Jennifer Coats (“Coats”) was an employed by Cottage Health Care as a staff nurse. Through her employment, she was able to participate in an employee welfare benefit plan which included coverage for long term disability benefits. These benefits were funded by Reliance Standard Life Insurance Company (“Reliance”). More specifically, Reliance “shall serve as the claims review fiduciary with respect to the insurance policy and the Plan” and shall “determine eligibility for benefits” and make “complete, final and binding decisions on all parties.”
The policy language includes:
MONTHLY BENEFIT: The Monthly Benefit is an amount equal to:
CORE: 50% of Covered Monthly earnings, payable in accordance with the section entitled Benefit Amount.
BUY-UP: 60% OF Covered Monthly earnings, payable in accordance with the section entitled Benefit Amount.
ELIGIBLE CLASSES: each employee of Cottage Health system . . . .according to the following classifications:
CLASS 1: active, Full-time and Part-time employees except an employee included in any other class and a traveling Nurse.
CLASS 2: active, Full-time Director or above employee
CLASS 1: “Part-time” means working for you for a minimum of 18 hours during a person’s regular work week, or a minimum of 36 hours bi-weekly but less than 72 hours bi-weekly.
Ibid. (emphasis added) In addition, the plan also contained the following information:
CLASS 1: “Covered Monthly Earnings” means the Insured’s monthly salary received from you on the first of the Policy month just before the date of Total disability. Covered Monthly earnings does not include commissions, overtime pay, bonuses or any other special compensation not received as Covered Monthly earnings.
If hourly paid employees are insured, the number of hours worked during a regular work week, not to exceed forty (40) hours per week, times 4.333, will be used to determine Covered Monthly Earnings.
When processing disability claims, Reliance fills out a standardized form which is called the “Integrated Disability Benefit Initial Statement of Claims, RS-1971-A.” This form is called the “EE App.” by employees. Once this form is filed, a disability claim is considered to have been formally filed. It contains five sections, some of which are executed by the claimant, while others are executed by an employer and by a treating physician.
In October of 2013, Coats obtained a back injury on the job. Since then, she has not worked for her employer. Reliance used the October date as the “date of loss” for Coats. In March of 2015, Coats filed for long term disability benefits by filing an EE App. with Reliance. There are several fields that needed answering on the form. Under the Claimant’s compensation field, Coats indicated “Hourly.” She then stated her “Weekly earnings (as defined in the policy) as “1,287.49.” Thirdly, she indicated that she worked 2 days a week for 12 hours a day when the form asked for the “Work schedule at time of disability ____ day/week _____ hrs/day.”
A claims examiner then requested Cottage’s records of “Payroll for the period of 07/01/2013 – 01/15/2014 and timecards for the period of 10/01/2013 – 01/15/2014.” Once the records were received and reviewed, the claims examiner indicated that Coats averaged 23.70 hours of work weekly for the previous twelve weeks before she became disabled. This meant that she would be eligible for benefits. However, the examiner then requested additional information regarding Coats’ employment. Upon receiving answer to those questions, the examiner recalculated Coats’ hours and concluded that she only average 16.83 hours per pay period, causing her to be ineligible for benefits. Later, a denial letter was sent out.
Soon after, an inquiry was made as to why the claim was denied, then the claims examiner evaluated the records again. This time, he decided that Coats had an average of 19.21 hours but “was an eligible employee immediately prior to leaving work.” Therefore, this meant that she was at least eligible for benefits. At this point, the claims reviewed changed the periods during which Coats worked from August 9 through October 18 to August 22 through October 13. This was due to the claims reviewer not including the time differential for hours that were worked between the hours of 7:00PM and 7:00AM.
As of June 11, 2015, Reliance granted Coats benefits in the amount of $2,194.96 per month. She did not find this amount to be enough, so she filed an appeal. This appeal was subsequently denied and led to the instant suit. The main issues at the heart of this suit is the definition of several phrases that are in the plan language, including “Covered Monthly Earnings,” “regular work week,” “regular weekly earnings,” and “rate per hour.” Coats argues that her rate of benefits was miscalculated.
Reliance argues that “regular work week” should be based on calculations of the records which show compensation, as well as time cards. Coats argues that “regular work week” means the number of hours an employee is scheduled to work on a normal basis; in this case, that is 24. To determine whether the phrase “regular work week” is ambiguous, the court will “consider the common and ordinary meaning of the word, as a reasonable person in the position of the participate would understand it.” “In that light, a term is ambiguous if it ‘is reasonably susceptible to more than one meaning, or where there is uncertainty as to the meaning of the term.”
The court believed that the phrase was indeed ambiguous. However, it had to determine whether Coats provided a reasonable interpretation of same. When applying the contra preferntum doctrine, the court decided that the phrase meant the number of hours during which an employee is regularly scheduled to work.
Coats also argues that her pay was incorrectly calculated. Overall, the court decided that her pay should have been calculated using the $5.00 differential for hours between 7:00PM and 7:00AM pursuant to the language of the policy. As a result, the court opted to rule in favor of Coats and against Reliance.[Note: this claim was not handled by the Ortiz Law Firm. It is merely summarized here for a better understanding of how Federal Courts are handling long term disability insurance claims.]
Coats v. RSL
Here is a copy of the decision in PDF: