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Appellate Court denies Liberty Mutual’s attempt to recover $163,661.57 in disability benefits paid to disability claimant and business owner

After 5 years of receiving long term disability benefits, Robin Dolan suddenly receives a letter in 2006 from Disability Reinsurance Management Services stating that her disability benefits had been wrongfully calculated and she must repay $163,661.57. Approximately 5 years after receiving this dreadful letter and extensive litigation, Ms. Dolan has finally received an Appellate Court ruling stating that Liberty Mutual was wrong in their interpretation of the disability policy. Unfortunately Ms. Dolan has had to suffer through the unreasonable actions of Liberty Mutual and their third party administrator DRMS.

The Disability Lawsuit

The case of D & H Therapy Associates, LLC; Robin Dolan vs. Boston Mutual Life Insurance Company (Liberty Mutual) deals with a claimant who participated in a group long term disability benefit insurance plan that was governed by the Employee Retirement Income Security Act (ERISA). The plaintiff in this case was also a partner in several physical therapy clinics which sponsored and administered the plan. The lawsuit was brought by the plaintiff against the Boston Mutual Life Insurance Company (Liberty Mutual) seeking a review of the termination of benefits and asserting a claim for fraudulent inducement. Boston Mutual counterclaimed that under the plan it is entitled to reimbursement of the $163,661.57 in disability benefits paid to the plaintiff.

The District Court for the District of Rhode Island held that Boston Mutual’s construction of the plan’s language was within its discretion as the plan administrator and that the plaintiff’s fraudulent inducement claim was preempted by ERISA. As to Boston Mutual’s counterclaim, it held that the reimbursement sought did not qualify as appropriate equitable relief under ERISA. Both parties appealed to the Court of Appeal with regard to this decision by the District Court.

The Facts of the Long Term Disability Claim

The plaintiff’s employer D&H Therapy Associates (D&H) obtained an ERISA plan from Boston Mutual in 2000. Under the plan, employees who suffered specified reductions in monthly earnings due to long term disability are eligible for benefits. In 2001, the plaintiff became partly disabled rendering her unable to continue some of her tasks as an employee. This resulted in a reduction in her monthly W – 2 earnings. The plaintiff applied and hence received benefits from Boston Mutual under the above mentioned plan.

In 2006, Boston Mutual’s third-party claims administrator, Disability Reinsurance Management Services (DRMS), conducted an audit and concluded that the plaintiff’s benefit payments had not properly taken account of business profits she received as a principal of D & H and another entity, Associated Professional Management, Inc. With those profits included, DRMS calculated that the plaintiff’s pre-disability monthly earnings was $5,833.33 and her post disability monthly earnings in 2002 was $7,670.67. Thus, in an August 2006 letter, Boston Mutual informed the plaintiff of the audit and asserted its right under the policy to recover overpayments due to “fraud or error.”

After several unsuccessful administrative appeals with Boston Mutual’s third-party claims administrator, the plaintiff initiated this lawsuit against Boston Mutual. The plaintiff challenged her benefit termination on two grounds:

The plaintiff argued that the plan defined “earnings” as W – 2 income such that non-salary income is not relevant to eligibility determinations.

The plaintiff argued that Boston Mutual should be stopped from construing the plan otherwise because it represented to D & H at the time of purchase that the plan defined “earnings” as W – 2 income.

The Plaintiff also claimed that Boston Mutual’s representations fraudulently induced D & H to forego renewing its preexisting insurance policy. Boston Mutual counterclaimed that under the plan it was entitled to reimbursement of the $163,661.57 it paid to the plaintiff.

The Court of Appeal Ruling

The Court of Appeal held that the Plan Administrator construed the plan in manner that was unreasonable, and thus abused its discretion. The claimant was not responsible for an overpayment and Liberty Mutual must continue paying disability benefits.

Discretionary Authority under an ERISA Plan

Normally when an ERISA plan gives an administrator discretionary authority to determine eligibility for benefits or construe the plan’s terms, the District court must uphold the administrator’s decision unless it is arbitrary, capricious, or an abuse of discretion.

The Court of Appeal held that Boston mutual had acted unreasonable by construing the term “earnings” in manner that could not be applied consistently within its own account of the plan’s meaning and by rendering the only provision in the plan meaningless that appeared to define “earnings” in a substantive way. The Court rendered its opinion that it has been Boston Mutual’s position that the term “earnings” refers to W – 2 income when it is used in conjunction with the terms “pre-disability” or “basic annual.” It has also been Boston Mutual’s position that the term “earnings” refers to all income deriving from employment when it is used alone or with the term “current.”

However, the plan’s express definitions of “pre-disability earnings” and “basic annual earnings” cannot support both of the above positions at once.

The Court concluded that if Boston Mutual’s definition of the unaccompanied term “earnings” were applied unaccompanied as used within the plan’s stated definitions of “pre-disability earnings” and “basic annual earnings,” the term “earnings” would have to refer to both W-2 income and non-salary income when used in conjunction with the terms “pre-disability” and “basic annual.”

However, if one accepted Boston Mutual’s definition of “earnings” as used in conjunction with “pre-disability” and “basic annual,” then the definition of the unaccompanied term “earnings” as used within the plan’s definitions of “pre-disability earnings” and “basic annual earnings” would have to refer only to salary income.

The Court of Appeal resolved this inconsistency by determining that if Boston Mutual wanted to offer a plan that determined benefit eligibility by comparing pre-disability W-2 income with post-disability income deriving from employment; it would have drafted a plan that made this clear. Hence, the Court of appeal ruled that Boston Mutual may not transform an existing plan to achieve this end by construing it in a fashion contrary to its terms. As such, the Court of Appeal concluded that Boston Mutual’s construction of the plan was unreasonable and, therefore, that its determination that the plaintiff has never been eligible for benefits constituted an abuse of discretion.

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Do you help Liberty Mutual claimants nationwide?

We represent Liberty Mutual clients nationwide and we encourage you to contact us for a FREE immediate phone consultation with one of our experienced disability insurance attorneys.

Can you help with a Liberty Mutual disability insurance policy?

Our disability insurance lawyers help policy holders seeking short or long term disability insurance benefits from Liberty Mutual. We have helped thousands of disability insurance claimants nationwide with monthly disability benefits. With more than 40 years of disability insurance experience we have helped individuals in almost every occupation and we are familiar with the disability income policies offered by Liberty Mutual.

How do you help Liberty Mutual claimants?

Our lawyers help individuals that have either purchased a Liberty Mutual long term disability insurance policy from an insurance company or obtained short or long term disability insurance coverage as a benefit from their employer.

Our experienced lawyers can assist with Liberty Mutual:

  • ERISA and Non-ERISA Appeals of Disability Benefit Denials
  • ERISA and Non-ERISA Disability Benefit Lawsuits
  • Applying For Short or Long Term Disability Benefits
  • Daily Handling & Management of Your Disability Claim
  • Disability Insurance Lump-Sum Buyout or Settlement Negotiations

Do you work in my state?

Yes. We are a national disability insurance law firm that is available to represent you regardless of where you live in the United States. We have partner lawyers in every state and we have filed lawsuits in most federal courts nationwide. Our disability lawyers represent disability claimants at all stages of a claim for disability insurance benefits. There is nothing that our lawyers have not seen in the disability insurance world.

What are your fees?

Since we represent disability insurance claimants at different stages of a disability insurance claim we offer a variety of different fee options. We understand that claimants living on disability insurance benefits have a limited source of income; therefore we always try to work with the claimant to make our attorney fees as affordable as possible.

The three available fee options are a contingency fee agreement (no attorney fee or cost unless we make a recovery), hourly fee or fixed flat rate.

In every case we provide each client with a written fee agreement detailing the terms and conditions. We always offer a free initial phone consultation and we appreciate the opportunity to work with you in obtaining payment of your disability insurance benefits.

Do I have to come to your office to work with your law firm?

No. For purposes of efficiency and to reduce expenses for our clients we have found that 99% of our clients prefer to communicate via telephone, e-mail, fax, GoToMeeting.com sessions, or Skype. If you prefer an initial in-person meeting please let us know. A disability company will never require you to come to their office and similarly we are set up so that we handle your entire claim without the need for you to come to our office.

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When you call us during normal business hours you will immediately speak with a disability attorney. We can be reached at 800-682-8331 or by email. Lawyer and staff must return all client calls same day. Client emails are usually replied to within the same business day and seem to be the preferred and most efficient method of communication for most clients.

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James P., ESQ.

I was understandably distressed when I was informed that CIGNA had terminated my disability benefits after ten years of payments. Their rational was that I was not bipolar even though I had lost my position as a partner in a national law firm due to bipolar disease, I was not in fact bipolar. I went on line and very quickly found that Dell & Schaefer had a sterling reputation. They really took me by the hand and guided me through the ERISA appeal process. They carefully explained everything. Not only was I treated in a professional manner; I truly felt that these people sensed my fear and pain, and were committed to doing justice.

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