Denied Disability Claimant Wins when Administrator Blows Deadline

San Jose, CAEmployers can change the terms of their long-term disability plans whenever they want. Those changes often affect what employees must show to make a disability claim, and they rarely make it easy to collect. Plans usually apply changed provisions even to employees who are already receiving benefits. They often lose those payments. But when a claimant brings a lawsuit, the US District Court for the Northern District of California recently held that rule-of-thumb is different. The plan provisions in effect when the disability accrued should govern.

That often works out better for plaintiffs in long-term denied disability cases. It’s a good reason to sue, if you can.

The usual runaround, with a twist

Melissa Vaccaro worked as a human resource professional at NetApp until 2015 when chronic pain, fatigue and cognitive impairment made it impossible for her to continue. She filed for LTD benefits in July 2015. Liberty denied her claim and Vaccaro appealed. Liberty failed to issue an appeal decision before the statutory deadline. Two days after the deadline, Vaccaro sued. Six months later, effective January 2017, Liberty amended its LTD plan in a way that would have conclusively justified its denial of Vaccaro’s 2015 claim.

But for the fact that she had already filed her lawsuit, that would have ended it. Not this time, however.

“Own occupation” vs. “any occupation”

The most important part of any LTD plan is its definition of disability. There are two choices: “own occupation” and “any occupation.”

Liberty’s “own occupation” standard, required that an employee be unable to pursue his or her own occupation in the usual way. Under its “any occupation” standard, an employee must be unable to engage in any occupation in which he or she could reasonably be expected to perform in light of age, education, training, experience, station in life, and physical and mental capacity. It is much harder to qualify for disability under the second definition.

Many LTD claimants start to collect benefits under the ”own occupation” standard but sometime thereafter must meet the “any occupation” test. That is when people lose LTD payments. The Liberty plan was unusual in that it created a class of employees who never had to meet the tougher “any occupation” standard. Under the 2015 version of the plan, Vaccaro arguably fell into that group but not under the changed 2017 definition.

Hard to get to court

The Employee Retirement Income Security Act (ERISA) requires employees to pursue all administrative remedies before they sue. The law further gives great deference to whatever the plan administrator decides unless it is arbitrary or capricious. Essentially, a claimant can only get to court if the decision is weird or if the administrator makes a huge mistake, like blowing past an appeals decision deadline.

The takeaway for workers who want to bring wrongly denied disability claims? Don’t sit on your rights. A day can make all the difference.