Long-Term Disability Benefits & ERISA

Lawyers who handle long-term disability (LTD) claims that are governed by the Employee Retirement Income Security Act of 1974 (ERISA), will want to read this opinion.  The opinion is titled, Enrique Talamantes v. Metropolitan Life Insurance Company.  It is a 2021, opinion from the United States Fifth Circuit.  It is a ruling that is favorable to the insured, which is unusual in cases governed by ERISA.

Plaintiff, was an engineer for him employer, BD.  BD provided its employees LTD coverage through plans governed by ERISADuring the relevant time period, BD used two insurers, Standard Insurance Co. (“Standard”) for the 2016 calendar year and MetLife Insurance Co. (“MetLife”) for the 2017 calendar year, to fund LTD payments under the Plan.

On November 9, 2016, Plaintiff became disabled due to trigeminal neuralgia and underwent microvascular decompression surgery.  In light of this disability, Plaintiff was approved for and paid short-term disability(“STD”) benefits for 34 days under the Plan from November 18, 2016 through December 22, 2016.  The Plan’s STD benefits were paid by BD and administered by Sedgwick Claims Management Services (“Sedgwick”) and did not involve Standard or MetLife.  On December 23, 2016, Plaintiff returned to full-time active work.  Standard’s policy terminated on December 31, 2016, and MetLife’s policy became effective on January 1, 2017. On January 12, 2017, Plaintiff stopped working and again became disabled because  of a relapse in his trigeminal neuralgia symptoms.

After a minor dispute over reinstating the STD benefits, Sedgwick approved Plaintiff for the maximum amount of STD benefits (146 days) from January 12, 2017 through June 7, 2017.  When added to the 34 days of STD benefits paid earlier, these benefits were paid by BD for a total of 180 daysAfter the STD benefits were exhausted, Sedgwick forwarded Plaintiff’s claim for LTD benefits to Standard, the LTD benefits insurer for 2016the year Plaintiff’s disability began.  Without addressing the merits of Plaintiff’s disability, Standard denied Plaintiff’s LTD claim on the basis that it was not covered under its policy.

Following denial, Plaintiff made a LTD benefits claim against MetLife in June 2018.  MetLife was the LTD benefits insurer for calendar year 2017the year Plaintiff’s disability relapsed.  After receiving no response, Plaintiff filed the instant lawsuit.

Plaintiff settled with Standard.  Plaintiff and MetLife jointly moved to bifurcate the trial on the issue of coverage and the merits of the disability claim.  The parties filed cross motions for summary judgment asking the Court to decide whether MetLife provided coverage to Plaintiff under the terms of the policy.

MetLife contends it does not cover Plaintiff’s claim because the Standard policy provides the necessary coverage.  The MetLife policy excludes payment of benefits if the claim is covered by another policy. Both policies cover Plaintiff under the general coverage provisions of the respective policies.  Standard’s policy states in its insuring clause, “If you become Disabled while insured under the Group Policy, we will pay LTD Benefits according to the terms of the Group Policy after we receive Proof of Loss.”  MetLife’s policy describes when its insurance takes effect and provides coverage when an employee was covered under a prior plan: “If You are Actively at Work on the day before the Replacement Date, You will become insured for Disability Income Insurance under this certificate on the Replacement Date.”  The Replacement Date is January 1, 2017, and it is undisputed that Plaintiff was “Actively at Work” the day before the new policy attached.  The parties agree that MetLife will not provide coverage for benefits due if coverage is provided by Standard’s policy.

MetLife argues that two general provisions in Standard’s policy continue to provide coverage for Plaintiff.  The first is the insuring clause discussed previously.  The second is the general rule for coverage after Standard’s policy ends or is changed:

During each period of continuous Disability, we will pay LTD Benefits according to the terms of the Group Policy in effect on the date you become Disabled.  Your right to receive LTD Benefits will not be affected by . . .Termination of the Group Policy after you become Disabled.

Fortunately, the policies have more specific provisions that apply to the situation in this casea transition from one policy to another during a period of temporary recovery.  Plaintiff relies on a specific provision in Standard’s policy that excludes coverage when an employee experiences a temporary recovery.  That specific provision describing the rules for a “Temporary Recovery” acknowledges:

You may temporarily recover from your Disability and then become Disabled again from the same cause or causes without having to serve a new Benefit Waiting Period.  Temporary Recovery means you cease to be Disabled for no longer than the applicable Allowable Period.

It is undisputed that Plaintiff met the conditions described above to be temporarily recovered.  The Standard policy next details the effects of aTemporary Recovery.  Herein lies the exclusion:

B. Effect of Temporary RecoveryIf your Temporary Recovery does not exceed the Allowable Periods [90 days], the following will apply.

1. The Predisability Earnings used to determine your LTD Benefit will not change.

2. The period of Temporary Recovery will not count toward your Benefit Waiting Period, your Maximum Benefit Period or your Own Occupation Period.

3. No LTD Benefits will be payable for the period of Temporary Recovery.

4.No LTD Benefits will be payable after benefits become payable to you under any other disability insurance plan under which you become insured during your period of Temporary Recovery.

5. Except as stated above, the provisions of the Group Policy will be applied as if there had been no interruption of your Disability.

The Court agrees with Plaintiff that paragraph four in Standard’s policy under the “Effect of Temporary Recovery” clause primes the general insuring clauses relied on by MetLife and excludes coverage for LTD benefits under the precise circumstances of this case.  Because Plaintiff became insured under MetLife’s policy during his temporary recovery, the above exclusion in Standard’s policy applies, and MetLife provides LTD benefits coverage.  MetLife’s provision specifically affording coverage when an employee is actively at work during the transition period fits the facts here perfectly and provides coverage to Plaintiff.

This opinion continues however, it needs to be read and digested.  It is a must read for situations where the employer switches insurance companies.


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