SunLife Released From Any Lawsuits Due To Claimant Giving Up Right To Sue In Severance Agreement

The signing of a severance package when leaving a job is not uncommon, but you may be signing away your right to pursue either a short or long term disability insurance claim. A recent lawsuit decision from the Federal Court in New York is a sad result for a SunLife policy holder that waived her right to challenge a SunLife disability benefit denial. This claim was not handled by our law firm.

After being denied disability benefits by SunLife Assurance Company of Canada, Kristen Schuyler, a former territorial sales representative entered into a separation agreement with her former employer and filed suit against SunLife to recover her withheld LTD benefits. US District Court of NY for the Southern District of New York found that SunLife had been released from any suits and causes of action related to the disability claim when Schuyler entered into the separation agreement with her former employer without including a specific carve out for the LTD claim.

Kristen Schuyler, a former territorial sales representative for Benco Dental Supply Company, found herself in a difficult situation after suffering a traumatic brain injury in 2015 while on a business trip to Nashville. Despite being released from the hospital after three days, Schuyler continued to experience cognitive problems, including confusion, difficulty with concentration, and memory problems.

Over the next four years, Schuyler sought treatment from multiple doctors and underwent various therapies to try and improve her symptoms. However, her condition did not improve, and in 2019, at the direction of her doctors, she submitted a claim for long-term disability benefits with Sun Life Assurance Company of Canada.

Unfortunately, SunLife denied Schuyler’s claim, stating that the information they received was not sufficient to demonstrate that she was totally disabled. Schuyler, through an attorney, appealed the decision, but SunLife denied the appeal.

During this time, Schuyler also accepted and entered into a separation agreement with her employer, Benco. Schuyler filed a lawsuit against SunLife in the US District Court for the Southern District of New York, seeking to overturn their decision to deny her disability claim.

SunLife sought dismissal of the lawsuit on the grounds that Schuyler had waived any legal claims she may have under ERISA through the separation agreement she signed with Benco. The Court examined whether Schuyler knowingly and voluntarily waived her claim for long-term disability benefits, even though SunLife was not specifically released in the separation agreement she signed with Benco.

The Court considered six factors in determining whether Schuyler’s waiver of her ERISA LTD claim was done knowingly and voluntarily. These included her education and business experience, the amount of time she had access to the agreement before signing it, her role in deciding the terms of the agreement, the clarity of the agreement, whether she was represented by counsel, and whether the consideration given in exchange for the waiver exceeded her LTD benefits.

The Court found that Schuyler was well-educated, holding both a bachelor’s and an MBA, and had extensive business experience based on her role as a Territorial Sales Rep and often dealt with contracts. It also found that she had negotiated an increase in the severance offer from $19,584 to $25,000.

Although the separation agreement did not specifically name Sun Life, it stated in two separate places that Schuyler released any claim under ERISA arising out of or in any way connected to her employment. Schuyler’s disability attorney had reviewed her agreement to ensure that it did not harm her LTD and SSD claims. However, the attorney did not advise her that the agreement should contain a specific carve-out provision to ensure that her LTD claim and benefits would not be affected.

Unfortunately, the Court found that SunLife, although not a released entity named in the agreement, was a plan administrator and an affiliated or related entity. Therefore, the Court concluded that Schuyler knowingly and voluntarily waived her LTD claim under ERISA, and the lawsuit was dismissed.

Kristen Schuyler’s case highlights the importance of carefully reviewing and understanding the terms of any legal agreement, especially when it comes to important benefits such as long-term disability insurance. In addition, it underscores the need for seeking advice from experienced counsel to ensure that one’s legal rights are fully protected.