A 3-judge panel at the 9th U.S. Circuit Court of Appeals has decided 2-1 to give a paralyzed California man a new chance to get more benefits from a group long-term disability (LTD) insurance carrier.
In a split decision, the panel majority found that a U.S. District Court judge should have paid more attention to how much the fact that the plan administrator, Unum Life Insurance Company of America, was also the plan insurer should have affected the court's analysis of whether Unum Life might have abused its discretion to interpret the group LTD policy.
Unum agreed that Stephan was permanently disabled. When the company calculated Stephan's monthly benefits, it based the calculations on Stephan's monthly salary and excluded Stephan's annual bonus.
Like many insurance policies, the group LTD plan that covered Stephan included a provision giving the insurer the discretion to interpret the terms of the policy. The federal courts generally hold that, when a benefit plan includes a discretionary clause, the courts can review the facts in a benefits decision involving the plan from scratch only if the insurer appears to have abused its discretion.