Cook v. Liberty Life Assur. Co. CV-00-408-B 01/15/02

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Kathleen Cook

v. Civil No. 00-408-B Opinion No.

Liberty Life Assurance Company of Boston

MEMORANDUM AND ORDER

Plaintiff Kathleen Cook was employed by Lockheed Sanders,

Inc. ("Sanders"), and was a participant in the Sanders Long Term

Disability Plan ("the Plan") . For nearly three-and-one-half

years. Cook received long-term disability benefits under the

Plan. In October 1998, defendant Liberty Life Assurance Company

of Boston ("Liberty"), the Plan's insurer and administrator,

terminated her benefits. Cook filed an administrative appeal

with Liberty, but Liberty confirmed its decision in May 2000.

Cook subsequently sued Liberty in Hillsborough County Superior

Court, Liberty removed the action to this court on grounds of

Employee Retirement Income Security Act ("ERISA") preemption, see

Metropolitan Life Ins. Co. v. Tavlor,

(1987), and Cook has agreed that I should construe her complaint as a claim

for benefits under ERISA section 502(a)(1)(B),

(a)(1)(B). Although only Liberty has filed a motion for

summary judgment, the parties concur that the lawfulness of

Liberty's termination decision is ripe for disposition on the

administrative record. I agree and, for the reasons that follow,

deny Liberty's motion.

I.

Cook, who has a bachelor's degree in business and a masters

degree in business administration, joined Sanders as a program

control administrator on July 11, 1983. Cook was a Plan

participant and Liberty was the Plan's insurer and administrator

at all relevant times. The group disability income policy

underlying the Plan entitles a participant to benefits only if

she submits "satisfactory proof" that she is disabled. The

policy does not elaborate on the meaning of this phrase except to

say that "[p]roof of continued Disability or Partial Disability,

when applicable, and regular attendance of a Physician must be

given to Liberty within 30 days of the request for the proof,"

and that "[t]he proof must cover, when applicable: (i) the date

- 2 - Disability or Partial Disability started; (ii) the cause of

Disability or Partial Disability; and (iii) the degree of

Disability or Partial Disability." The policy gives Liberty the

right, at its own expense and as often as is reasonably required,

"to have a Covered Person, whose Injury or Sickness is the basis

of a claim, examined by a Physician or vocational expert of its

choice." The policy also states: "Liberty shall possess the

authority, in its sole discretion, to construe the terms of this

policy and to determine benefit eligibility hereunder. Liberty's

decisions regarding construction of the terms of this policy and

benefit eligibility shall be conclusive and binding."

For the first 24 months of coverage, the policy regards a

participant as "disabled" if she is "unable to perform all of the

material and substantial duties of [her] occupation on an Active

Employment basis because of an Injury or Sickness." After 24

months of benefits have been paid, an employee is considered

"disabled" only if she is "unable to perform, with reasonable

continuity, all of the material and substantial duties of [her]

own or any other occupation for which [she] is or becomes

reasonably fitted by training, education, experience, age and

physical and mental capacity."

- 3 - In February 1995, Cook filed a claim for short term

disability benefits under a different employee benefit plan

sponsored by Liberty. The claim form reported that Cook was

suffering from Chronic Fatigue Syndrome ("CFS"), and had not

worked since late fall, 1994. Dr. W. Stewart Blackwood, Cook's

attending physician, attached to the claim form an Attending

Physician's Statement of Disability ("APSD"), which indicated

that he had first seen Cook in April 1994; had been seeing her

monthly; had last seen her on February 3, 1995; and was scheduled

to see her again on March 3, 1995. Dr. Blackwood stated that,

because of her CFS, Cook was at that time totally disabled from

her own or any occupation. He also wrote "Unknown" next to a

boilerplate inquiry as to when Cook should be able to return to

work.

Cook remained disabled throughout the 22 weeks of coverage

provided by the short-term disability policy under which she was

collecting benefits. During that time. Cook continued to see Dr.

Blackwood and also began seeing Dr. Irina Barkan, a biochemist

experienced in treating CFS. The medical evidence reveals that

Cook continued to suffer from CFS; had an elevated Epstein-Barr

Virus ("EBV") titre (at least at times); had asthma, allergies,

- 4 - and a compromised immune system, all of which were aggravated by

her poorly ventilated work environment; and was being treated

with dietary and behavioral modifications, vitamins, and rest.

On April 20, 1995, around the time her short term disability

benefits expired. Cook applied for long-term disability benefits

under the Plan. Cook claimed that she was disabled from her

prior work because of "severe fatigue" and EBV. In support of

her application. Dr. Blackwood gave Cook a Class 5 ("Severe

limitation of functional capacity; incapable of minimum

activity") physical impairment rating. On May 8, 1995, Liberty

approved Cook's application.

From May 1995 to March 1997, Liberty paid Cook long term

disability benefits. Meanwhile, in November 1996, the Social

Security Administration rejected Cook's initial claim for

disability benefits, and Dr. Blackwood informed Liberty that, in

addition to CFS, Cook also suffered from fibromyalgia. In March

1997, Liberty informed Cook that, as of April 4, 1997, she would

need to demonstrate a total disability from any occupation in

order to continue receiving benefits. Liberty contemporaneously

sent letters to D r s . Blackwood and Barkan requesting recent

office notes and diagnostic tests, and that they complete

- 5 - physical capacities and restrictions forms. Dr. Barkan did not

respond, but Dr. Blackwood's physical capacities and restrictions

form, delivered in early April 1997, indicated that Cook was

suffering from CFS, had to avoid working in excess of 40 hours

per week, and had to have a one-hour lunch break and two fifteen

minute breaks per day.1 At around this same time. Dr. Blackwood

completed at least two medical certificates setting forth these

same restrictions.2

On April 24, 1997, Cook informed Liberty that she had

returned to work on April 14, 1997. But on May 6, 1997, Cook

informed Liberty that, as of the previous day. Dr. Blackwood had

pulled her out of work because she had a severe reaction to an

infected tooth and her immune system could not handle the

infection. Liberty subsequently asked Dr. Blackwood to provide

it with an update on Cook's clinical status and work capacity.

Dr. Blackwood responded that Cook was unable to work because of a

2In the three years prior to becoming disabled. Cook regularly worked 50-60 hour weeks, often without breaks.

21he record contains an undated medical certificate, which was received by Liberty on May 8, 1997, wherein Dr. Blackwood authorized Cook to return to work as of April 14, 1997. The record also contains a medical certificate dated March 24, 1997 authorizing Cook to return to work as of April 3, 1997.

- 6 - recurrence of CFS, and provided Liberty with a copy of a May 5,

1997 office note in which he opined that Cook was showing

symptoms of depression. Meanwhile, in May 1997, Liberty learned

that Cook recently had been doing some work as a real estate

agent. The record reflects that, by late June 1997, Cook had

improved, that she believed herself capable of part-time work,

and that Dr. Blackwood concurred so long as Cook did not return

to the same work environment and thus trigger her asthma and

allergies.

On July 2, 1997, Liberty requested information from Bob

Kelliher Realty concerning Cook's employment as a real estate

agent. Kelliher responded that Cook had had one closing and had

earned $175.02, that she was not putting in any desk time, but

that she was doing "occasional open houses, showings, and

[answering] customer phone calls." Liberty and Cook subsequently

had conversations wherein Cook acknowledged that she recently had

been doing part-time work as a real estate agent, that she was

only doing as much work as her body allowed, that she was making

less than 20% of her pre-disability income, and that she was

thinking of doing census work, which would allow her to set her

own hours and schedule.

- 7 - In November 1997, Dr. Blackwood sent Liberty copies of

recent office notes pertaining to Cook, as well as an updated

APSD. In the APSD, Dr. Blackwood opined that Cook then had a

Class 4 ("Moderate limitation of functional capacity; capable of

clerical/administrative activity') physical impairment and a

Class 3 ("able to engage in only limited stressful situations and

engage only in limited interpersonal relations (moderate

limitations)") mental/nervous impairment. Liberty nonetheless

continued to pay Cook benefits.

On June 24, 1998, Cook, with Liberty's assistance, received

a fully favorable disability decision from the Social Security

Administration. In July 1998, Liberty asked Dr. Blackwood for

his office notes and diagnostic tests from December 1997 forward.

Liberty also asked Cook to complete a supplementary statement and

activities questionnaire so as to evaluate her continued

eligibility for benefits. Both complied with Liberty's requests.

In the questionnaire. Cook did not mention her real estate work

in response to a question asking if she had returned to any type

of employment, and replied "Don't know" to a question asking

whether she anticipated a return to work in the future. For

reasons that are not explained in the record. Dr. Blackwood included with his response a copy of the March 24, 1997 medical

certificate authorizing Cook to return to work in April 1997.

On August 18, 1998, Liberty wrote to Dr. Blackwood and asked

whether, based upon his last examination of Cook, Cook's current

restrictions and limitations remained the same as those listed on

the March 24, 1997 medical certificate (a 40 hour work week with

a daily one-hour lunch break and two daily fifteen minute breaks)

he had recently sent to Liberty. Dr. Blackwood wrote back and

answered "yes." Liberty subsequently asked Carol S. Vroman, a

vocational expert, to conduct a vocational disability review

based on Dr. Blackwood's answer to its August 18, 1998 letter.

Unsurprisingly, Vroman concluded, in a report dated October 14,

1998, that there were a host of jobs that a person with Cook's

educational background could perform with the restrictions noted

on the March 24, 1997 certificate. On October 16, 1998, Liberty

wrote Cook and informed her that it was terminating her benefits,

effective October 31, 1998, on the basis of Dr. Blackwood's

response to Liberty's August 18, 1998 letter and Vroman's October

14, 1998 vocational assessment. In that same letter. Liberty

also asked Cook to pay it back $44,731.13 it became entitled to

offset because of Cook's retroactive social security award.

- 9 - On October 2 6 , 1998, Dr. Blackwood wrote to Liberty and explained that his "yes" answer to the question posed in

Liberty's August 18, 1998 letter had been based upon a misunder­

standing :

With reference to the letter you sent on August 18, 1998, requesting an update on Ms. Cook's limitations and physical capacities form. I mistakenly thought your letter was referring to my disability form completed on May 5, 1997 which indicated that she was out of work indefinitely. Subsequent to that, I had written a letter on March 23, 1998 to an Attorney McNeil, indicating that based on my last examination, I did not think that Ms. Cook was medical [sic] able to return to full time activity. The reasons were that she finds regular hours exhausting, also has a difficult time dealing with stress, sitting for long periods of time. She also has fatigue after doing any normal activities and [sic] makes it difficult to see how she can maintain a regular job as she would have to be out of work intermittently to recover and could not sustain the continuity required to do any reasonable jo b .

Because of the updated disability letters and the information extending into 1998, I did not appreciate that your letter was referring back to my note of March, 1997 which was merely a trial base return to work which as my notes were [sic] clearly not successful.

At this time, it is my opinion that Ms. Cook is not able to perform with any reasonable continuity the material and potential duties of her job or any similar occupation for which her training and experience would have otherwise been reasonable for her. I apologize if my prior note was unclear but as you can understand there have [sic] been a lot of paperwork for this

- 10 - particular lady and things have progressed along [sic] way since March, 1997.

On November 5, 1998, Dr. Blackwood wrote a follow-up letter

opining that Cook also was suffering from a "totally disabling"

severe and chronic asthma. On this same date. Cook also filed

with Liberty an internal appeal challenging the termination

decision. On April 12, 1999, Liberty denied Cook's appeal,

stating that "the additional medical information submitted by Dr.

Blackwood . . . does not support limitations that would render

you incapable of performing the material and substantial duties

of any occupation." The denial letter also referenced Vroman's

October 14, 1998 vocational assessment by way of explanation.

Cook subsequently retained counsel, who wrote Liberty and

requested an independent review of the termination decision.

Several letters were exchanged, but by letter dated May 22, 2000,

Liberty stood by its termination decision. Again, Liberty

referenced Vroman's October 14, 1998 vocational assessment in

explaining its decision to confirm the termination of Cook's

benefits. This proceeding ensued.

- 11 - II.

Cook's complaint, which I construe as a claim for benefits

pursuant to ERISA section 502(a) (1) (B),

(a) (1)

(B), asserts, inter alia, an entitlement to benefits from October

31, 1998 to the present. The primary thrust of Cook's pleading

is that Liberty acted inequitably in basing its decision to

terminate her benefits on Dr. Blackwood's mistaken response to

Liberty's August 18, 1998 letter, and the vocational assessment

predicated upon that mistaken response. As set forth above, only

Liberty has moved for summary judgment, but the parties agree,

correctly, that the lawfulness of Liberty's decision to terminate

Cook's benefits is now ripe for review.

Because the Plan reserves to Liberty the discretion to

interpret and apply its terms, I must be circumspect in reviewing

Liberty's decision to terminate Cook's benefits. See, e.g.,

Pari-Fasano v. ITT Hartford Life and Acc. Ins. Co.,

(1st Cir. 2000) (noting that, in the situation just

described, deference to the plan administrator's decisions is

required under Firestone Tire & Rubber Co. v. Bruch,

(1989)). The First Circuit has variously described the

applicable standard of review in a case such as this as one

- 12 - requiring deference unless the decision was "arbitrary and

capricious," "unreasonable," and/or an "abuse of discretion," see

i d . at 418-19 (parsing Doyle v. Paul Revere Life Ins. Co.,

(1st Cir. 1998) and Doe v. Travelers Ins. Co . ,

(1st Cir. 1999)). But the Circuit has distanced itself from

previous implications that there may be substantive differences

between and among these standards. See i d .

In any event, it is apparent that Liberty's termination

decision cannot stand if, in reaching it. Liberty ignored a

material factor deserving significant weight, relied upon an

improper factor, or seriously erred in weighing the proper

factors. See, e.g., I.P. Lund Trading ApS v. Kohler Co.,

(1st Cir. 1998) (describing the ways in which an

abuse of discretion can occur).

III.

In its summary judgment motion. Liberty argues that I must

enter judgment in its favor if it reasonably determined that,

after October 31, 1998, Cook did not provide it with "sufficient

proof that she continued to be incapable of performing the

material and substantial duties of any occupation for which she

- 13 - was reasonably fitted." Motion for Summary Judgment at 24.

However, Liberty did not terminate Cook's benefits on this basis.

Rather, in each letter explaining its termination decision.

Liberty noted that it was Dr. Blackwood's affirmative answer to

its August 18, 1998 letter (which asked Dr. Blackwood if he

regarded as still applicable the limitations set forth on his

March 24, 1997 medical certificate), and Vroman's October 14,

1998 vocational assessment (which was entirely premised on the

limitations set forth in the March 24, 1997 medical certificate),

which grounded its decision to terminate benefits.

The obvious flaw in Liberty's reasoning is that it overlooks

the fact that Dr. Blackwood informed Liberty shortly after it

terminated Cook's benefits that it could not rely on either his

March 24, 1997 medical certificate or his response to Liberty's

August 18, 1998 letter because neither document reflected his

views concerning Cook's ability to work. Liberty cannot simply

ignore Dr. Blackwood's assertion that he erred in his response to

the August 18, 1998 letter and continue to base its termination

decision on his allegedly erroneous response. Moreover, Liberty

has failed to point to any other evidence to contradict the

medical evidence that Cook produced to support her disability

- 14 - claim. Under these circumstances. Liberty's decision to

terminate Cook's benefits based on Dr. Blackwood's response to

the August 18, 1998 letter was an abuse of its discretion.

IV.

As Liberty suggests, it may well have had adequate grounds

for it to terminate Cook's benefits on or before October 31,

1998. I have no occasion here, however, to review decisions that

Liberty never made. Accordingly, I deny Liberty's motion for

summary judgment [document no. 8]. On or before February 7,

2002, the parties shall file either a proposed final judgment

setting forth the specific benefits owed Cook under the Plan, or

a joint motion for a status conference detailing the issues

precluding the entry of final judgment in this matter.

SO ORDERED.

Paul Barbadoro Chief Judge

January 15, 2001

cc: Ronald E. Cook, Esq. William D. Randolph, Esq.

- 15 -