Federal Court Upholds Insurer’s Denial of Disability Benefits Based on Pretrial Detention, Despite Ambiguity in Policy Language

In McGuire v. United of Omaha Life Insurance Company, No. CV 25-201, 2025 WL 2162440 (W.D. Pa. July 30, 2025), the U.S. District Court for the Western District of Pennsylvania granted judgment on the pleadings in favor of United of Omaha Life Insurance Company, rejecting Plaintiff E. McGuire’s claim for long-term disability (“LTD”) benefits under the Employee Retirement Income Security Act of 1974 (“ERISA”). The case offers a nuanced exploration of policy interpretation under ERISA’s deferential review standard, particularly when plan language is ambiguous and the claimant has not been convicted of a crime.

Background: LTD Benefits Denied After Pretrial Confinement

McGuire was employed by 98 Ventures and covered under a Group Voluntary LTD policy issued by United of Omaha. After becoming disabled in mid-2022, McGuire received LTD benefits from December 2022 through July 3, 2024. However, in May 2024, McGuire was arrested on charges of stalking, harassment, and terroristic threats. Unable to afford bail, he remained in pretrial detention for over 31 days in Allegheny County Jail. The charges were later dismissed, and McGuire was never tried or convicted.

Despite this, United of Omaha terminated his LTD benefits based on a provision in the plan excluding benefits for individuals who have been “incarcerated or imprisoned for 31 days or longer.” After exhausting administrative appeals, McGuire brought suit under ERISA § 502(a)(1)(B), seeking to enforce his right to continued benefits.

Legal Standards: Deferential Review and Administrator Discretion

Judge Nora Barry Fischer applied the well-established framework from Firestone Tire & Rubber Co. v. Bruch, which holds that courts review ERISA benefits denials under an “arbitrary and capricious” standard when the plan grants discretionary authority to the administrator. Here, the policy explicitly conferred discretion upon United of Omaha to interpret terms and determine eligibility.

Because of this grant of discretion, the court deferred to United of Omaha’s interpretation unless it was found to be arbitrary, capricious, or unsupported by substantial evidence.

The Crux: What Does “Incarcerated” Mean?

A central dispute in the case was whether the term “incarcerated” unambiguously applies to pretrial confinement. United of Omaha argued it did, citing dictionary definitions and state case law suggesting that incarceration encompasses confinement, regardless of conviction.

But the court found otherwise. Judge Fischer concluded the term was ambiguous, noting that several Pennsylvania Supreme Court decisions recognized that “incarceration” could refer either to post-conviction imprisonment or to broader pretrial confinement. The cited cases did not squarely address whether pretrial detention qualified as “incarceration” for benefits exclusion purposes, leaving room for competing interpretations.

Despite Ambiguity, Insurer’s Interpretation Stands

Although the court found the term “incarceration” ambiguous, it nonetheless upheld United of Omaha’s interpretation under the deferential standard of review. The insurer’s decision was not arbitrary or capricious, the court held, because it was based on reasonable and commonly accepted definitions that equate incarceration with confinement.

McGuire’s argument that ambiguity should be construed against the drafter (under the contra proferentem doctrine) was squarely rejected. The court, citing Third Circuit precedent (Fleisher v. Standard Insurance Co.), emphasized that contra proferentem does not apply when judicial review is conducted under an abuse of discretion standard. Deference to the administrator’s reasonable interpretation prevails, even where ambiguity exists.

Public Policy Arguments Fail to Sway the Court

McGuire also asserted that enforcing the benefits exclusion based on pretrial detention—especially where confinement was allegedly due to indigence rather than wrongdoing—violated public policy. But the court declined to entertain this line of reasoning, noting that ERISA preempts state law and does not impose substantive requirements on benefit plans. Absent a clear federal policy forbidding such exclusions, the court saw no basis to invalidate United of Omaha’s interpretation on policy grounds.

Conclusion

The ruling in McGuire reinforces the strength of ERISA’s deferential standard of review and the uphill battle plaintiffs face when challenging an administrator’s interpretation of ambiguous plan language. While the court acknowledged the implications of terminating benefits based on pretrial detention without conviction, it ultimately upheld the insurer’s decision, deferring to its discretionary authority under the plan.

For ERISA claimants and practitioners, McGuire serves as a reminder that plan language matters—but so does the standard of review. When an ERISA plan clearly grants discretion to the claims administrator, even reasonable but harsh interpretations of ambiguous terms may survive judicial scrutiny.