California Federal Court Finds Coverage Provision in Aetna Long-term Disability Plan to Be Ambiguous

Employee Terminated Despite Suffering From Disability Which Impacted His Work Performance

Kevin worked for Ametek, Inc. from 2008 until July 2012, holding various positions over the course of that time. Beginning in 2009 he began suffering a number of serious health problems which forced him to take medical leave until early 2010, at which time he returned to work. Kevin worked, despite his serious health problems stemming from a spontaneous ruptured bowel until July 2012, when he was laid off by Ametek.

Aetna Denies Claim Alleging that Employee Was Not Covered Employee Under the Plan.

Following his termination Kevin sought long-term disability benefits under his ERISA governed employee long-term disability plan, administered and funded by Aetna Life Insurance Company (Aetna), claiming that his disability began prior to his termination. Aetna promptly denied Kevin’s long-term disability claim, not on the basis of his medical condition, but rather claiming that he was earning his full salary up to the point he was terminated, and because his eligibility for coverage ended on the day he was terminated a claim for disability would not be covered after his date of termination, despite the fact that Kevin continued to pay the premiums for one week following his termination. Aetna relied on a provision commonly found in Aetna Long-term Disability Plans titled, “When Coverage Ends,” and states,

Your coverage under the plan will end if:

  • The plan is discontinued;
  • You voluntarily stop your coverage;
  • The group policy ends;
  • You are no longer eligible for coverage;
  • You do not make any required contributions;
  • You become covered under another plan offered by your employer;
  • Your employment stops for any reason, including job elimination or being placed on severance. This will be the date you stop active work. However, if premium payments are made on your behalf, Aetna may deem your employment to continue, for purposes of remaining eligible for coverage under this Plan, as described below:
    – If you are not actively at work due to illness or injury, your coverage may continue, until stopped by your employer, but not beyond 12 months from the start of the absence.
    – If you are not actively at work due to temporary lay-off or leave of absence, your coverage will stop on the last full day you are actively at work before the start of the lay-off or leave of absence.

    It is your employer’s responsibility to let Aetna know when your employment ends. The limits above may be extended only if Aetna and your employer agree, in writing, to extend them.

Aetna relied on the bullet which states, “Your employment stops for any reason, including job elimination or being placed on severance…”.

After exhausting all of his appeals with Aetna, Kevin sued Aetna in California federal court. Aetna moved to dismiss Kevin’s case on the grounds that coverage did not extend beyond his date of termination.

Kevin argued that since he paid his premiums for an additional week, coverage extended beyond his date of termination. Aetna did not challenge the fact that Kevin paid his premium, but rather argued that Aetna and Ametek did not enter into a written agreement to extend Kevin’s coverage as provided in the Coverage Provision of the long-term disability plan.

Federal Court Finds Aetna’s Coverage Provision to be Ambiguous and Open to Numerous Reasonable Interpretations.

The U.S. District Court denied Aetna’s motion for summary judgment finding that the coverage provision in the long-term disability plan was ambiguous and open to numerous reasonable interpretations. Furthermore, that a “person of average intelligence and experience” could reasonably think that eligibility for coverage is extended if they paid their premiums and the criteria of the provision are met.

The court found Aetna decision to deny Kevin’s claim on the basis that he was not a covered employee was incorrect, however, he was not necessarily entitled to disability benefits since Aetna’s denial was based on eligibility for coverage, and not a determination based on his medical condition. The court remanded the claim back to Aetna to evaluate the evidence of Kevin’s disability and to determine, based on the evidence, if Kevin was disabled under the terms of the long-term disability plan.

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