In Faciane vs. Sun Life Assurance Company of Canada, the claimant received a monthly benefit for long-term disability benefits pursuant to an ERISA-regulated group insurance policy. The group policy covered employees of Capital One Financial Corporation. He alleged that Sun Life had been underpaying him for years. The material facts of the case were not in dispute. Mr. Faciane had been receiving a minimum benefit of $100 since December 1, 2006. In a March 31, 2008 letter to Faciane, Sun Life explained to the claimant how it had calculated his benefit amount. At some point in time, Faciane realized that his benefits may have been underpaid.
However, Faciane did not challenge Sun Life’s March 2008 calculation until June 26, 2017 – almost 10 years later!
After his administrative appeal with Sun Life was denied, Faciane filed a lawsuit against Sun Life seeking a higher monthly benefit. Unfortunately, Faciane offered no explanation either in his complaint or in his filings with the Court as to why the information available to him in 2008 was insufficient to put him on notice of an alleged major miscalculation and underpayment of LTD benefits.
Time Limit to File a Lawsuit Under the Policy
The long term disability insurance policy provides, in a subsection titled “Legal Proceedings”:
“No legal action may start:
1. until 60 days after Proof of Claim has been given; nor
2. more than 3 years after the time Proof of Claim is required.”
Based on his date of disability, Mr. Faciane’s “Proof of Claim” was required by early March 2007. Therefore, the policy’s bar on the start of a lawsuit “more than 3 years after the time Proof of Claim is required” took effect in early March 2010—years before Faciane initiated his case.
The Court’s Evaluation of Sun Life’s Argument That the Claim Should be Dismissed Due to Untimeliness
The court followed so-called “clear repudiation concept” and concluded that “an erroneously calculated award of benefits under an ERISA plan can serve as an event other than a denial that triggers the statute of limitations, as long as it is (1) a repudiation (2) that is clear and made known to the beneficiary.”
The Court concluded that Faciane had “enough information available to [him] to assure that he [knew] or reasonably should [have known] of the [alleged] miscalculation” at the time that he received Sun Life’s March 31, 2008 letter.
Under the terms of the policy (set forth above), Faciane’s claim was not time-barred until early March 2010 (3 years after the time Proof of Claim was required). Thus, Faciane had about two years in which to administratively challenge the calculation of his “Basic Monthly Earnings” and, depending on the outcome, bring a lawsuit.
Yet, Faciane did not file a lawsuit until December 2017. This was way past the time limit to file a lawsuit.
In short, the Court concluded that the application of the limitations period defined in the policy was enforceable and that Faciane’s miscalculation claim against Sun Life was time-barred. Accordingly, the Court granted Sun Life’s Motion for Summary Judgment on the issue of timeliness and dismissed the case with prejudice.
What About the “Continuing Violation Theory”?
A savvy plaintiff might argue something like the ‘continuing violation theory’, whereby a new cause of action would accrue upon each underpayment of benefits owed under the plan.
However, several courts have rejected the ‘continuing violation theory’ in an ERISA miscalculation claim, noting that the theory “is not as clear a fit in cases where the plaintiff[’s] claims are based on a single decision that results in lasting negative effects.” Here is another quote from another case: “While Plaintiffs may have felt the ongoing effects of their ineligibility for ERISA benefits every time they received a paycheck from a third-party payroll agency, Plaintiffs’ own allegations make clear that Defendants’ wrongful conduct, if any, involved the misclassification of Plaintiffs as off-payroll employees at their time of hire in April 1994. The district court properly dismissed Plaintiffs’ ERISA § 510 claim as time-barred.”
In short, Federal Courts do not seem to be adopting the ‘continuing violation theory’ in ERISA disability cases.[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.]
Here is a copy of the decision in PDF: Faciane v. Sun Life