Employees in Chicago and around the rest of Illinois frequently consult us about working either part-time or in a reduced capacity while receiving long-term disability benefits. Most long-term disability insurance policies provide partial disability benefits, as long as you meet the definition of “Disabled,” and your earnings from the substitute work do not exceed a certain threshold. The most typical thresholds are 60% or 80% of your pre-disability earnings. But the policies typically state your long-term disability benefits will end of “Monthly Earnings” exceed that threshold. So how do the policies treat bonuses not received on a monthly basis? Do they count as Monthly Earnings in the month received, making it easier for the insurer to terminate your benefits. One recent case addressed this very issue.
In Neumiller v. Hartford Life & Accident Insurance Co., No. 22-35688, 2023 WL 4173022 (9th Cir. June 26, 2023), Neumiller qualified or long-term disability benefits under a policy insured by Hartford. Later, Neumiller started working again, but retained her benefits under the partial disability provision of the policy. The policy stated Neumiller’s benefits would terminate when her “Current Monthly Earnings” exceed 60% of pre-disability earnings. Neumiller received a salary and a “Trimester Bonus.” Upon receipt of the Trimester Bonus, Hartford terminated Neumiller’s benefits contending her Current Monthly Earnings exceeded 60% of pre-disability earnings in the month Neumiller received the bonus. After unsuccessfully appealing, Neumiller sued under ERISA § 502(a).
The United States Court of Appeals for the Ninth Circuit vacated a ruling against Neumiller. The court explained the policy was ambiguous as to whether bonus income is treated as all received in the month paid, or apportioned out over the time period accrued. Citing Ninth Circuit precedent, Blankenship v. Liberty Life Assurance Co. of Boston, 486 F.3d 620 (9th Cir. 2007), the court held such ambiguities must be construed in the insured’s favor. The court thus treated the Trimester Bonus as apportioned over the period accrued for purposes of the definition of Current Monthly Earnings. The court, however, could not determine from the record what impact this would have on Neumiller’s right to continued benefits, so it vacated the district court opinion and remanded for further proceedings consistent with the opinion.
If you have a claim for long-term disability benefits, contact a knowledgeable ERISA long-term disability attorney immediately.