This month’s Friday Five covers cases relating to the interpretation of time periods for claims under life insurance and disability plans, a situation where three separate administrators handled a disability benefits claim (but came to different decisions), the Eleventh Circuit’s parsing of exclusionary language in a disability plan, and a court’s insistence on an insurer following strict formalities to invoke extensions during the administrative appeal process.

1. Court Rejects Life Insurance Claim When Insured Died a Few Days Outside of Post-Benefit Termination Grace Period Window. In a recent life insurance dispute in California federal court, the insured stopped working on Friday, January 22, 2021. The plan provided for life insurance benefits to be paid if an insured died within 31 days after termination of coverage. The insured had $710,000 in coverage and died on February 24, 2021 (33 days after his last day of work). The court, on a motion to dismiss, was tasked with determining when the insured’s coverage ended – the last day he worked (which was two days outside of the 31-day grace period), or the first day he did not work (which was a Monday following his Friday resignation and within the grace period). The court accepted the insurance company’s more straightforward interpretation of the applicable plan provisions, which stated that coverage ends “at . . . termination of employment.” As such, the court found that the insured’s coverage terminated on the same day as his resignation, which meant that the 31-day grace period for claims passed before his death and benefits were denied. Stolte v. Securian Life Ins. Co., No. 21-7735, 2022 WL 3357839 (N.D. Cal. Aug. 15, 2022).
2. Court Finds That New Claims Administrator Properly Terminated LTD Benefits After Plaintiff Received Benefits for Thirteen Years Under Two Other Administrators. In a long-term disability benefits case, the plaintiff suffered from a number of conditions that caused chronic pain. She was on benefit for approximately thirteen years. Benefits under the relevant plan were administered by three separate insurance companies during this time period. Shortly after the latest administrator took over, the plaintiff’s benefits were terminated. One of the plaintiff’s arguments to the court on summary judgment was that the current administrator’s termination was per se arbitrary because it diverged from the longstanding decisions of the prior administrators, which kept her on-claim for over a decade. The court disagreed with the plaintiff, particularly because there was evidence in the claim file that the plaintiff’s condition changed over time and the termination reflected this relatively recent change in medical evidence. Foggie v. Am. Nat’l Red Cross LTD Plan, No. 21-0001, 2022 WL 3580745 (E.D. Va. Aug. 18, 2022).
3. Eleventh Circuit Disagrees With Insurer’s Interpretation of Plan Exclusion, but Affirms Summary Judgment Because the Interpretation Was Still Reasonable. A prominent Birmingham, Alabama attorney was diagnosed with Parkinson’s disease and went on disability with her firm’s then-existing benefits plan, which was administered by Sun Life Assurance. After a few years of benefits, the firm cancelled its policy with Sun Life and moved coverage to Hartford Insurance. The plaintiff, however, continued to receive benefits under the Sun Life policy. The new Hartford plan included an exclusion when an insured was receiving benefits under a “prior disability plan,” which was “terminated.” Hartford ultimately denied the plaintiff’s claim because she was receiving benefits under the prior, and terminated, Sun Life policy. The court affirmed summary judgment for Hartford and upheld Hartford’s application of the prior plan exclusion as reasonable. But, the Eleventh Circuit expressly noted that, if it had the case on a de novo review, it would side with the plaintiff because only the Sun Life policy was terminated, not the entire benefits plan. According to the appellate court, a more reasonable reading of the express language of the exclusion was to recognize the difference between a policy (which was terminated by the plaintiff’s law firm in favor of a new insurer) and a plan (which the law firm kept intact, albeit with a new administrator). Stewart v. The Hartford Life and Acc. Ins. Co., 43 F.4th 1251 (11th Cir. 2022).
4. Eleventh Circuit Affirms Dismissal Under Three-Year Period to File Suit Under Policy. The insurer terminated the plaintiff’s long-term disability benefits and affirmed the termination on appeal in June 2016. The disability policy, and denial letter, explained that the plaintiff had the right to bring a civil suit under Section 502(a) of ERISA, but did not specifically identify any deadlines. In April 2021, almost five years later, the plaintiff sued in federal court. The insurer moved to dismiss under the policy’s three-year statute of limitations, but the plaintiff argued in favor of equitable tolling because she was unaware of the applicable limitations period. The Eleventh Circuit affirmed the trial court’s dismissal because lack of actual notice of the limitations period was irrelevant; the plaintiff could have requested a copy of the policy to confirm the deadlines for herself. The appellate court noted that the exercise of “even minimal diligence” would have allowed the plaintiff to discover the limitations period and timely file her claim. Bakos v. Unum Life Ins. Co. of Am., No. 22-11131, 2022 WL 3696648 (11th Cir. Aug. 25, 2022).
5. Virginia Federal Court Chides Insurer for Failure to Follow Formalities to Extend Appeal Period on Administrative Review. In a long-term disability benefits dispute, the court was first asked to decide whether the litigation was proper and if the plaintiff had exhausted administrative remedies before filing suit. The court explained that, normally, a claims administrator has forty-five days to make a decision on administrative appeal, which can only be extended for “special circumstances.” Here, the insurer failed to invoke the extension because, among other reasons, it did not provide the date by which the appeal decision would be made in the letter requesting an extension, which was a necessary element of the process. As such, the court found that the plaintiff exhausted administrative remedies and could proceed with litigation even though the insurer had not rendered its decision on administrative appeal. Rupprecht v. Reliance Standard Life Ins. Co., No. 21-1260, 2022 WL 3702086 (E.D. Va. Aug. 26, 2022).