Generally, when employees have a question concerning their employer provided group long-term disability insurance coverage, the first place they turn is to their HR department. HR Departments are not in the business of underwriting, or interpreting insurance policies, and often do not have the adequate knowledge to competently answer specific questions concerning the terms and conditions of the disability insurance plan. They can, and should provide the employees with the long-term disability plan documents, and enrollment information, but beyond those tasks, should not be relied upon to answer questions concerning eligibility and coverage. It is important to know that, although the employer may be liable to its employee, as a fiduciary, misrepresentations made by an HR representative concerning plan coverage will not trump the terms and conditions of the long-term disability plan itself, and no liability will be placed on the long-term disability insurance company.
Employer Misrepresents Coverage Provided Through Group Long-term Disability Insurance Plan
Recently, the U.S. District Court for North Carolina, dismissed an action brought by a former maintenance mechanic against Reliance Standard Life Insurance Company, and his employer, US Cotton, for benefits which he claimed were owed under the his employer provided group long-term disability insurance plan.
Robert Breyan was diagnosed with chronic obstructive pulmonary disorder (COPD), a degenerative lung condition that impedes the ability to breathe. Mr. Breyan was advised by his doctors that he should maintain all of the disability insurance available to him, as his condition was not expected to improve, and that he would likely, one day, need to file a disability claim. Mr. Breyan maintained a private disability insurance policy, and also purchased coverage through the Reliance Standard long-term disability insurance plan, offered through US Cotton. On multiple occasions, Mr. Breyan was misinformed and assured by human resources at US Cotton that the Reliance Standard plan would provide him with 60% of his annual income. They failed to inform him of any possible reductions or offsets for other disability income benefits, such as Social Security disability, nor did they provide him with a summary plan description, describing the terms of the plan.
Due to his COPD, Mr. Breyan was eventually forced to file a long-term disability claim with Reliance Standard. Mr. Breyan’s claim with Reliance Standard was quickly approved, and shortly thereafter, he was approved for social security disability benefits as well. Mr. Breyan then learned that Reliance Standard had overpaid his claim, due to his receipt of social security disability benefits, and that it was reducing his monthly benefits by the monthly amount he was receiving from social security disability.
Mr. Breyan sued both Reliance Standard and his employer for wrongfully denying his disability benefits. Specifically, he claimed that he was due the amount that the human resources employees informed him he would receive, sixty percent of his salary until retirement age – without being reduced or offset by receipt of any other disability income benefits.
The U.S. District Court found that, although US Cotton induced Mr. Breyan to believe that the benefits he would receive would not be reduced or offset by other payments such as social security disability benefits, the law is clear, the plan documents rule. The court found that the oral representations, or misrepresentations, were immaterial as to the question of whether the benefits promised under the terms of the plan were denied.
Although the court dismissed the claim for wrongful denial of benefits against Reliance Standard, it allowed Mr. Breyan to maintain a claim against him employer, US Cotton, for breach of fiduciary duty. The court found that it is plausible for Mr. Breyan to show that US Cotton breached its fiduciary duty to him by not just misinforming him, but also by failing to comply with its affirmative duty to inform when it knew that silence might be harmful.
You can read about more cases with Reliance Standard on this page.