Here is a case wherein one of the issues was whether or not an employee was eligible for Long Term Disability (LTD) based on the definition in the policy of “full time” employee.
This is a 2022, case is from the 5th Circuit Court of Appeals. It is an appeal from the Northern District of Texas. The opinion in the case is styled, James W. Newsom v. Reliance Standard Life Insurance Company.
Newsome had a policy that, among other things, provided short term disability (STD) benefits and LTD benefits. The plan is governed by the Employee Retirement Income Security Act of 1974 (ERISA).
Newsome was a software architect for Lereta, where he had been employed for 23 years. He had health problems dating back to 1999. By September 2017, his health was such that he could no longer work a 40 hour week. Lereta reduced Newsom’s work week to 32 hours per week. But he was unable to consistently work a full 32 hour week after October 2017. After his being unable to work the 32 hour schedule, he was placed on part-time status, scheduling him for less than 30 hours per week. In January 2018, Newsom was unable to work at all and he made a claim for disability benefits.
By the time Newsome was unable to work he was only working 28 hours per week, meaning he did not qualify as a full-time employee and thus did not qualify for benefit coverage.
The relevant policy language for this issue states:
ELIGIBLE CLASSES: Each active, Full-time employee of LERETA, . . . effective November 1, 2015, as amended through January 1, 2018, except any person employed on a temporary or seasonal basis . . . .
. . .
“Full-time” means working for you for a minimum of 30 hours during a person’s regular work week.
Newsom’s claim for benefits was denied and this lawsuit ensued.
Relying on these policy provisions, Newsom appealed Reliance’s initial denial of claim, contending that Reliance had incorrectly determined his date of “disability,” i.e., when Newsom could no longer “perform the material duties of his/her regular [o]ccupation.” He asserted the true date of disability occurred the week of October 16, 2017—his last scheduled 32-hour work week—because his disability required him to work a reduced schedule (28 hours/week) after that week. Newsom further contended that the number of hours that he actually worked per week was irrelevant because his “regular” work week, i.e., his schedule set by Lereta, was full time (30+ hours/week) through the week of October 16, 2017.
When construing ERISA plan provisions, courts are to give the language of an insurance contract its ordinary and generally accepted meaning if such a meaning exists. Courts apply the rule of contra proferentem to ambiguous terms—construing them strictly in favor of the insured—but [o]nly if the plan terms remain ambiguous after applying ordinary principles of contract interpretation.
The Court found in favor of Newsom on this issue. It is a must read for ERISA lawyers who handle disability cases.