Ladd v. ITT Corp.

• Decision Date: 22 June 1998
• Docket Number: No. 97-4138,97-4138
• Citation: 148 F.3d 753
• Parties: 22 Employee Benefits Cas. 1330 Rebecca LADD, Plaintiff-Appellant, v. ITT CORPORATION and Metropolitan Life Insurance Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 753

148 F.3d 753

22 Employee Benefits Cas. 1330

Rebecca LADD, Plaintiff-Appellant, v. ITT CORPORATION and Metropolitan Life Insurance Company Defendants-Appellees.

No. 97-4138.

United States Court of Appeals Seventh Circuit.

Argued May 21, 1998.

Decided June 22, 1998.

Mark D. DeBofsky (argued), DeBofsky & DeBofsky, Chicago, IL, for Plaintiff-Appellant.

Thomas J. Piskorski, Joshua M. Henderson (argued), Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for Defendants-Appellees.

Before POSNER, Chief Judge, and COFFEY and EVANS, Circuit Judges.

POSNER, Chief Judge.

This is an ERISA suit to overturn the denial of Rebecca Ladd's claim for disability benefits under the employee welfare plan sponsored by her employer, ITT, and administered by MetLife. Since the plan authorized the plan administrator to use its discretion in making claims determinations, our role is the limited one of determining whether MetLife abused its discretion--acted unreasonably--or, as the cases say (but all these are different ways of saying the same thing), exercised its discretion in an "arbitrary and capricious" manner. E.g., Hightshue v. AIG Life Ins. Co., 135 F.3d 1144, 1147 (7th Cir.1998); Brehmer v. Inland Steel Industries Pension Plan, 114 F.3d 656, 660 (7th Cir.1997); Paramore v. Delta Air Lines, Inc., 129 F.3d 1446, 1450-51 (11th Cir.1997). If, however, the administrator has a conflict of interest, then, though the standard of review is nominally the same, the judicial inquiry is more searching. E.g., id.; Hightshue v. AIG Life Ins. Co., supra, 135 F.3d at 1147. ITT's plan is financed entirely by payroll deductions from the wages of the employees enrolled in it. MetLife functions only as a claims administrator, and not as an insurer. From these circumstances, it is tempting to infer that neither defendant has a conflict of interest in administering the plan--that if Ladd gets benefits, there will be a little less for other employees, and therefore no skin off ITT's hide. But this does not seem quite correct, since the plan summary given to employees does not condition benefits on the plan's having sufficient employee-contributed funds to cover them. The employee's entitlement is stated in absolute terms, implying that ITT would have to dig into its own pocket if claims exceeded contributions. This possibility might make MetLife inclined to resolve close cases against the claimant. But this issue has not been explored by the parties; we have no idea how large the plan's funds are or what provision has been made for the contingency of an excess of claims over funds. So we shall assume that neither defendant has any stake in MetLife's decision to deny Ladd the benefits she sought and therefore that the denial is entitled to undiluted deference by us--undiluted, that is, by concerns with conflicts of interest, but not unlimited. If without strain on our part the decision can fairly be described as arbitrary, we must reverse.

In 1993, Ladd, a 38-year-old customer service representative for ITT, sustained nerve damage to her neck and both wrists when a shelving unit fell on her at work. She sought total-disability benefits under the employee benefit plan, which required that she be "unable to engage in any and every duty pertaining to any occupation or employment for wage or profit for which you are qualified, or become reasonably qualified by training, education or experience." The wording is different from that of the statute governing social security disability benefits, which defines disability (so far as relevant here) as an "inability to engage in any substantial gainful activity." 42 U.S.C. § 423(d)(1)(A). But MetLife was unable to articulate any difference in actual meaning until the oral argument of the appeal, when its lawyer said that the reference to "any and every duty" means that an ITT employee is not disabled unless he or she can't even do part-time work, whereas (he thought) under the Social Security Act a worker who cannot work full time is deemed totally disabled. That is not what the Act says. As long as the worker can engage in "substantial gainful activity," he is not disabled even if the only work that he is capable of doing is only part time. E.g., Brewer v. Chater, 103 F.3d 1384, 1391-92 (7th Cir.1997); 20 C.F.R. § 404.1572(a). Of course, the work must not be so meager as not to be substantial and gainful. See 20 C.F.R. §§ 404.1573(e), 404.1574(a), (b). But the same, it turns out, is true under ITT's disability plan. For MetLife's lawyer quickly retreated from his effort to distinguish the plan from the social security disability law when asked whether a worker who could work ten minutes a day was thereby disentitled to total-disability benefits under the plan; he said no. Anyway his attempt comes much too late in the litigation to be considered. We shall proceed on the assumption that "total disability" under the plan means, at least insofar as Ladd's claim is concerned, the same thing as under the social security disability program. Helms v. Monsanto Co., 728 F.2d 1416, 1420-21 (11th Cir.1984); see also Torix v. Ball Corp., 862 F.2d 1428, 1431 (10th Cir.1988); Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 695 n. 11 (7th Cir.1992).

As a result of the accident, Ladd came under the care of an orthopedic surgeon named Freitag, who diagnosed significant damage to Ladd's spinal disks, causing severe pain, and carpal tunnel syndrome in both wrists, also causing severe pain and limiting the use of both of her hands and both wrists. Freitag pronounced her totally disabled from gainful employment. MetLife had Ladd examined in 1994 by a Dr. Holmes, who concurred in Freitag's evaluation (though Holmes thought that she might be able to work four hours a day, provided her work would not require her to turn her head a lot), as did another physician who examined her years later, Dr. Kurzydlowski. Freitag continued to treat and examine Ladd throughout the period relevant to this suit.

MetLife encouraged Ladd to apply for social security disability benefits, and even provided her with legal representation to assist her with the application. After a hearing, an administrative law judge found that Ladd was indeed totally disabled,...