What If Your Settlement Agreement Provides More than the Long-Term Disability Policy Does?

Chicagoans who settle long-term disability insurance claims involving being put back on claim should review the settlement agreement language closely. Sometimes, settlement agreements provide terms that build in future amendments to the policy. But ordinarily, once you make a claim, you have a right to the terms of the policy at the time you triggered the qualifying event: becoming disabled. If you contend your settlement agreements provides more than the policy did when you became disabled, an insurer may argue you are seeking relief beyond the terms of the plan, so your claim must be dismissed. This happened recently, and posed an interesting question about which claims ERISA preempts and which claims it does not. ERISA § 514 ordinarily supersedes all state laws insofar as they relate to an employee benefit plan. So does ERISA preempt a claim for more benefits than the plan provides, thereby triggering dismissal?

In Caggiano v. Prudential Insurance Co., No. 20-7979,, 2021 WL 1050166 (D.N.J. Mar. 18, 2021), Caggiano worked for Prudential and settled a whistleblower claim that placed him on long-term disability leave under Prudential’s plan. At the time, the plan only provided benefits until age 65, but the parties later amended their agreement to allow Caggiano to receive benefits beyond age 65. When Caggiano sued for not honoring the settlement agreement, Prudential removed to federal court and argued the claim was preempted, and thus subject to dismissal.

The court held ERISA § 514 does not preempt Caggiano’s claim because he sued to recover something other than benefits under the terms of the plan; he sought to enforce his settlement agreement. Therefore, he did not bring a claim under ERISA § 502(a) for benefits due under the plan. He brought a claim for breach of his settlement agreement.

If you reached a settlement agreement to place you on long-term disability claim and you are concerned the insurer is not honoring the agreement, consult a skilled ERISA long-term disability lawyer right away.