Published
This month’s Friday Five examines recent court rulings on both short- and long-term disability benefits, focusing on key interpretations—including how "earnings" are defined under an employer’s plan.
The Saul Ewing ERISA Litigation Team
- Whether Defendant’s decision to terminate Plaintiff’s long-term disability coverage was an abuse of discretion to terminate benefits based on the mental illness limitation in the policy when Plaintiff’s alleged disability had a physical cause? Lisa Hall (“Plaintiff”) worked for Robert Wood Johnson University Hospital (“Employer”) as a clinical nurse instructor when she was severely injured in a motor vehicle accident in November 2015. Plaintiff applied for long-term disability (“LTD”) benefits under Employer’s long-term disability plan (“Plan”) through a policy (“Policy”) issued by Reliance Standard Insurance (“Defendant”). Defendant approved Plaintiff’s LTD claim in September 2016 and determined that Plaintiff had demonstrated a “Total Disability,” or an inability to perform her job as a clinical nurse instructor. The Policy provided that at the 24-month mark, benefits for a disability will cease if the disability is caused by or contributed to by mental or nervous disorders. In January of 2020, Defendant terminated Plaintiff’s LTD benefits based upon the determination that Plaintiff did not satisfy the definition of ‘Totally Disabled’ because her neurology exams did not explain what was precluding her from full time work function. Plaintiff appealed the termination through Defendant’s internal review process. Upon review Defendant upheld the termination of LTD benefits. Plaintiff filed a complaint challenging the denial of benefits and argued that Defendant’s decision to terminate LTD benefits was arbitrary and capricious. The court held that Defendant’s decision to terminate Plaintiff's LTD benefits was not arbitrary and capricious because it fully articulated its reasoning in making its determination that Plaintiff did not have restrictions or limitations from a non-psychiatric condition that rendered her totally disabled from any occupation. Specifically, the court found it was not arbitrary and capricious for Defendant to rely on and give weight to the opinions of its own medical consultants to determine Plaintiff’s eligibility. Although noting that some courts are divided on this issue, the court relied upon 3rd Circuit precedent in holding that the policy’s mental illness limitation was properly invoked even though Plaintiff’s mental condition has a physical cause. Lisa Hall, v. Reliance Standard Insurance, 2025 WL 1233203 (USDC, N.J. D. April 29, 2025)
- Whether the Plaintiff met his burden to prove that he continued to be entitled to long-term disability benefits by relying on treating provider opinions. Rick Lalonde (“Plaintiff”) worked for Providence Health & Services (“Employer”) as a Manager of the Sterile Processing Department and was a participant in Employer’s ERISA-governed plan (“Plan”) that provided long-term disability (“LTD”) benefits to eligible employees issued by Metropolitan Life Insurance Company (“Defendant”). The Plan provided monthly long-term disability benefits, after a 180-day elimination period, to participants that were disabled under the terms of the Plan and limited LTD benefits to 24 months for disabilities due to alcohol, drug, or substance abuse or addiction and for disabilities due to mental or nervous disorders or diseases. Plaintiff was involved in a hit and run automobile accident on his way to work in February 2017 and diagnosed by a neurosurgeon with severe spinal stenosis and spondylolisthesis with severe compression on the nerve roots and had a total laminectomy performed in August 2017. Plaintiff submitted a claim to Defendant for LTD benefits and Defendant approved Plaintiff’s claim until January 2019 when Plaintiff was notified that his benefits were being terminated citing insufficient evidence of continued disability either physical or mental. After a trial was held on the administrative record, the Court found the evidence weighed in Plaintiff’s favor and held that he met his burden of establishing his continued entitlement to LTD benefits. The court afforded greater weight to the opinions of Plaintiff’s treating providers and afforded less weight to Defendant’s physician reviews because they failed to grapple with the contrary reports and conclusions of Plaintiff’s treating providers. Rick LaLonde v. Metropolitan Life Insurance Co., 2025 WL 1324139 (USDC, C.D. CA, May 7, 2025)
- Whether the long-term disability (“LTD”) plan included Plaintiff’s K-1 earnings in the definition of “insured earnings.” Jason Rappaport (“Plaintiff”) was a 50% owner and worked as a licensed mortgage banker at Industrial Credit of Canada d/b/a ICC Mortgage Services (”Employer”) and received a salary on a Schedule K-1 that reflected earnings paid as profits for someone who owns a company. Employer had a group disability insurance policy with an LTD plan (“Plan”) administered by Guardian Life insurance Company (“Defendant”). The Plan defined insured earnings as the “rate of monthly earnings,” excluding bonuses, commissions, and “any other extra compensation.” Plaintiff was diagnosed with leukemia in 2015 and applied for and received LTD benefits until Defendant terminated benefits in January 2021. Defendant determined that Plaintiff no longer qualified for benefits because he was capable of earning more than the maximum permitted under the Plan: 80% of his pre-disability earnings. Plaintiff contended that Defendant erroneously excluded his K-1 earnings from its calculation of his insured earnings and improperly terminated his LTD benefits based on his earning capability. Plaintiff sought recovery of unpaid LTD benefits and an alternative remedy of reformation of the Plan so that “insured earnings” would include bonuses and commissions. The Court applied a de novo standard of review and analyzed the Plan’s language and relevant extrinsic evidence. The court concluded that K-1 earnings did not fall under the exclusions argued by Defendant that “insured earnings” should be limited to W-2 wages and excluded specific categories such as bonuses and commissions. The Court found that because they were part of Plaintiff’s regular, non-discretionary income derived from his ownership stake and not transactional or supplemental in nature that the term “earnings” was broad enough to encompass K-1 earnings, which reflect a partner’s share of a company’s profits and are a common form of compensation for business owners like Plaintiff. Jason Rappaport v. Guardian Life Insurance Company of America, 2025 WL 1156760 (USDC, S.D.NY, April 21, 2025)
- Whether Defendant’s decision to terminate Plaintiff’s LTD benefits stemming from her COVID-19 symptoms was procedurally sound and supported by substantial evidence. Brandi Goodwin (“Plaintiff”) worked as a part-time nursing assistant at Fisher Titus Hospital (“Employer”) where Unum Life Insurance Company (“Defendant”) administered Employer’s benefits plans. Plaintiff contracted COVID-19 in December 2020, leading to symptoms such as shortness of breath and chest pain. Plaintiff filed for and was granted short-term disability benefits that were extended until June 2021. After her short-term disability benefits concluded, Plaintiff applied for long-term disability (“LTD”) benefits and Defendant denied her claim citing a lack of substantive evidence supporting continued disability. Plaintiff contended that Defendant ignored substantial evidence of her disability and failed to justify its shift from granting short-term to denying long-term benefits. The Sixth Circuit employed an “abuse of discretion” standard to evaluate the reasonableness of Defendant’s final decision. The Court found that Defendant’s decision was neither procedurally nor substantively unreasonable. The Court determined that Defendant considered all relevant evidence, including new medical opinions and test results, and provided rational reasons for changing its benefits determination from short-term to long-term. Specifically, the transition from short-term to long-term benefits denial was justified by new medical opinions and evaluations obtained during the long-term assessment phase, which were absent during the short-term benefit period. Goodwin v. Unum Life Insurance Company of America, 2025 WL 1403640 (US Court of Appeals, 6th Circ. 2025)
- Whether Plaintiff was entitled to summary judgment when there were disputed issues of fact in the administrative record. Troy Gavin (“Plaintiff”) was a participant in his Employer’s short-term disability plan (“Plan”). Plaintiff had a stroke in April 2021 and applied for and was approved for short-term disability under the Plan until August 2021 but benefits were denied thereafter because Plaintiff's Disability & Leave Provider statement did not “include any objective clinical exam findings or treatment regarding Plaintiff’s disability for his condition.” Plaintiff argued that Employer’s decision to deny him benefits under the Plan was arbitrary and capricious. The Court denied Plaintiff’s Motion for Summary Judgment based upon the totality of the circumstances and found that Plaintiff did not meet his burden of showing that there are no genuine disputes of fact as to whether Employer arbitrarily and capriciously came to the decision to deny Plaintiff’s short-term disability benefits. Specifically, the Court found that: 1) Plaintiff’s argument that the administrative record does not mention Plaintiff's occupation once was false as his job title is included in parts of the administrative record; 2) the argument that Defendant failed to seek out all medical documentation regarding a recent hospitalization was without merit because “the court will not speculate as to why such information that the Plaintiff asserts would have supported his request for benefits was never given to the decisionmaker”; and 3) Plaintiff’s arguments regarding the evidence considered by the IME physician and the appropriate weight to give certain medical and non-medical documents that were provided to the examiner were reason enough to deny summary judgment because a disputed issue of fact exists. Troy Gavin v. Eaton Aeroquip Inc., 2025 WL 1479509 (USDC E.D. PA. May 22, 2025)
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