A federal appeals court in Pennsylvania has ruled against a mutual insurer and in favor of an injured railroad employee in a case involving an interpretation of the term “total disability.”

A 3-member panel at the 3rd U.S. Circuit of Appeals unanimously agreed to uphold a district court ruling in favor of James D. Meyer, a brakeman and conductor, and against CUNA Mutual Insurance Society, Madison, Wis.

Meyers, a member of a credit union, bought a credit disability insurance policy for a loan from CUNA Mutual in 1999.

CUNA Mutual stated in the policy’s total disability clause that the company would cover payments for 12 months if “a member is not able to perform substantially all of the duties of his occupation.”

To qualify for total disability benefits for more than 1 year, the member would have to be “unable to perform any of the duties of his occupation; or (2) … is unable to perform the duties of any occupation for which he is reasonably qualified by education, training or experience.”

In 2000, Meyers was injured at work and began to receive CUNA Mutual disability benefits, according to court documents.

Three years later, CUNA stopped paying benefits and said Meyer no longer met the definition of “total disability.”

Meyer’s physician’s report, “indicated [he was] capable of modified light duty work” according to CUNA Mutual.

Meyers, however, maintained that he was never cleared by any physician to return to his old occupation.

The district court ruled in favor of Meyer and held CUNA Mutual’s definition of “total disability” to be ambiguous. The district court also issued a class-action injunction requiring the insurer to interpret the provision in favor of claimants in the future.

CUNA Mutual appealed the district court’s ruling.

“Meyer’s interpretation is unreasonable because it allegedly conflicts with industry custom and practices,” CUNA Mutual said.

The 3rd Circuit dismissed the appeal and vacated an injunction against a class action suit.

“A court construes ambiguities in an insurance policy strictly against the insurer,” Circuit Judge Joseph Greenaway Jr. writes in an opinion for the court. “The burden of drafting with precision rests with the insurance company” and the usage of the word “or” within the policy “suggested a choice between two alternatives.”

The choice allowed Meyers to argue that he fell under the first option of the “total disability” clause and was unable to resume “the duties of his occupation,” Greenaway says.

The 3rd Circuit rejected the district court’s definition interpretation injunction and said the lower court had no authority to impose the injunction.

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