ERISA Plan Member Eligible For Disability Benefits From MetLife Where MetLife Failed To Cross-Complain For Indemnification

In Mitchell v. CB Richard Ellis Long Term Disability Plan, Metropolitan Life Insurance Company, UNUM Life Insurance Company of America, etc., Nos. 08-55277, 08-55689 (July 26), MetLife appealed from a district court’s judgment awarding Mitchell long-term disability benefits and attorneys fees in an ERISA action.  MetLife is the current administrator for the CB Richard Ellis plan, and it insured and administered the plan at the time Mitchell filed his claim for benefits.  UNUM, however, was the insurer and administrator of the plan at the onset of Mitchell’s disability.  The Ninth Circuit found that Mitchell was in fact eligible for benefits under MetLife’s policy, and, because MetLife failed to file a compulsory cross-complaint for indemnification against UNUM, the district court action should be affirmed.

The Ninth Circuit found that MetLife, arguing no coverage under its policy,  incorrectly relied on a single line in that policy, the first clause of which states: “If You Become Disabled while insured.”  It found that the Met Life reading took that phrase out of context and without regard to the policy definition of “disabled.”  The sentence, in its entirety, states “If You Become Disabled while insured, proof of disability must be sent to Us.”  Thus, read in context, the clause upon which MetLife relied does not provide that coverage takes effect only if disability begins after the policy’s effective date.  Rather, the Court went on, it stipulates the requirements for submitting a claim if an individual is “disabled” while insured.  The Court also rejected MetLife’s belated argument that Mitchell had not met the “actively at work” requirement in the policy, finding that he was never put on leave and never stopped working as a full-time employee even though his ability to generate commission income had been reduced.  Finally, the Court determined that because MetLife had failed to file a compulsory cross-complaint against UNUM for indemnification, the district court did not err by failing to address that issue and the issue, in turn, was not now before the Circuit.

July 26, 2010   Posted in: Blog