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Home > Blog > Blog > Long Term Disability > Fifth Circuit Gives Reliance Standard Second Bite at the Apple in Dispute Over Long-Term Disability Benefits

Fifth Circuit Gives Reliance Standard Second Bite at the Apple in Dispute Over Long-Term Disability Benefits

In Newsom v. Reliance Standard Life Ins. Co., No. 20-10994, __F.4th__, 2022 WL 500403 (5th Cir. Feb. 18, 2022), Plaintiff-Appellee James Newsom worked as a software architect for Lereta, LLC for 23 years before some long-standing health conditions deteriorated to the point of causing him to cut back on his work hours. In September 2017, his scheduled work week was reduced from 40 hours to 32 hours. At the end of October 2017, he was placed on part-time status and scheduled for less than 30 hours per week. He continued to work part-time until January 30, 2018, when his health caused him to stop working altogether. Defendant Reliance Standard insured Lereta’s short-term and long-term disability benefits. Newsom applied for short-term disability (STD) benefits with Reliance Standard and reported January 30 as his last day of work and January 29 as the first day he became unable to work because of his disability.

Reliance Standard denied Newsom’s STD benefit claim on the basis that as of his date of loss, January 31, 2018, he had only worked 28 hours per week prior to that date. Because of this he did not qualify as a full-time active employee entitled to benefit coverage. “Full-time” in the policy “means working for [the employer] for a minimum of 30 hours during a person’s regular work week.” Regular work week is not defined. Newsom appealed the STD denial to Reliance and asserted his true date of disability occurred the week of October 16, 2017, his last scheduled 32-hour work week, because his disability required him to work a part-time schedule after that. Reliance agreed and paid his STD benefits using October 23, 2017 as the date of disability. However, when it came to his long-term disability (LTD) benefits, Reliance determined that his date of disability was January 31, 2018. Because he did not work at least a 30-hour work week before that date, he was not eligible for LTD benefits. Newsom appealed the denial, but Reliance upheld its decision.

Newsom filed suit against Reliance under ERISA Section 502(a)(1)(B). The district court ruled in favor of Newsom, resting its interpretation of the term “regular work week” as used in the definition of “full-time” in the LTD policy, to mean “normal, ordinary, standard work week” or “scheduled work week,” not “actual hours worked.” Because Newsom was scheduled to work 32-hour weeks through the week of October 16, 2017, he was a full-time employee regardless of whether he actually worked more than 30 hours each of those weeks. The district court also found that Newsom was unable to perform the material duties of his job on a full-time basis as of October 23, 2017. He ordered payment of LTD benefits in the amount of $194,290.72.

Reliance appealed three issues: (1) the district court’s interpretation of “regular work week”; (2) the district court’s finding of disability as of October 23, 2017; and (3) the district court’s award of LTD benefits rather than remanding the claim to Reliance to analyze whether Newsom was disabled. The Fifth Circuit affirmed the judgment of the district court as to Newsom’s eligibility for LTD benefits and alleged date of disability. It found that the interpretation of “regular work week” was answered in Miller v. Reliance Standard Life Ins. Co., 999 F.3d 280 (5th Cir. 2021), where the court, applying contra proferentem, interpreted this ambiguous phrase in favor of the insured. The district court did not err by interpreting “full time” and its reference to a “regular work week” to mean the “scheduled work week” set by the employer. On the date of disability, the court found no clear error in the district court’s analysis, which was consistent with Reliance’s decision on Newsom’s STD claim.

On the last issue, the court vacated the judgment as to Newsom’s entitlement to LTD benefits. The court agreed with Reliance Standard that a remand is necessary in this case because Reliance did not decide an element of the claim, here, whether Newsom met the definition of Total Disability. On this point, the court found the Seventh Circuit’s reasoning in Pakovich v. Broadspire Services, Inc., 535 F.3d 601 (7th Cir. 2008) to be persuasive. The district court conflated the issues of eligibility and disability, but these are distinct issues. The file contains some medical records, but it is incomplete since Reliance did not examine the merits of Newsom’s claim. Further, Newsom’s treating physician estimated that Newsom could return to work by August 1, 2018. The district court did not address this in the order. The court remanded the matter with instructions for the district court to remand Newsom’s claim to Reliance for further proceedings consistent with this opinion.

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