In a very interesting recent ruling from the U.S. District Court for the Northern District of Illinois, Eastern Division, the court wrestled with the question of the meaning of the term "total disability." In LeDonne v. AXA Equitable Life Ins.Co., 2009 U.S.Dist.LEXIS 103054 (N.D.Ill. Nov. 2), the court revisited an issue the same judge, Marvin E. Aspen, had faced more than 20 years ago in the case of Rahman v. Paul Revere, 684 F.Supp. 192 (N.D.Ill. 1988). Dr. Rahman, an emergency room cardiologist, claimed an entitlement to monthly disability payments under a policy that paid benefits if he was unable to perform the important duties of his regular occupation. He asserted that due to a leg injury that prevented him from being able to run to patients in the event of an emergency, he was unable to perform his regular occupation even though he remained capable of practicing as a cardiologist in all other respects. The court found the doctor's inability to perform that key duty entitled him to benefits.

In LeDonne, the owner of a Chicago hardware store, suffered injuries to his pelvis in a motorcycle accident. Although he was able to return to work after a lengthy rehabilitation period, LeDonne was unable to perform many of his prior job duties, even though he continued to review mail, do some accounting work, talk to customers and supervise employees. Based on LeDonne's ability to perform those duties, the insurer ceased paying disability benefits. LeDonne sued after his pre-litigation efforts failed to convince the insurer to reinstate benefits.

The court analyzed the issues and found that to prove total disability LeDonne had to show that he was unable to perform the important duties of his pre-injury occupation and that he was not engaged in any other gainful occupation. Both parties relied on McFarland v. General American Life Ins. Co., 149 F.3d 583 (7th Cir. 1998) ("McFarland I") and McFarland v. General American Life Ins. Co., 210 F.3d 375, 2000 WL 125746 (7th Cir. Jan. 21, 2000) ("McFarland II") in analyzing the policy. Under those rulings, the insured must experience either a qualitative or quantitative reduction in capacity that would show he was no longer performing his prior occupation. McFarland defined those terms:

"A qualitative reduction occurs when the insured loses the ability to perform only one of several essential duties, but the unperformable duty is so essential to the insured's occupation that not performing it prevents the insured from continuing in the occupation. Id. A qualitative reduction could cause total disability "even if, in percentage terms, the disability affected an essential duty that comprised, for example, only 5% of the person's overall duties." Id. As an example, the court in McFarland I refers to a baseball shortstop who loses the ability to throw. Although he can still run, catch, and hit, his inability to perform the essential task of throwing renders him incapable of continuing to be a shortstop. Id. at 587-88.

"In contrast, a quantitative reduction occurs when an injury does not "physically prevent an employee from performing any given task, but the injury instead renders the person unable to perform enough of the tasks or to perform for a long enough period to continue working at his regular occupation." Id. at 588. For example, a person who is still able to perform each important duty but "is reduced perhaps to 25% of the prior output," could be considered unable to perform the essential duties of an occupation. Id."

Applying the concept of both qualitative and quantitative disability to the case, the court found LeDonne performed a variety of different job duties falling into four main categories: management, sales, paperwork, and receiving. The court determined that LeDonne's injuries caused both qualitative and quantitative reductions in capacity. Specifically, LeDonne could no longer unload deliveries and stock shelves. Quantitatively, he could not stand or sit continuously, which reduced his ability to perform customer service and supervision of employees. Citing a vocational report the plaintiff provided, the court thus concluded that a jury could find LeDonne was no longer able to function as an owner-operator of the hardware store. On the other hand, since LeDonne continued to set prices, keep books and records, review mail, and continue to serve customers and supervise employees, albeit in a reduced capacity, the court found a jury could conclude that he could continue to function as an owner-operator. Hence, the court found summary judgment inappropriate.

Because he remained employed and was earning the same salary as before his injury, the insurer alternatively maintained that LeDonne was ineligible for benefits because he was engaged in gainful employment. The court disagreed, finding that AXA could not establish LeDonne was engaged in other gainful employment. Without a policy definition of "gainful employment," the court made the crucial finding that owner compensation is not necessarily the same as gainful employment. The court cited the example of a shareholder who collects dividends as an owner but is not gainfully employed in the business in which equity is held. The court found it to be "an open question as to where after January 2003 LeDonne fell on the spectrum between the passive shareholder and the active owner-operator." The court also pointed out the insurer had acted inconsistently since it paid LeDonne total disability benefits while he was undergoing rehabilitation even though he was also receiving payment from the hardware store during that entire period. The court found that "prior to LeDonne's return to Ace and in direct contrast to its current argument, AXA appears to have taken the position that being compensated as an owner did not constitute 'gainful occupation' under the Policy."

Finally, the court dismissed plaintiff's claims for extracontractual damages for unreasonable and vexatious conduct pursuant to 215 ILCS 5/155 finding the denial of summary judgment creates a "real, genuine, and not feigned" dispute over whether LeDonne remained totally disabled after January 2003. The court also dismissed a fraud claim against the broker who sold the policy.

Given the Rahman ruling, and the court's quotations from McFarland, this was an exceptionally close case on whether to grant summary judgment. However, unlike Rahman, where Dr. Rahman was no longer able to work as an emergency room cardiologist, LeDonne was the owner-operator of a hardware store both before and after his accident. Nonetheless, from the court's description, even though LeDonne may have held the same title and performed many of the same duties, a jury could easily find that he is not performing the same occupation and is therefore entitled to benefits.

This case illustrates the profound difference between group long-term disability insurance and individual disability income insurance. Group insurance covers a loss of income due to disability and would have been of no benefit to LeDonne, but disability income insurance protects the insured against the inability to perform one's pre-injury or pre-illness occupation. A recent ruling that dealt with these issues and illustrates this point is Gammill v. Provident, 346 Ark. 161, 168, 55 S.W.3d 763 (2001), which held that a cardiologist who was able to perform majority of pre-disability duties despite his impairments still qualified for total disability benefits, finding: "It is only necessary that it be shown that he is unable to perform any one or more of the substantial or material acts of his occupation in his usual and customary manner. Nor does the mere fact that one continues to work at his regular job establish a lack of disability. It is only a factor to be considered, and where an insured is able to continue his employment with the aid of his fellow employees or in some manner other than his usual and customary one, he may still be "disabled.")(emphasis in original). A similar ruling was issued in Dowdle v. National Life Insur.Co., 407 F.3d 967 (8th Cir. 2005), which found that a surgeon who could no longer perform surgery following an accident qualified for total disability benefits even though he continued to see patients. Yet another frequently cited ruling on this issue is Giampa v. Trustmark, 73 F.Supp.2d 22 (D.Mass. 1999), which dealt with the question of whether a chiropractor who could no longer perform manipulations was entitled to total disability benefits when the evidence showed he was managing several chiropractic clinics. These are all fascinating cases that raise issues that are often difficult to determine as a matter of law and require careful analysis of the policy terminology and relevant facts.