Can Standard Insurance Company’s Failure to Raise an Issue be Considered a Waiver?
The case of Jose Chavez v. Standard Insurance Company has quite a history with the United States District Court for the Northern District of Texas, Dallas Division. It began in September 2016 when Standard first began paying long-term disability benefits to Chavez. He had several operations on his wrist and was no longer able to perform the duties of his own occupation.
Standard terminated his benefits in July 2017. Chavez appealed, and after exhausting his administrative remedies, he filed an ERISA lawsuit in the federal district court. Standard responded by arguing that Chavez was not entitled to benefits because his wrist problem was due to “arthritis,” a condition that was limited to 12 months of LTD coverage under the policy.
The policy under which Chavez was covered also provided benefits for 24 months if Chavez could prove he was unable to perform the substantial duties of his own occupation. After 24 months, the definition of disability changed and required Chavez to prove he was unable to perform the duties of any occupation for which he had experience, was trained, or educated.
In March 2020, the Court ruled in favor of Chavez, finding his type of arthritis did not fall under the 12-month limitation and ordered Standard to pay benefits from the termination date to the date of the judgment with prejudgment interest.
After that decision became final, Standard filed a request for the Court to change its decision and remand to the plan administrator to evaluate whether Chavez could perform the duties of any occupation for the time period between September 2018 and the judgment. In September 2020, the Court ruled against Standard, holding Standard had waived that issue by not raising it in the earlier case. Chavez also filed motions for discovery and for attorneys’ fees, cases that are not relevant to the issues determine in the March and September 2020 decisions.
The March 2020 Decision: Chavez’s Condition is Not One Limited to only 12 Months of Benefits
In March 2020, the Court determined that Chavez’s wrist problem was not one that, according to the policy, was limited to 12-months of benefits. Therefore, the court ruled that Chavez was entitled to LTD benefits from the date of its erroneous termination through April 2020, the date of the judgment, plus prejudgment interest.
The Court noted in a footnote in the March case that Standard “did not contest that Chavez would be totally disabled” if his condition were not one with coverage limited to the 12-month LTD benefit time. Standard had only argued that Chavez’s injury was one that was only eligible for 12-months of coverage.
After the decision was final and officially published, Standard objected and argued that the Court should only have awarded benefits for the 24-month period under the “own occupation” definition of disability. Since Chavez began receiving benefits in September 2016, Standard asked the Court to remand to the plan administrator to determine if Chavez proved he was disabled from working under the “any occupation” standard, which would have commenced in September 2018.
The September 2020 Decision: Standard Waived its Right to Determine Chavez’s Eligibility for LTD Benefits Under the “Any Occupation” Definition from September 2, 2018 to the Date of the Judgment of March 30, 2020.
On September 30, 2020, the Court refused Standard’s request to remand for a determination of whether Chavez could perform job duties of “any occupation” from September 2018 until the time of the judgment. The Court specifically held that benefit claimants are not required to go through “a two-step benefit process: first, apply for ‘own occupation’ benefits and, second, later apply for ‘any occupation’ benefits.” The Court made it clear that there is simply “a single application for LTD benefits.”
The Court held that Standard had waived that argument when it had not presented it to the Court in the earlier case. In holding that Standard waived the issue, the Court stated: “Standard knew Chavez in this case was seeking LTD benefits through the date of judgment. Standard knew nothing in the SPD [summary plan description] required Chavez to make a separate claim for ‘any occupation’ benefits. Standard knew it could request a new physical exam of Chavez to make an ‘any occupation’ determination of disability. Nonetheless, Standard elected not to take action. These actions constitute a classic example of waiver.”
The Court also noted that under ERISA, plan administrators are required to give claimants written notice of the reasons for the denial of benefits. Here, at the administrative level, Standard had never given Chavez the required notice that his benefits were being denied because he had not shown he could not work at “any occupation.” The Court continued: “To permit Standard now to assert that basis for denial when it declined to assert it in the administrative level would violate the purpose of ERISA’s written notice requirement. In essence, when Standard elected not to raise ‘any occupation’ at the administrative level, it in effect ‘doubled down’ on the stated basis of its administrative denial. Having lost that bet, it must now pay up.”
Although the Court refused to remand for Standard to determine if Chavez proved he was unable to work at any occupation from September 2018 until the March 2020 judgment, Standard was not precluded from reviewing Chavez’s claim for LTD benefits past the time encompassed by the judgment.
This case was not handled by our office, but it may provide claimants guidance in their pursuit of obtaining LTD benefits under their employer benefit disability insurance policy. If you need assistance with a similar matter, please contact any of our disability lawyers at Dell & Schaefer for a free consultation.
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