Second Circuit Finds Employee Did Not Knowingly Waive ERISA Claim Against Insurer of Former Employer’s Disability Plan

In Schuyler v. Sun Life Assurance Co. of Canada, No. 23-498, —F.4th—-, 2025 WL 2349010 (2d Cir. Aug. 14, 2025), the Second Circuit vacated summary judgment for Sun Life, holding that a former employee’s separation agreement with her employer did not amount to a knowing and voluntary waiver of her ERISA claim for long-term disability (LTD) benefits. The court emphasized that the employer’s explicit pre-execution assurances that the agreement would not affect the LTD claim were dispositive, even though the contract contained broad release language that arguably covered related entities and ERISA claims.

K. Schuyler worked as a Territory Sales Representative for Benco Dental Supply Company from 2011 until late 2019. In 2015, she suffered a traumatic brain injury in a fall and, over the following years, experienced ongoing cognitive and sensory symptoms. She took a six-month medical leave in May 2019 and filed a claim for LTD benefits under Benco’s ERISA-governed LTD Plan, insured and administered by Sun Life.

In October 2019, Sun Life denied the claim, finding insufficient medical evidence of disability. Two months later, Schuyler negotiated a Separation Agreement and Release with Benco, under which she would receive $25,000 in severance. The agreement released Benco and its “parents, subsidiaries, related or affiliated entities … and parties-in-interest” from “any and all” claims, expressly including ERISA claims.

Before signing, Schuyler directly asked Benco whether the agreement would affect her LTD claim. Benco’s counsel twice assured her in writing that Sun Life was “a separate and independent third-party entity in charge of LTD” and that the agreement “should have absolutely no effect on your ability to appeal your LTD” claim. Relying on these statements, Schuyler signed the agreement on December 12, 2019. She then pursued her LTD administrative appeal, which Sun Life denied in August 2020.

Schuyler sued Sun Life in the Southern District of New York under ERISA, alleging wrongful denial of benefits and related violations. Sun Life argued that the release in the separation agreement barred her claims. The district court agreed, holding that the release applied to Sun Life and was executed knowingly and voluntarily under the six-factor test from Laniok v. Advisory Comm. of Brainerd Mfg. Co. Pension Plan, 935 F.2d 1360 (2d Cir. 1991). (We summarized the district court’s decision in our March 17, 2023 blog.)

On appeal, the Second Circuit framed two questions: (1) Did Schuyler knowingly and voluntarily waive her ERISA claims against Sun Life? and (2) Did the agreement’s terms, as a matter of contract interpretation, extend to Sun Life? The court answered only the first, finding that the undisputed evidence established the absence of a knowing and voluntary waiver.

The court reiterated that ERISA waivers require heightened judicial scrutiny because employees are relinquishing rights Congress strongly intended to protect. Under Laniok, courts consider six non-exclusive factors, but the “essential question” is whether, under the totality of the circumstances, the waiver was knowing and voluntary.

Here, the court found it critical that the only counterparty to the agreement—Benco—told Schuyler in unequivocal terms that the agreement would not affect her LTD claim and emphasized Sun Life’s independence. Schuyler’s affidavit stating that she relied on these assurances was corroborated by contemporaneous written communications. The court rejected Sun Life’s attempt to limit the assurances to the administrative appeal process, noting that the release’s broad language covered both administrative and judicial claims. Either the release barred both avenues or neither.

Because Sun Life was not a party to the agreement and was never mentioned by name, and because the agreement’s coverage of “related or affiliated entities” and “agents” was not so clear as to override Benco’s statements, the court concluded no reasonable factfinder could find a knowing and voluntary waiver.

The court acknowledged Schuyler’s business sophistication, the time she had to review the agreement, and her consultation with counsel. But it found these factors insufficient in the face of direct, unqualified assurances from the counterparty that her LTD claim was unaffected. The $25,000 severance, paid solely by Benco, was also modest compared to the potentially significant LTD benefits—further undermining the idea that Schuyler knowingly traded away her claim.

Chief Judge Livingston dissented, arguing that every Laniok factor weighed in favor of Sun Life. She viewed Sun Life as clearly a “related entity” under the release and found Schuyler’s claimed misunderstanding of the assurances uncorroborated and inconsistent with the agreement’s integration clause, which superseded prior representations. In her view, Schuyler knew “exactly the bargain she was making” and could not avoid the waiver by asserting a subjective misunderstanding.

In summary, the Second Circuit held that, under the heightened scrutiny applicable to ERISA waivers, Schuyler did not knowingly and voluntarily release her long-term disability claim against Sun Life when she signed her separation agreement with Benco. The court found dispositive the employer’s explicit, written assurances that the agreement would not affect her LTD claim and emphasized that Sun Life was neither a party to the agreement nor clearly encompassed within its release language. Because the undisputed evidence established that Schuyler reasonably understood her rights to be preserved, the court vacated the district court’s grant of summary judgment in Sun Life’s favor and remanded the case for further proceedings consistent with its opinion.