In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15‐1794
CAROLE CHENEY,
Plaintiff‐Appellee,
v.
STANDARD INSURANCE COMPANY and LONG TERM DISABILITY
INSURANCE,
Defendants‐Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 13 C 4269 — Susan E. Cox, Magistrate Judge.
____________________
ARGUED JANUARY 20, 2016 — DECIDED JULY 27, 2016
____________________
Before WOOD, Chief Judge, and MANION and ROVNER, Cir‐
cuit Judges.
WOOD, Chief Judge. Carole Cheney was an attorney at Kirk‐
land & Ellis, LLP (Kirkland) for approximately 20 years. She
became a partner at the firm in 1997. She suffered from a spi‐
nal disease that first led her to seek accommodations in 1994,
and ultimately resulted in a three‐level anterior cervical
2 No. 15‐1794
discectomy and fusion and removal of her C5 vertebra in
2012.
Although Cheney had managed to work for many years
despite her condition, by 2012 she had had enough, and so she
submitted a claim for long‐term disability benefits in July
2012. Standard Insurance Company (“Standard”)1, Kirkland’s
insurer, denied her claim based on a finding that her coverage
had ended in March of 2012, and that she was able at least
through March to perform her job. (Although Standard’s ini‐
tial denial used the March date, it never made that argument
to the court and was thus not judicially estopped from argu‐
ing later, as it did, that coverage ended in December 2011.)
After Standard refused to reconsider its position, Cheney
sued in federal district court, raising claims under the Em‐
ployee Retirement Income Security Act (ERISA), 29 U.S.C. §
1132. The parties consented to the jurisdiction of the magis‐
trate judge, 28 U.S.C. § 636(c), and agreed to a trial based on
the stipulated paper record. The court found in favor of
Cheney, and Standard appeals. Because the district court
made unsupported factual findings and misinterpreted the
governing documents, we vacate its decision and remand for
a new trial.
I
A
Cheney began working at Kirkland in 1991. In 1994, she
requested ergonomic accommodations to mitigate neck and
1 The arguments focus on Standard, which administered the Long
Term Disability Plan. No one has argued that there is any legal difference
between the two, and we refer to the defendants throughout as “Stand‐
ard.”
No. 15‐1794 3
lower back pain. Kirkland obliged. In 2003, she received per‐
mission to work mostly from home. She also began attending
physical therapy and saw multiple orthopedic and chiroprac‐
tic doctors. She was diagnosed in 2007 with degenerative dis‐
ease of her cervical spine. For the first four months of 2010,
Cheney’s pay was based on a 21‐hour work week. In May of
2010, Kirkland sent her a letter confirming that she would be
paid hourly, with no minimum required hours, until Febru‐
ary 2011. But for the remainder of 2010, she did almost no le‐
gal work for the firm. Instead, from May to November 2010,
Cheney campaigned for election as the DuPage County Board
Chairman. Kirkland paid her nothing from May to October;
in November, she worked seven hours; in December, she
worked 17. In early 2011 Cheney returned to work at approx‐
imately 24 hours per week. But the political bug bit again, and
so in September 2011 she announced her campaign for the Il‐
linois House of Representatives. Her last hours were logged
on December 19, 2011. She lost the primary on March 20, 2012.
In the meantime, Cheney’s condition was deteriorating
gradually. Scans taken in November and December 2011
showed degeneration and mild to moderate cervical and cen‐
tral spinal stenosis. Cheney’s physician, Dr. Staci Ahrens, re‐
ported that Cheney suffered a fall that exacerbated her pain
in early October 2011. On October 25, Cheney indicated that
she was feeling better. On November 15, Dr. Ahrens noted
that Cheney “reports sitting and using the computer have
been extremely bothersome … . She has experienced this issue
for years, so she is extremely frustrated, as it does inhibit her
ability to perform her job and disrupts her every ADL [activ‐
ity of daily life] once exacerbated.ʺ On November 18, Dr.
Ahrens noted that Cheney had to discontinue doing paper‐
4 No. 15‐1794
work because of her pain. On December 19, Dr. Ahrens re‐
ported that Cheney was “doing better and attempting to take
frequent breaks” but that her neck pain was aggravated by
carrying Christmas lights.
In November 2011, Cheney initiated a conversation with
Kirkland about taking a six‐month leave of absence. The firm
approved a leave, which was to begin on January 3, 2012, and
last until July of 2012. Her last day of work, however, was De‐
cember 19, 2011. We will have more to say about the status of
the two‐week period between December 19 and January 3; it
is enough for now to say that it is unclear.
On April 17, 2012, Cheney met with a neurosurgeon, who
advised her to complete a twelve‐week intensive physical
therapy program and receive cervical epidural injection ther‐
apy. After the twelve‐week program failed to improve
Cheney’s condition, the neurosurgeon recommended cervical
spinal fusion surgery, which Cheney received on August 27.
Cheney submitted her claim for long‐term disability benefits
to Standard on July 17, just before the surgery.
B
The long‐term disability policy Kirkland offered to its law‐
yers through Standard covers the “Member,” a term defined
by the policy’s “Becoming Insured” and “General Policy In‐
formation” sections. Those sections describe “the Member” as
a “regular employee” who is “Actively at Work at least 60%
of the Employer’s full time schedule” or “A partner of the Em‐
ployer who is Actively At Work for the Employer.” The policy
defines “Active Work and Actively At Work” as “performing
with reasonable continuity the Material Duties of your Own
Occupation at your Employer’s usual place of business.” The
No. 15‐1794 5
policy also states that “Actively At Work [includes] regularly
scheduled days off, holidays, or vacation days, so long as the
person is capable of Active Work on those days.”
An employee must complete an “eligibility waiting pe‐
riod” before she is entitled to benefits. The policy states that
an employee becomes eligible on the later of the Group Policy
Effective Date—in this case January 1, 2008—or the date the
employee becomes a Member. Once an employee is covered,
if she “become[s] disabled while insured under the Group
Policy, [Standard] will pay [long‐term disability] Benefits” af‐
ter receiving satisfactory proof of loss.
The policy’s termination provision reads, in relevant part:
Your insurance ends automatically on the earliest of:
1. The date the last period ends for which a premium con‐
tribution was made for your insurance.
2. The date the Group Policy terminates.
3. The date your employment terminates.
4. The day you cease to be a Member. However, your in‐
surance will be continued during the following periods
when you are absent from Active Work, unless it ends un‐
der any of the above.
a. During the first 90 days of a temporary or indef‐
inite administrative or involuntary leave of absence
or sick leave, provided your Employer is paying
you at least the same Predisability Earnings paid to
you immediately before you ceased to be a Mem‐
ber. …
b. …
c. During any other temporary leave of absence ap‐
6 No. 15‐1794
proved by your Employer in advance and in writ‐
ing and scheduled to last 9 months or less. A period
of Disability is not a leave of absence.
d. During the Benefit Waiting Period.
Finally, the policy defines disability as follows: “You are
Disabled from your Own Occupation if, as a result of Physical
Disease, Injury, Pregnancy or Mental Disorder, you are una‐
ble to perform with reasonable continuity the Material Duties
of your Own Occupation.” “Own Occupation” is defined as
employment “of the same general character as the occupation
you are regularly performing for your Employer when Disa‐
bility begins.” The policy also states that if your Own Occu‐
pation necessitates a professional or occupational license, the
scope of your Own Occupation is “as broad as the scope of
your license.” “Material Duties” are defined as “the essential
tasks, functions and operations, and the skills, abilities,
knowledge, training and experience, generally required by
employers from those engaged in a particular occupation that
cannot be reasonably modified or omitted.”
The policy establishes a Benefit Waiting Period of 180
days, meaning that a Member must remain disabled from
working for that time in order to qualify for benefits. Benefits
begin after 180 days of disability. Predisability Earnings are
calculated for firm partners based on the prior tax year.
C
The district court found that Cheney was covered under
the policy through September 2012, nine months after she be‐
gan her temporary leave, even though her leave was to last
only six months. The court considered it “reasonable to as‐
sume” that during the period between December 19 and
No. 15‐1794 7
when Cheney’s leave began on January 3rd, she was either
using sick days or taking vacation days that may not have
been officially documented. Because a Member is considered
“Actively at Work” while taking holiday or vacation days, so
long as she is capable of work at that time, the court con‐
cluded that Cheney’s coverage did not end on December 19,
2011, despite the language in paragraph 3 of the Termination
provision. The court also ruled that the leave commencing on
January 3, 2012, was not a “period of Disability,” but instead
was a regular temporary leave of absence scheduled to last
nine months or less. Had it been a period of disability, it
would have triggered the end of Cheney’s coverage under
paragraph 4.c. With those hurdles cleared, the court deter‐
mined that Cheney was eligible for long‐term disability ben‐
efits because her condition prevented her from fulfilling the
obligations of a litigation partner.
II
We review challenges to ERISA benefit determinations de
novo where, as here, the benefit plan does not grant discretion‐
ary authority to the plan fiduciary. Firestone Tire & Rubber Co.
v. Bruch, 489 U.S. 101, 115 (1989). We evaluate the question
whether Policy terms are ambiguous de novo. Aeroground, Inc.
v. CenterPoint Props. Trust, 738 F.3d 810, 813 (7th Cir. 2013).
Ambiguous contract terms are construed in favor of the in‐
sured. Santaella v. Metropolitan Life Ins. Co., 123 F.3d 456, 461
(7th Cir. 1997). We review factual findings by the district court
for clear error. Ray v. Clements, 700 F.3d 993, 1012–13 (7th Cir.
2012). Finally, we apply federal common law to interpret the
policy terms and “draw[] on general principles of contract in‐
8 No. 15‐1794
terpretation, at least to the extent that those principles are con‐
sistent with ERISA.” Schultz v. Aviall, Inc. Long Term Disability
Plan, 670 F.3d 834, 838 (7th Cir. 2012).
Standard argues that the district court erred when it found
that the policy covered Cheney past December 19 and in de‐
fining her occupation too narrowly. Additionally, Standard
takes issue with the district court’s calculation of Cheney’s
Predisability Earnings. Cheney responds that Standard’s ap‐
peal cannot go forward, because it did not file a motion under
Federal Rule of Civil Procedure 52(b) requesting more specific
findings of fact. There is no such requirement for appeal, how‐
ever, and so we are free to proceed to the merits.
A
To be entitled to benefits, Cheney must demonstrate that
she was covered by the policy when she became disabled. Alt‐
hough Cheney’s last work hours of any kind (these happened
to be billable) were recorded on December 19, the fact that she
was on payroll until January 3, 2012, and her leave of absence
did not expire until July 2012, muddies the answer to the
question of her last date of coverage.
The use of the term “leave” is normally reserved for ab‐
sences taken by existing employees, and so one might think
that it implies that Cheney was an employee at least until July
2012. But the policy did not condition coverage exclusively on
a person’s status as an employee. Instead, it listed at least two
different bases for the end of coverage: the termination of em‐
ployment (paragraph 3); and the date the employee ceases to
be a Member (paragraph 4). Being a Member requires “Active
Work.” This indicates that there are some people who are no
longer working actively (as defined in the policy) but whose
No. 15‐1794 9
employment has not yet been terminated, who have lost cov‐
erage. If employment termination were always required, par‐
agraph 4 would be empty. Applied here, even if Cheney did
not lose her coverage under paragraph 3 (because she was still
being paid until her leave expired), she was no longer en‐
gaged in “Active Work” as of December 20, 2011, and thus
had to qualify under one of the exceptions in the subparts of
paragraph 4.
The district court’s first problematic ruling was its deter‐
mination that Cheney’s last day of “Active Work” was Janu‐
ary 2, 2012, not December 19, 2011. The court picked January
2 because that was the start of the “temporary leave of absence
approved” by Kirkland. The district court reached that con‐
clusion by noting that “[i]t [would be] a stretch to claim that
plaintiff, a lawyer with Kirkland for twenty years, immedi‐
ately ceased being a ‘Member’ two weeks before her sched‐
uled leave of absence simply because this is the date she indi‐
cated as her last day of work prior to her leave.” It acknowl‐
edged that Cheney had not explained the two‐week gap until
her motion for entry of judgment, but found that while no ev‐
idence supported the claim that she was using vacation and
sick days, “there [was] nothing in the record to dispute it.”
There are several problems with the court’s conclusion
that Cheney was using vacation or sick days to fill the gap.
We do not, however, rely on any alleged admission based on
Cheney’s statement in the complaint that she “successfully
held the position of Partner Attorney specializing in appellate
litigation at Kirkland & Ellis LLP where she worked until De‐
cember 19, 2011, at which point she received approval for a
previously sought six‐month leave of absence.” Stating that
she “worked until December 19” is not the same as stating
10 No. 15‐1794
that her employment terminated on that date or that she
ceased to be a Member on that date. But there are ample ad‐
ditional reasons to set aside this part of the district court’s de‐
cision.
First, the court should not have resolved doubts or gaps in
the evidence in Cheney’s favor, because she had the burden
to demonstrate policy coverage. See Ruttenberg v. U.S. Life Ins.
Co., 413 F.3d 652, 663 (7th Cir. 2005) (employee seeking to en‐
force benefits bears burden of demonstrating entitlement).
Second, the policy states that for purposes of the definition
of Member, Active Work includes “regularly scheduled days
off, holidays, or vacation days, so long as the person is capable of
Active Work on those days.” (Emphasis added.) This clause sug‐
gests that if someone is on vacation or sick time, but unable to
work because of a disability, he is not “Actively at Work.” An
employee may remain covered, even if not “Actively at
Work,” for the first 90 days of administrative, involuntary, or
sick leave; or during a scheduled non‐disability pre‐approved
temporary leave. Because Cheney claims disability from De‐
cember 20 onward, she could not have been “capable of Ac‐
tive Work” between December 20 and her January leave. Nei‐
ther did that two‐week period count as the first 90 days of a
leave or a 9‐month or less scheduled leave. Had Cheney’s
scheduled leave begun on December 20 instead of January
3rd, perhaps she would have a better argument. But it did not,
and the district court erred in finding that her coverage ex‐
tended based on the stipulated record.
The district court opined that the “Active Work” language
applied only to when the insurance becomes effective, not
when it ends. But no such distinction can be found in the plain
language of paragraph 4, which states that coverage ends
No. 15‐1794 11
when a person ceases to be a Member, unless she is absent
from Active Work for one of the enumerated reasons.
Even if, counterfactually, Cheney’s leave had begun on
December 20 and there were no two‐week gap to deal with,
the problem of her leave remains. The policy contains no ex‐
ception to termination of coverage for a temporary leave for
disability. If Cheney was covered until the day her leave be‐
gan, she still would not be covered during her leave if it was
a disability leave. The district court worked around this diffi‐
culty by finding that because Cheney did not request her
leave “under the auspices of ‘sick leave,’” the leave did not
formally constitute “sick leave” and did not end coverage. It
did not grapple with the policy’s explicit carve‐out for disa‐
bility leave. Neither did Cheney, in her brief in this court, ad‐
dress whether her leave of absence was “a period of Disabil‐
ity.” She has put herself in a bind by simultaneously claiming
disability and that the resulting leave was not a disability
leave. The policy may offer poor coverage to people with a
chronic, gradually developing disability, but the propriety of
that failing is not the question before us. Nothing in ERISA
required Standard or Kirkland to write a different policy—a
fact that Cheney appears to acknowledge.
Cheney also relies on a case where we held that there is no
inherent incompatibility between working full time and being
disabled from working full time. Hawkins v. First Union, 326
F.3d 914, 918 (7th Cir. 2003). But Standard did not deny
Cheney’s claim based on her working while claiming disabil‐
ity. Cheney was not working at all after December 19, and so
Hawkins is inapposite.
12 No. 15‐1794
The district court impermissibly stretched Cheney’s policy
coverage by ignoring certain provisions and making conclu‐
sions of fact without supporting evidence. Standard asks for
a new trial, which is fully warranted on this ground.
B
The district court made no explicit finding about the onset
date of Cheney’s long‐term disability. Instead, it inferred that
her disability began sometime between December 19, 2011,
and September 3, 2012, and lasted for at least the 180‐day ben‐
efit‐waiting period. Given the court’s misinterpretation of the
coverage provisions, the specific date of disability may be cru‐
cial. If Cheney became disabled from performing her job on
December 19 (i.e., while she was still working), it is possible
that she would be entitled to benefits under the terms of the
policy. If she became disabled later, the stipulated record be‐
fore us indicates that she would not be so entitled, because
her coverage would have ended.
The district court did not nail down exactly when Cheney
met the definition of disability. It also asked the wrong ques‐
tion, namely, whether she was capable of working as a litiga‐
tion partner in a big law firm, stating that “[w]hether plaintiff
can find other, less demanding, work as a lawyer is not the
question.” But the court was wrong: that was the question un‐
der the policy. It explicitly states that one’s occupation, if it
requires a license, is “as broad as the scope of [the] license.”
Because the practice of law requires a license, the issue is
whether Cheney can find any work—in the same specialty or
another, or generally—as a lawyer. A new trial is also neces‐
sary on this point.
No. 15‐1794 13
The court also erred by finding that an inability to per‐
form one essential job task is sufficient for entitlement to ben‐
efits. It relied on our holding in McFarland v. Gen. Am. Ins. Co.,
149 F.3d 583 (7th Cir. 1998), but that case did not go so far. In
McFarland, we found unambiguous an insurance contract that
defined “occupational disability” as “[inability] to perform
the material and substantial duties of [one’s] regular occupa‐
tion.” Id. at 585, 587. Under that clause, a person has a total
disability “[w]hen the insured cannot perform a sufficient
number of his material and substantial duties and is therefore
precluded from continuing the employment he undertook be‐
fore the disability.” Id. at 587. We explicitly rejected the notion
that being unable to perform one task is always sufficient for
total disability, unless that task is essential to performing the
job, as in the case of a shortstop unable to throw or a barber
who lost a hand. Id. at 588.
The inability to perform a single material job task does not
demonstrate disability within the meaning of this policy.
Nothing in the record supported the idea that the act of sitting
at a computer or in court is so essential to being a lawyer that
there is no way to be a lawyer without performing it. It was
not even clear whether Cheney could instead have stood at a
computer or in the courtroom to mitigate her pain. The court
did briefly note that Cheney had already tried switching from
sitting to standing and that this had not helped. But the
court’s treatment was cursory and not supported by evidence
from Cheney’s doctors.
Because the district court failed (1) to find when Cheney
became disabled, (2) to use as a basis of comparison all work
that someone licensed to practice law in Illinois may perform,
14 No. 15‐1794
and (3) to analyze the medical evidence in the proper light, a
new trial is necessary on these bases as well.
C
Standard also takes issue with the district court’s calcula‐
tion of Cheney’s Predisability Earnings. The pertinent lan‐
guage in the policy for this point is as follows:
Your Predisability Earnings will be based on
your earnings in effect on your last full day of
Active Work. However, if you are a Partner,
your Predisability Earnings will be based on
your prior tax year. Any subsequent change in
your earnings after that last day of Active Work
will not affect your Predisability Earnings.
Because Cheney took significant time off in 2010, a “prior
tax year” of 2010 would result in much lower benefits than a
prior tax year of 2011. The district court asked for additional
briefing on calculating Predisability Earnings. The parties
agreed, and the court found, the relevant date for determining
the “prior tax year” to be the date on which Cheney ceased
“Active Work.” Although Cheney at times listed her last day
of work as December 31, 2011, or December 19, 2011, the dis‐
trict court concluded nonetheless that she was “in ‘Active
Work’ status” until her leave began on January 3, 2012. That
finding permitted the use of 2011 as the reference year. Along
the way, the court found the term “Active Work” to be am‐
biguous, allowing it to implement an interpretation in
Cheney’s favor. Ruttenberg, 413 F.3d at 665–66.
Once again, we must disagree with the district court’s
reading of the policy. The term “Active Work” is not ambigu‐
No. 15‐1794 15
ous. It means that an employee is either engaged in perform‐
ing the material duties of their job, or on regular vacation but
capable of performing those duties. The district court made
the same mistakes interpreting “Active Work” here as it did
in extending Cheney’s coverage date. Either Cheney was dis‐
abled as of December 20, 2011 (the day after her last work
day), and not capable of “Active Work” between December
20 and January 3, meaning that the “prior year” for earnings
purposes would be 2010 (a year in which Cheney worked
only a few months); or she was on regularly scheduled vaca‐
tion and capable of “Active Work” from December 20 to Jan‐
uary 3, 2012, but not yet disabled. The latter interpretation, at
this point, is not one that Cheney’s own pleadings support,
given her consistent claim of December 20 as the date of the
beginning of her disability.
The court also thought that Cheney’s “reasonable expecta‐
tions” of coverage were relevant and appropriate to consider,
in light of ERISA’s purposes. Ruttenberg, 413 F.3d at 668 n.19
(citing Second, Fourth, Sixth, and Ninth Circuit precedent).
No one disputes that “ERISA maintains the basic goal of ‘pro‐
tecting employees’ justified expectations of receiving the ben‐
efits their employers promise them.’” Young v. Verizonʹs Bell
Atl. Cash Balance Plan, 615 F.3d 808, 819 (7th Cir. 2010) (quot‐
ing Cent. Laborersʹ Pension Fund v. Heinz, 541 U.S. 739, 743
(2004)) (allowing reformation of plan in favor of the plan be‐
cause scrivener’s error did not actually lead employees to ex‐
pect greater benefits). But the reasonable‐expectation doctrine
is related to actual reliance by the employee. We can find no
evidence here from which the district court could have con‐
cluded that Cheney had an expectation, let alone relied on an
expectation, of receiving disability benefits based on her 2010
earnings.
16 No. 15‐1794
We do note, however, that where a person was a partner
for only part of her prior tax year, Predisability Earnings un‐
der the policy are calculated based only on months during
which she was a partner. It may be possible to argue—alt‐
hough the policy does not address the proper calculation of
benefits from a prior tax year in which the employee had a
substantial period of unpaid leave—that the policy would ap‐
ply in the same manner, calculating earnings only from the
months during which the person was actually being paid. Be‐
cause Cheney was a non‐equity partner, she received no in‐
come at all during her 2010 leave, which began in May of that
year. This principle would enable her to exclude the months
of leave and calculate a more representative monthly pay.
That point, however, can be taken up on remand. All we
can say at this juncture is that the district court’s calculation
of Predisability Earnings based on the year 2011 is not tenable.
Should the court decide after a new trial that Cheney is eligi‐
ble for long‐term disability benefits, it will need to take a fresh
look at Cheney’s Predisability Earnings in accordance with
the principles we have discussed here.
III
Because the district court erred in interpreting the policy
and made factual findings unsupported by the record evi‐
dence, we VACATE the district court’s judgment and REMAND
for proceedings consistent with this opinion.