ERISA Disability and Life Insurance Litigation
Oral arguments from various courts of appeal across the federal circuits involving long term disability or life insurance claims governed by ERISA.
The podcast is a production of Ben Glass Law, a national long term disability and life insurance law firm headquartered in Fairfax, VA.
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ERISA Disability and Life Insurance Litigation
What Could Have Been Done Differently to Protect the Claimant's Rights to Disability Benefits?
IN THIS EPISODE, we take a closer look at the story of a former employee at a dental supply company who suffered a traumatic brain injury from a fall down a flight of stairs. Despite thorough treatment, she continued to suffer symptoms that ended her career.
The claimant applied for long-term disability benefits but was denied on October 17, 2019. However, she didn't give up and appealed the decision, but unfortunately, her appeal was also turned down on August 31, 2020.
Subsequently, she took her case to court, arguing that the insurance company wrongly refused her benefits. Claiming that Sun Life Assurance wrongly denied her benefits from her job's benefit plan, she took legal action under the Employee Retirement Income Security Act (ERISA) in December 2020. Her case exemplifies how complicated and tough it can be to deal with insurance companies.
JOIN US as we break down her case, explore why her claims were denied, and discuss what this means for others trying to get disability benefits. Hear about her journey and the challenges she faced in getting the support she needed.
This is the oral argument in the 2nd circuit court of appeals.
These public domain recordings are brought to you by Ben Glass Law, a national long term disability and life insurance firm headquartered in Fairfax, VA.
By making these recordings into a "podcast," we've made the listening easier for claimants, attorneys and claims adjusters alike.
If long term disability or life insurance benefits have been denied, we'd love to review your denial letter and give you a strategy for moving forward. This is a free service and you can go here to begin submitting your denial letter.
So if the release is saying no, you're not waiving that claim, then you're not waiving any part of that claim. It would make no sense for the employer to say you've released the claim, but we'll let you appeal as an exception, but you can't file suit. Either they've released everything or nothing.
Speaker 2:And welcome to this podcast. This podcast is brought to you by Ben Glass Law, a personal injury and long-term disability law firm with headquarters in Fairfax, Virginia. Listening to oral arguments is one of the best ways to both learn and stay abreast of the substantive and procedural aspects of practicing law. By putting these public domain recordings into the form of a podcast, Ben Glass Law has made it easy for the public to access these recordings. All commentary that is not part of the actual court proceedings is that of the show's sponsor.
Speaker 3:A Schuller v Sun Life Insurance Company.
Speaker 1:Good morning, your Honor. May it please the court. My name is Glenn Cantor. I represent the appellate. I have reserved two minutes for appeal. In the last case, Judge Livingston, you referenced totality of circumstances. That's what this case is about. There is no way that if you look at the totality of circumstances of the key document, which is the release and the factors surrounding it and the facts surrounding it, that any reasonable trier of fact could have determined that my client, knowingly waived to right to make LTD benefits, make a claim and a lawsuit for LTD benefits. Let's start with the burden. We know this is an affirmative defense and the burden falls on Sun Life to prove its claim. We know that, because these are ERISA claims, that there is closer scrutiny. There is closer scrutiny given to the issue of waiver. We also know that contra preferentum is applied If it's ambiguous in any way. If this release is ambiguous, if the surrounding facts are ambiguous, the motion for summary judgment should have been denied and the claim should have gone forward on its merits.
Speaker 4:We start with the words before we get to the facts. Are the words ambiguous here?
Speaker 1:I don't think the words are ambiguous. I think the words show there is no waiver, so let me go through that quickly.
Speaker 4:The question is whether it is a related or affiliated entity.
Speaker 1:That's one of the issues anyway.
Speaker 4:Yes, entity, that's one of the issues anyway, and when I think of a related or affiliated entity, I think of a subsidiary or a parent company as opposed to an independent insurance company.
Speaker 1:That was my argument. Your Honor, the average person is going to think affiliated a holding company, a sister company, a subsidiary, somebody owned by common stockholders, not some third-party insurance company Affiliated entity has no meaning to a layperson. Now the district court referenced that. This release.
Speaker 4:Well, if you take a broad interpretation of affiliated, it's affiliated in the sense that Sun Life is working with Bancorp. No, they're not working. Why isn't, under the plain meaning of the word, affiliated. They have a relationship. Sun Life is the claim by Dushyari, an administrator. Why isn't it related in that sense?
Speaker 1:I don't think it is.
Speaker 4:Why not, though I know you think that, but why not?
Speaker 1:I know I have to answer the questions, but I don't understand how it could.
Speaker 4:I don't have to answer my question, but it would help if you answered my question.
Speaker 1:I'm trying, your Honor to say I don't understand how it could be affiliated. They have no common ownership, they don't share profits and there's a document that says that Benco has no control over what Sun Life does. I don't know how you would call them affiliated, any more than if Benco uses Federal Express or Benco uses UPS or Benco uses a food service.
Speaker 4:I don't know if it's in the record, but if a plaintiff were to recover, does Benco share any financial responsibility for that? Does it have to pay it, or is it?
Speaker 1:Zero, completely zero. They have purchased insurance?
Speaker 4:Is that on the record?
Speaker 1:I can't say for sure, but I can say for certain that they purchased insurance for this purpose, so it is 100% Sun Life's responsibility to pay these benefits. The only other thing in this entire release that could be looked at as potentially causing a waiver is the fact that it does mention the word ERISA. However, these are ERISA claims that are waived against BNCO. There are ERISA claims that were waived against BNCO. Can I ask you to?
Speaker 5:understand that. Let's assume we agree with you that affiliated entities doesn't encompass a third-party insurer providing those benefits for the employer benefit plan. What if this was a self-insured situation and Sun Life was acting as a third-party administrator?
Speaker 1:Then I lose. Okay, absolutely I lose, although I would say there's no circuit to my knowledge that has ruled in this way, but I think they should. These are very important releases. They release employee rights. If employers want to release or get releases of employee benefit plans and past, present and future claims for employee benefits, all they have to do is say so. It's a seven-page release with thousands of words written in eight point. All they had to do was put in there and you are releasing your right to an LCD claim.
Speaker 4:The release starts off in the first paragraph saying parties in interest. Why is it Sun Life, a party in interest?
Speaker 1:They're not a named party to this.
Speaker 4:You don't have to be named. It says Banco and blah, blah blah, including Parties in Interest. Why isn't it a Party in Interest?
Speaker 1:Because there's nothing in here that indicates they're being released, the claims. The risk of claims being released would be against BNCO. For example, 502 claim for penalties for not giving planned documents out, or 510 claim for termination of somebody for making their ERISA claims. Those are released against BNCO. But so I think the release itself is at best ambiguous and it could have been clarified. And I think this court should say if you want to release employee benefits, put it in the document. Because, going to the next point, ms Shuler did know there was an issue and she asked what if we decide that it is ambiguous?
Speaker 4:What would be the next step that would happen in the litigation?
Speaker 1:Send it back for a decision on the merits, because the court never got the merits of the disability claim. It said you've waived your claim somehow because you signed this minuscule de minimis severance agreement.
Speaker 4:If it got to the merits, wouldn't there be an issue as to whether, under the contract, you need to resolve the ambiguity? What do the parties intend and what do the ambiguous provisions really mean?
Speaker 1:No, your Honor, you want me to go through all that.
Speaker 1:No, if it's ambiguous, it can't be construed against my client, contra preferendum. If it's ambiguous, case over on that issue and it goes back on the merits Once again. I would say I believe it is imperative that this court issue a decision, a published decision, saying look, employers, you know how to write a release Affiliated entity. The IRS has pages on it. It certainly wouldn't include an insurance company insuring an employee benefit plan. Just add a paragraph. So we know. Ms Shuler asked. She wrote a letter. She said I'm going to appendix 38, question five in pertinent part. Finally, this agreement will not affect my ability to appeal the Sun Life LTD claim Response. I'm sure your lawyer told you this as part of his or her advice to you, but this agreement should have absolutely no effect on your ability to appeal your LTD.
Speaker 1:The employer, as far as we know, agrees with us. There's nothing in the record that says the employer thinks they were waiving the appeal right. Sun Life certainly has no more rights of the record. This is the employer thinks they were waiving the appeal right. Some lights certainly have no more rights of the employer. And which, of course, raises the issue of this was raised for the first time in litigation. It wasn't part of the administrative record. So Ms Shuler never had the chance to supplement and say wait, no, I knew this was not part of my release. I talked to my lawyer. He agreed with me. And even the employer is saying to me no, it's not releasing Now, isn't?
Speaker 3:Sun Life, an agent of Benco.
Speaker 1:No, they're not an agent. If they're an agent, benco can control Sun Life. It says here in Appendix 38, we have no control over what Sun Life does. We bought the policy. We don't have any right to have any control over whether Sun Life pays this claim or not.
Speaker 1:Now I would say it's very deceptive that the employer responds only to the question that's asked Exactly. The question is may I appeal my Sun Life disability denial? Because remember, at the time she's writing this letter to Benko, she's made a son life claim. It's been denied. So she's in the appeal, the pre-litigation request for administrative process stage. That's what she's thinking about. May I proceed with this? And the employer responds yes, you certainly may. There's two alternatives. One, the employer is saying yes, you certainly may. There's two alternatives. One, the employer is saying yes, you can appeal and yes, you have all your rights. Or two, the employer's lawyer for the employer is thinking got him. She only asked about can I appeal my LTD claim? It doesn't ask if she can sue. If that's the case, that's a breach of fiduciary duty on the part of the employer and some life has no more rights than the employer.
Speaker 1:This case, or this release, is governed in the Pennsylvania law governing jurisdiction. I think it's paragraph 17 of the release, appendix 70. The Third Circuit has talked about this issue. It says once an ERISA beneficiary has requested information from an ERISA fiduciary who is aware of the beneficiary's status and situation, the fiduciary has an obligation to convey complete and accurate information material to the beneficiary's circumstance, even if that information comprises elements about which the beneficiary has not specifically inquired. That's Bixler v Central Pennsylvania, 12f2 at 1292. Ms Shuler goes to the employer and says I want to make sure this is not going to affect my right to appeal the denial, what I'm doing right now. And the employer comes back and says absolutely it will not. Now, once again, two options. The employer meant it and also meant and if they deny the appeal you can force bring suit. Or the employer thought yeah, you can appeal, but you can't sue under this release.
Speaker 5:How would that be coherent, given the admittedly broad language of what's released as distinguished from who's released? In other words, this isn't a waiver of a right to sue, this is a release of claims. So how would it be coherent to say, oh, but you can continue to pursue your claim. You haven't released your claim as to Sun Life to the extent of the administrative appeal. You've only released it insofar as you take the next step and go to court. I don't understand how that is. You've described released it insofar as you take the next step and go to court. I don't understand how that is. You've described that as an option that they could have meant, and I guess I'm asking you to tell me how that could coherently be an option.
Speaker 1:It couldn't be, and that's what I'm saying. It's not a coherent option. The employee is asking a lay person question May I proceed with my LTD claim? And the claim has been denied. So now I have to appeal it and then, of course, the next step is, if it's denied, again litigation. The employee is not. There's no way to impose upon the employee the obligation to say may I proceed with my appeal and if it's denied, then file a lawsuit.
Speaker 1:The release would release all claims. So if the release is saying no, you're not waiving that claim, then you're not waiving any part of that claim. It would make no sense for the employer to say you've released the claim but we'll let you appeal as an exception. But you can't file suit. Either they've released everything or nothing. And the everything is belied by yes, you can proceed with your ERISA appeal, and to waive everything is belied by the fact that they have an obligation to tell her If she's going to waive everything and she's asking about it. Don't hold back information. And once again, this was raised for the first time during the administrative process. Okay, I did have time for rebuttal, but I'm not sure if it's going.
Speaker 3:You deserve some rebuttal time.
Speaker 1:Okay, thank you, your Honors.
Speaker 6:Good morning, may it please the Court? Josh Packrack, I represent the Appellee Sun Life. I'd first like to address the issue that council is saying the employer had an obligation to be truthful. The employer had an obligation to give more information. My client's not the employer. My client wasn't provided with this release, even though this happened before the appeal, and they asked for information from the client, so he can't blame my client for something that was hidden from it by his client during the entire process.
Speaker 4:Is that evidence of the party's intent in entering into the release agreement?
Speaker 6:I'm sorry, your Honor.
Speaker 4:Even assuming Wabenko is not your client, doesn't the statement from Wabenko's lawyer provide some evidence of what the party's intended by entering into the release agreement?
Speaker 6:I think there are a few problems with their argument on that point. First of all, it shows that she was aware that potentially, benco, this release applied to Sun Life. By raising the subject, she knew it potentially did.
Speaker 4:Maybe that's true, and then she was told in essence that it does not.
Speaker 6:But that leads to the second problem your Honor.
Speaker 2:This podcast is brought to you by Ben Glass Law, a national leader in long-term disability insurance claims. We help doctors, lawyers, entrepreneurs, ceos and other C-suite executives get paid for their long-term disability benefits. Visit us at benglasslawcom or give us a call at 703-591-9829.
Speaker 6:This release has an integration clause that council completely ignores. This clause states that paragraph 15 is essay 253 of the record. That is the final, complete and only agreement between the parties and it supersedes any and all prior understandings and agreements.
Speaker 4:What happens if we decide the release is ambiguous. Then the district court, putting aside the argument about contra preferendum, but the district court would look at principles of contract construction, which would also include extrinsic evidence, perhaps of the party's intent. And could they not look at what the attorney said?
Speaker 6:Correct? I agree that. No, I don't think they can. I think that precludes that argument. If they find ambiguity in certain parts, yes, they don't jump right to the judge. Doesn't jump right to the disability claim. It has to hold a hearing on the understanding.
Speaker 4:Do you think there's any race-related or affiliated entity?
Speaker 6:Well, I don't think there is, because, as your honor said, affiliated means working with, but, as Chief Judge Livingston said, there's a more important, and I think it's the one that really applies here, and that's agent. You look at the relationship between the two.
Speaker 4:The word agent refers to an agent of the affiliated or related entity. It doesn't actually say an agent of Benko the affiliated or related entity.
Speaker 6:It doesn't actually say an agent of Benco. My reading of it is that it is an agent and my that it is one of the subsidiaries, related or affiliated entities, employees, agents. So it is separate, your Honor, and that's on page 247 of the supplemental appendix.
Speaker 4:The line above that it says all of its parents, subsidiaries, related or affiliated entities and their respective officers, et cetera, et cetera, agents.
Speaker 6:So it seems to be referring to agents of related or affiliated entities, parents, subsidiaries. Am I reading it incorrectly? I do read it differently, your Honor, I apologize. I read it as Benco by itself and its so it's not only saying affiliated agents et cetera, it's referring to Benco and those other entities.
Speaker 4:And when you look at agent You're saying it refers to Benco and Benco's agents.
Speaker 6:Correct and its affiliates and its other entities that are identified.
Speaker 5:Can I try to understand just the scope of your argument. If the plaintiff here had been injured because of a defective stairway in the building where her employer Benko leased space from a third-party landlord, would this release her claims against that third-party landlord for the personal injury?
Speaker 6:No, but there's a lot different relationship here. Your Honor as an agent. What's an agent mean? You're doing business on behalf of somebody else.
Speaker 5:Let me give you a better hypothetical. There's a third-party payroll processor that Benko uses to pay your paychecks and her last paycheck. The third-party payroll processor, after they take in the money from the account of the employer, applies it to the wrong account. They apply it to somebody else's account. Does this release her claim against that third party payroll provider which executes the payroll function for the employer?
Speaker 6:I think this deals with a benefit that deals with something totally different and she's entitled to that money. She's not entitled to the benefit here. I don't think it's analogous To me. I look at the fact that Benco established a benefit plan. It retained, as Judge Shin said, it retained Sun Life here as its claim administrator. And it also said Sun Life, you're a fiduciary of this, you're our fiduciary.
Speaker 5:Don't you think the payroll processing company, the bank, that's doing that as a fiduciary? For purposes of the payroll processing.
Speaker 6:No, it's actually. The IRS has described that as a clerical duty which is not a fiduciary responsibility. So there is a distinction. My client is named as a fiduciary. I think it's quite telling, judge Robinson, because you would ask counsel if it mattered if this was a TPA or an insured plan. The statute makes no distinction. It defines employee benefit plan as insured or self-funded. If you're a claim administrator and counsel said I lose. If they're a TPA, I lose. Guess what? There's no difference. So he does lose.
Speaker 5:Describing the ERISA statute right. One of the things that's tricky about this is we're interpreting under state law a general release that encompasses lots of things, including, but not limited to, erisa claims, and I guess I'm wondering just how much we then draw from the ERISA statute to interpret the meaning of the terms in that contract.
Speaker 6:She hired a disability lawyer to handle her ERISA claim, so he would have known that party and interest means a fiduciary.
Speaker 3:So it does it is we read the phrase party and interest in this agreement, with the background of the ERISA statute in mind. How do we know that?
Speaker 6:Because, again, she hires an ERISA disability lawyer to represent her and that person would have known this or should have known this. But that's only one small part of it.
Speaker 3:That only goes to your. I'm setting aside what she did.
Speaker 6:I understand Just interpreting the agreement.
Speaker 3:How do we know that the party and interest reference we should read with the background understanding of ERISA, simply because it obviously applies to ERISA claims.
Speaker 6:I think that's part of it, that she hires a disability lawyer. To be perfectly honest, I prefer the agent argument.
Speaker 4:It's more than just ERISA claims. Right, it's not just ERISA claims at issue.
Speaker 6:Looking at the release as a whole, yes, the release itself, yeah, and that's part of the problem here. It's so broad. It specifically identifies a risk, it identifies claims, it identifies litigation lawsuits, and I think it's important to note that this release was so broad purposely and that doesn't make it ambiguous. It specifically said that any other entity third, party.
Speaker 4:It may be very broad but it doesn't clearly, it doesn't explicitly refer to the insurance company right.
Speaker 6:It doesn't. But it says that Benco could transfer the rights under this release to any third party. So that's in paragraph 19,.
Speaker 5:I believe, transfer the rights of the settlement agreement.
Speaker 6:Yes, they can't go and immunize any person.
Speaker 5:They couldn't go to some other person with a claim that she's got a claim against and say oh, I hereby immunize you no, but this is specific to benko's plan, this specific to benko's agent.
Speaker 6:So I think, if you look at the fact that this I think it covers under agent, I think it's covered. Sunlight is covered under affiliate. But then when you look at also, she could have assigned this to or Benko could have assigned this to anybody. She knew that there was this possibility. That's why she asked her attorney and Benko does this preclude me from bringing an appeal Now? Then you look at the integration clause and it says you can't rely on those prior understandings.
Speaker 5:There's a circularity here, right? I don't think you would contend that if it's clear, if it's unambiguous, then the integration clause becomes a relevant factor, saying we're not going to enforce extrinsic promises If it's ambiguous. You're not arguing that extrinsic representation about what the contract does or doesn't mean from the other party to the contract is not relevant to evaluating the mutual intent.
Speaker 6:I think that parts of it could be subject to extraneous evidence, extrinsic evidence. But when you look at the fact that here it's specifically saying prior understandings don't matter, they don't matter. There's one thing, can I?
Speaker 5:shift to that. I just have my bullet of time On this party and interest. I'm trying to figure out whether that's a little bit of a red herring. Parties and interests are listed in the sort of description of who's implicated by the contract, which could just be a catch-all for people who are covered by the contract. But the actual release provision doesn't say anything about parties and interests. It has the same laundry list parents, subsidiaries, related or affiliated entities. It doesn't say anything about parties and interests. Isn't that the operative clause and doesn't that render the parties in interest conversation?
Speaker 6:irrelevant. No, because it's defining what Benco, who Benco is, but that definition includes all of those other people on the list, right. Precisely.
Speaker 5:So you wouldn't have actually needed to say anything other than voluntary and foreverly releases Benco, because you've defined on your argument. You've defined benco above to include its directors, officers, shareholders, partners, related entities, etc. So I guess what what's now happening is you're saying yes. In the actual operative release language, they chose to list every single one of the other things from the definition I don don't read it that way.
Speaker 6:I read it as being included that this is comprehensive. This is such a comprehensive. It's spelled in suspenders.
Speaker 5:They wanted to make sure, and that's why what's weird is that the suspenders apply to every other conceivable relationship except for the party in interest, and that's what's making me wonder whether parties in interest is just shorthand to whoever is protected by this contract.
Speaker 6:Then you go to agent or affiliate. There are so many others and, if I may, your Honor, there's one thing that could have protected her she knew that her prior understanding or the prior statement by Benko wasn't integrated into this agreement, into this release. It's a broad release that could be sent to any third party and she didn't put anything into this. She could have she negotiated terms. All she had to say was put into this release that it doesn't apply to Sun Life. I've seen those before in cases. It's a very simple thing to do. She had an attorney. That's one of the laniac factors. That is an important landing out factor.
Speaker 5:How do you weigh that factor and I think we have to accept for the purposes of in this posture, we have to accept her representation that her attorney told her that it didn't operate as a release of her claim against Sun Life. How do we weigh the factor of whether she had an attorney if the record tells us that the attorney agreed with the position she's now taking?
Speaker 6:It's not in the record what her attorney believed, what the fact is what's in the record is what she said.
Speaker 5:her attorney told her.
Speaker 6:There are some credibility issues with her, I'll leave that at that. Some big credibility.
Speaker 6:We don't resolve credibility issues at this stage. Right, yeah, but the lanyard factor is not whether the attorney gave her good advice, is it? The landing out factor is whether she had an attorney and whether the person being released Benko here, the one who made the agreement recommended that she speak to her attorney. You heard Mr Cantor read that language. They did both. So both those and the district court here concluded that these factors overwhelmingly support the fact that she knowingly and voluntarily entered into this. Again, the test isn't whether she made the best decision. It isn't even whether her attorney messed up. She knowingly and voluntarily.
Speaker 6:If I may and I know I'm running a little over I just want to address the waiver argument the council made, which is interesting because they in fact have waived making that argument by not presenting it in the district court. But, more importantly, that applies to claim-based defenses. This is not a claim-based defense such as is she disabled? Does this policy provision applies? This is like a statute of limitations. It's a legal defense and it has to be included as an affirmative defense. And it has to be included as an affirmative defense, which we did. And I finally would point out on this issue that this court does allow even claim-based new defenses, but says that they are reviewed de novo is what the district court here did. Your Honors, we believe there was knowing voluntary relinquishment and that it does apply to sunlight. Thank you, your Honors.
Speaker 1:Thank you, your Honors. Thank you, your Honor. I could probably go on for an hour, which I doubt this court's going to give me. However, this panel sitting back here are going is this, is it not ambiguous? What does affiliated mean? Parties' interest is referenced here. It's not referenced there. How can this agreement be anything but ambiguous to a layperson when it doesn't say and by the way, you are waiving your claims against Sun Life, mr Bacharach is correct there's an integration clause.
Speaker 1:My client goes to the employer and says I have questions. The employer could have said read it, it is what it is. If you want us to amend it, we can do that. The employer could have said read it, it is what it is. If you want us to amend it, we can do that. The employer doesn't do that. They say we're going to answer your questions, and they do. The employer says no, you have not waived this right to LTD.
Speaker 1:I just think and as I said, I could go on for a long time the simplest thing here, on for a long time. The simplest thing here if employers want to get a severance release and they want that release to waive employee benefits, put it in there. It's a really simple thing to do. You've got a multi-billion dollar corporation on the one hand. You've got Mishula on the other. Who is the one who's supposed to know what this release really encompasses and what they intended to release? Some life is here. They don't know what this meant. They just wanted to mean that to avoid addressing this on the merits, and that's, I think, the last point I'll make is ERISA is an equitable statute and the intent here is to allow Mishul to have her disability claim heard on the merits. This is a technical defense based on an ambiguous release that they're not even a party to. They're not mentioned. There's no consideration given by them for this release. They should not be allowed to escape even having the claim heard on the merits by this technical argument, and I will thank you.
Speaker 3:Thank you both.
Speaker 2:And we'll take the matter under advisement. The proceeding has been a production of Ben Glass Law, a Fairfax, Virginia-based personal injury and long-term disability law firm. For a free evaluation of your claim, visit us at benglasslawcom or call us at 703-591-9829.