Disability Insurance Policies are complicated legal documents that are unfortunately difficult for most individuals to properly understand. While a disability policy is intended to be drafted so that a claimant will clearly understand all of the terms and conditions, a claimant’s misunderstanding can jeopardize a claimant’s right to disability benefits. A recent disability case reveals the importance of complying with a disability policy’s statute of limitations provisions. A statute of limitations is the period of time in which a lawsuit may be filed. Failure to file a lawsuit within the statue of limitations will result in dismissal of a lawsuit. The steps that must be taken in order to obtain disability benefits are not always contained within the disability policy.
Scharff vs Raytheon Company
Donna Scharff was an employee of the Raytheon Company, as well as a participant in both their short-term and long-term disability benefit plans. The plans, privately funded by the Raytheon Company, were administered by MetLife. When Scharff applied for short-term disability benefits and was denied, internal appeals took place before Raytheon gave Scharff their final decision – including a statement to refer to the summary plan description for more information on how to file a lawsuit.
The summary plan description (or SPD) had been provided to each employee involved with the plan and included statute of limitation information in the ‘Disability’ section under ‘Claims Appeal Procedure.’ When Scharff received her letter of denial, the administrator of the plan did not specifically say to check the statute of limitations provided in the SPD.
Mrs. Scharff filed suit against Raytheon Company, with the goal of receiving both her short term and long term disability benefits. However, the Raytheon Company stated that Mrs. Scharff’s lawsuit was untimely and moved to dismiss the case, as the ‘one year’ statute of limitations had already passed by 20 days. Mrs. Scharff said that her untimely filing should be excused, as she was not aware of the statute of limitations – and that the company failed to point it out to her in the denial letter.
The District Court disagreed with Mrs. Scharff and dismissed her case, because of the fact that Scharff filed her lawsuit 20 days after the one year statute of limitations.
Mrs. Scharff appealed the decision made by the District Court, and the appellate court felt as if MetLife did not have a duty to inform her of the statute of limitations in their denial letter. The appellate court also felt as if the information in the SPD was fine where it was, because most individuals would not have trouble finding that information.
The appellate court stated, “A reasonable plan participant whose disability claim had been denied would proceed, naturally, to examine the information that appears under the large-typeface, bolded, and italicized heading, ‘Claims Appeal Procedure’… the average participant in the Plaintiff’s position would have located and understood the one year deadline in the SPD.”
The court ruled that:
- The placement of the one year statute of limitations information in the SPD was not intentionally deceptive and that most individuals would have found and understood it.
- The placement of the one year statute of limitations did not violate guidelines set forth by ERISA or other laws regarding the clarity of contracts.
Mrs. Scharff’s lawsuit would not have been dismissed had she seen and understood the statute of limitations – however, this is another example of how easy it is to misunderstand the language of disability insurance policies.