Federal Court Rules On Disability Insurance Interest Claim
The 2nd Circuit Court of Appeals says members of employee benefit plans may be able to collect interest on unreasonably late benefits payments from disability insurers and other benefits providers.
The U.S. Supreme Court and other courts have usually held that Section 502(a)(3) of the Employee Retirement Income Security Act of 1974 prohibits plan members from suing in federal court for cash payments other than those specifically required by the terms of the plan contract.
But a three-judge 2nd Circuit panel has ruled in favor of the plaintiff in Helen Dunnigan, et al. vs. Metropolitan Life Insurance Company, a suit filed by a former auditor who says Metropolitan Life, New York, ought to pay her interest on back benefits payments it awarded her after four years and eight months of appeals.
“Unless such a delay is justified, we see no reason why it does not constitute a breach of fiduciary duty,” Circuit Judge Pierre Leval writes in an opinion for the court.
“Award of interest is [a] cognizable claim where plaintiffs seek restitution of the wrongful gain that the plan obtained by having the interest-free use of money rightfully theirs under the terms of the plan,” Leval adds, quoting a 1999 opinion from the 3rd Circuit Court of Appeals.
The ruling deals only with interpretation of ERISA, not with the merits of the underlying case.
If the ruling survives appeals, it will send the Dunnigan case back to the U.S. District Court in New York for consideration of the request for class-action status.
Lawyers for Dunnigan are seeking court permission to represent a class consisting of long-term disability insurance beneficiaries who have received lump-sum, retroactive benefits payments without also receiving interest.
A spokeswoman for MetLife declined to comment.
Michael Schoeman, a partner with Schoeman, Updike & Kaufman L.L.P., New York, who helped represent Dunnigan, welcomed the ruling.