Employees in Chicago with claims for long-term disability benefits rarely can calculate the precise amount of benefit the insurance policy owes them. The amount is usually some percentage, e.g., 60%, of pre-disability earnings. But the policies also define pre-disability earnings, often to include base salary at the time of disability, or based on the previous twelve months. The insurer usually gathers payroll data from the employer to verify earnings, and tells you the monthly benefit amount. Few people question the calculation. With the insurer undertaking all these tasks to calculate the benefit, is it responsible if it overpays the claim? A recent case held the insurer is a fiduciary with respect to calculating benefits, and bears the responsibility to accurately calculate those benefits.
In Morris v. Aetna Life Insurance Co., No. 21-56169, 2023 WL 3773656 (9th Cir. June 2, 2023), Morris was a software engineer diagnosed with cancer and went on disability leave in 2009 under her employer’s group long-term disability insurance policy, insured by Aetna. Aetna approved the long-term disability claim and paid Morris a monthly benefit of $4,113.17. Morris relied on the calculation in negotiating her divorce settlement, paying her taxes, and refinancing her home. In 2018, Aetna discovered it miscalculated the benefit by paying Morris more than the true monthly benefit, and began withholding Morris’ long-term disability payment to recoup the overpayment. After Morris unsuccessfully appealed the overpayment, she sued for breach of fiduciary duty under ERISA § 502(a). Aetna moved to dismiss by arguing it is not a fiduciary with respects to calculating benefit payments. The district court granted the motion, and Morris appealed.
The United States Court of Appeals for the Ninth Circuit reversed, holding Aetna was a fiduciary with respect to calculating benefits. The court reasoned that Aetna provided Morris with individualized consultations with benefits counselors, consulted with Morris by phone regarding her benefit amount numerous times, sent Morris letters regarding her benefit amount Aetna knew Morris would share with her lender as proof of income, and communicated with Morris banks to verify her benefit amount. The court explained Aetna’s actions “lie well within the category of ‘well-established fiduciary functions.’” The court distinguished Bafford v. Northrop Grumman Corp., 994 F.3d 1020 (9th Cir. 2021), which held the mere calculation of benefits is a ministerial function, rather than a fiduciary one. The court here explained that Morris’s claim is not based on the simple miscalculation of benefits, but on Aetna’s actions for nearly a decade in failing to avoid the overpayment.
If you have a claim for long-term disability, contact a skilled ERISA long-term disability attorney today.