In the case of Pamela P. v. Sun Life and Health Insurance Company, the court record shows that Pamela P. applied for long-term disability benefits under an employee benefits plan that was maintained by Los Padres Bank for its employees and was awarded disability benefits for over three years. Said plan was underwritten by Sun Life with its Group Certificate governed by ERISA (the Employee Retirement Income Security Act). Mention of the certificate is relevant to this proceeding in that the certificate was specifically assigned to Los Padres Bank in October 2001, with its subsidiaries listed as Harrington Bank and Harrington Wealth Management.
Employees included in the Sun Life policy of Los Padres Bank are required by the language in the policy to be “insured under the policy at the time your Disability commences,” in order to be eligible to receive disability benefits, which is the issue that was debated in Pamela P.’s case which was heard in the United States District Court of the Western District of Missouri. In addition, the certificate “grants Sun Life express discretionary authority to approve or deny claims.”
Background of Pamela P.’s Disability Claim
Pamela P. began working for Los Padres Mortgage Company, LLC in 2002 as vice president and business development officer. At the time of Pamela P.’s employ, Los Padres bank owned 51% of Los Padros Mortgage Company, LLC, and Resource Marketing Group, Inc. owned the remaining 49% of the mortgage company. Pamela P. was paid a monthly salary in addition to commissions in her job there. Reporting to Los Padros Bank, Pamela P. adhered to the bank’s hiring policies and practices and was considered to have a light duty occupation that required some travel.
On February 1, 2004, Pamela P. fractured her right foot when she missed a step while exiting a friend’s home during a Superbowl party. Upon examination by her doctor, Pamela P.’s doctor recommended that Pamela P. undergo an “open reduction of the fracture to straighten out the angulation and to insert a couple of screws to help stabilize the fracture.” Pamela P. was provided with a Cam Walker and told not to bear weight on the ankle and was instructed to use crutches to assist that provision. On February 6, 2004, Pamela P. underwent the procedure and her doctor noted some tissue damage while performing the surgery, telling Pamela P. to stay off the ankle until he instructed her otherwise.
During her follow-up examinations on February 13, and February 23, Pamela P. was said to be healing appropriately. Unfortunately, on February 23, 2004, Pamela P. fell in a restroom at work and re-injured her right foot. Advised to keep the foot elevated and not to drive, Pamela P. was instructed to not return to work until the foot had healed Re-evaluated on March 22, 2004 with some other complications, Pamela P.’s doctor ordered her to remain on a non-weight bearing status. Consequently in April 2004, Pamela P. applied for long term disability benefits with Sun Life and began receiving payments in May 2004 (more info on the disability application).
Pamela P. was examined by her doctor again on April 21, 2004 and he noted that Pamela P. was in pain and was continuing her use of the Cam Walker and a wheel chair. On April 27, 2004, Pamela P.’s doctor saw Pamela P. again as a result of her ongoing pain, noted that her wound was healed and attributed her pain to the Kwires in her foot. He x-rayed the Kwires, which were found to be intact and planed to remove them soon and noted that Pamela P. had “osteroporosis of the fracture area.”
Continuing follow-up visits with no relief, Pamela P. applied for Social Security Disability (SSD) in August, 2005; and while the Social Security Administration found that Pamela P. was impaired, it suggested she pursue a sedentary position. After extensive therapies, surgical procedures, and pain management, Pamela P.’s doctors determined that she “was able to work in a sedentary work setting” and that “further rehabilitation services” would not improve her situation.
Sun Life Terminates Pamela P.’s Disability Benefits
Upon evaluation of Pamela P.’s file and some video surveillance (read more on video surveillance for disability claimants) that showed Pamela P. moving without assistive devices by an independent medical consultant, Sun Life terminated Pamela P.’s disability benefits in July of 2007. In May 2008, Pamela P. appealed the insurer’s decision to terminate her disability benefits, submitted various supporting documentation of her pain and her “mental cloudiness” from the taking of pain medication. After many exchanges of Pamela P.’s medical records among physicians and administrators, on April 6, 2009, Sun Life upheld their decision to terminate Pamela P.’s disability benefits.
During the shuffling of paperwork and the many evaluations, Sun Life tried one more tactic to deny Pamela P.’s disability benefits that appeared to be a point worth going to court with. In a twelve-page letter explaining the insurer’s denial, it wrote that besides not having sufficient evidence to show a true disability on Pamela P.’s part, that Pamela P. was ineligible for Sun Life disability benefits because Los Padres Mortgage Company was “not a covered subsidiary relative to the coverage issued to Los Padres Bank” in the first place. In addition it noted that Pamela P. did not receive treatment for her ankle from October 2006 through February 2008, causing the recent application for benefits to fall “outside the applicable 6 to 12 months interval” required in Sun Life’s policy with the bank.
Pamela P. and Her Disability Lawyer Head to District Court to Pursue Her Claim
And, while the Court looked at Pamela P.s case and considered her suit, in the end, they had to conclude that Pamela P. was not covered under Sun Life’s policy as Los Padros Mortgage Company LLC was not on the Los Padros Bank’s certificate for disability benefits to employees, making all other arguments null and void. The court stated that “At most, Sun Life should have caught the coverage error sooner, which is not the same thing as misrepresenting a material fact.” Noting that Pamela P. received three years of benefits for which she was not entitled and that a claim for equitable estoppel did not exist, the court ruled in favor of Sun Life and denied Pamela P. further access to any Sun Life disability benefit payments.
Note: Equitable estoppl would exist if Sun Life knew that Pamela P. wasn’t entitled to benefits, but provided those anyway. By continuing to pay those benefits with the knowledge that Pamela P. was ineligible would have obligated the insurer by law to continue paying benefits meaning that the insurer could not arbitrarily discontinue them. Here, though, Sun Life was not purposely misrepresenting a material fact by paying her and case law states that “[c]ourts may apply the doctrine of estoppels in ERISA cases only to interpret ambiguous plan terms.” The plan terms here weren’t ambiguous; Sun Life paid benefits to Pamela P. in error. The court summed it up as follows:
Sun Life’s failure to note the lack of coverage in its initial determination was an error, not an interpretation of an ambiguous provision. Furthermore, ‘common-law estoppels principles cannot be used to obtain ERISA benefits that are not payable under the terms of the ERISA plan.’