The Wagner Law Group | Est. 1996

Sophisticated Legal Solutions And Boutique-Style Service

Court Settles Dispute When Employer Switches LTD Insurer

On Behalf of | Jul 15, 2021 |

The Fifth Circuit Court of Appeals has determined, in Talamantes v Metropolitan Life Insurance Company, that a long-term disability (“LTD”) insurer was responsible for benefit payments even though a participant’s disability began before its insurance policy was effective.

Facts. The plaintiff participated in his employer’s LTD plan. During the relevant time period, the employer bought an LTD insurance policy from one insurer for 2016 and switched to a different insurer for 2017. On November 9, 2016, the plaintiff became disabled due to illness. In light of this disability, the plaintiff was approved for and received short-term disability (“STD”) benefits for 34 days from November 18, 2016 through December 22, 2016. (Note: the plan’s STD benefits payments did not involve either insurer.) On December 23, 2016, the plaintiff returned to full-time active work. The first insurer’s policy terminated on December 31, 2016, and the plan’s new policy (with a new insurer) became effective on January 1, 2017. On January 12, 2017, the plaintiff stopped working and again became disabled because of a recurrence of his illness.

At trial, the second insurer contended that it did not cover plaintiff’s claim because the plan’s previous policy (effective in 2016) provided the necessary coverage. The second insurer further asserted that its LTD policy excludes payment of benefits if the claim is covered by another policy.  The first insurer claimed it was not responsible because benefits were based on claims relating to the period after its coverage had ended.

Appeals Court. The Fifth Circuit observed that, with respect to the second insurer’s insurance policy (effective in 2017), the underlying contract stated, “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.” Construing this language, the court ruled that the “Replacement Date” was January 1, 2017, and that the plaintiff was “Actively at Work” the day before the new policy attached.

Therefore, the Fifth Circuit concluded that, because the plaintiff became insured under the second insurer’s policy during his temporary recovery, the second insurer was responsible for his LTD benefits.  In reaching this conclusion, the court noted the “[second policy’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 [p]laintiff.”