the prevailing party in an ERISA case. The first test looks at five factors: (1) the degree of the offending party's culpability or bad faith; (2) the degree of the offending party's ability to satisfy an award of attorney's fees; (3) the degree to which such an award would deter other persons acting under similar circumstances; (4) the amount of benefit conferred on all the plan members; and (5) the relative merits of the parties' positions. The second test looks to whether the losing party's position was "substantially justified." Quinn v. Blue Cross Blue Shield Ass'n, 161 F.3d 472, 478 (7th Cir. 1998); see also, Fritcher v. Health Care Service Corp., 301 F.3d 811, 819 (7th Cir. 2002).
A fee award is appropriate in this case under either standard. AUL's position in this matter was not substantially justified. The majority of Denault's claims in this litigation were based upon whether he was "Partially Disabled" within the meaning of the Policy. AUL never even bothered to provide Denault with an administrative determination as to his entitlement to partial disability benefits, despite two written requests from his attorneys on the specific issue of his entitlement to partial disability benefits.
Further, AUL's position that Denault was able to perform the material and substantial duties of his former occupation as a customer service manager is not supported by the administrative record alone or by that record as supplemented by the evidence at trial. Denault's neurologist Dr. John Scott (who also performed the independent medical examination for AUL) opined in January 2001 that Denault was not able to perform a job that required more than four hours of work per day, or any job that was stressful. No medical opinion from any physician who examined Denault contradicts this opinion. Denault's former manager at the video store testified that during the entire period of Denault's employment, he did not believe Denault was capable of performing certain detail-oriented work, such as accounting tasks, that were normally performed by video store clerks.
There is no evidence that AUL made any effort to determine the material and substantial duties of Denault's former employment as a customer service manager, other than reviewing a written job description. There also is no evidence that AUL made any effort to determine the material and substantial duties of his employment as a video store clerk or a self-employed handyman to compare those duties to Denault's former occupation as a customer service manager.
AUL repeatedly focused its analysis on only the physical demands of Denault's job at HSD, which was sedentary in nature and did not conflict with restrictions such as not operating heavy machinery, working around open water, or driving a car. That analysis missed entirely the point of the medical evidence. The issue was whether the disturbances in Denault's brain were preventing him from handling the extensive mental demands of the job: supervising a number of other employees effectively, communicating accurately, reliably and promptly with demanding customers, and handling a relatively high degree of stress. Whether AUL was willfully blind to the issue or simply failed to understand it, its position was not substantially justified.
Under the first factor of the five-factor test, the court does not find that AUL acted in bad faith, but its position was not substantially justified. Its complete failure to address the issue of partial disability was not justified. Second, AUL is able to satisfy a fee award. Third, a fee award in such cases should help deter other plan administrators and insurers from similarly obtuse treatment of claims for benefits. The fourth factor is a wash, for Denault's case helps him but does not directly benefit others. Fifth, the relative merits of the parties' positions weigh in favor of a fee award for the reasons already stated.
Accordingly, Denault is entitled to an award of his reasonable attorney's fees. The amount of those fees will be determined upon the filing by plaintiff of a petition for determination of fees. Plaintiff shall file such a petition no later than January 16, 2004. Defendant may file any response no later than January 30, 2004. The court will hold a hearing on the request of either party but in the absence of such a request will rule on the written submissions.
VI. Prejudgment Interest
An award of pre-judgment interest is available to a prevailing plaintiff in ERISA cases. Fritcher v. Health Care Service Corp., 301 F.3d 811, 819-20 (7th Cir. 2002). There is a presumption in favor of such an award. Whether to award such interest is a question of fairness, and it is acceptable for a court to award such interest where it is necessary to make a plaintiff whole. Id. at 820.
Denault has been deprived of disability benefits to which he was entitled, beginning with the payment that ordinarily would have been made in December 2000. An award of pre-judgment interest is necessary to make Denault whole. The Seventh Circuit has suggested that district courts use the prime rate for fixing pre-judgment interest where there is no statutory interest rate, as in ERISA cases. Fritcher, 301 F.3d at 820.
Plaintiff shall include a calculation of prejudgment interest using the prime rate in his petition for attorney's fees, and defendant may address the calculation in its response. The court urges counsel to confer on the calculation of the prejudgment interest to see if the amount can be determined by agreement. The court will enter one final judgment that includes the benefits, attorney fees, and prejudgment interest.
So ordered.