Although this California non-ERISA disability policy litigation was not handled by our disability insurance lawyers, it is relevant to contract law for those who are employed by a state or federal government and have long term disability policies not covered by ERISA.
California insurance law, not ERISA, applies to a lawsuit against a disability insurer by a former government employee
The plaintiff in Klees v. Liberty Life Assurance Company of Boston, a former employee of the University of California, a governmental employer, was initially approved for long term disability benefits due to her many medical conditions, including fibromyalgia, seronegative inflammatory arthritis and injuries she had suffered in a car accident.
When Liberty terminated the plaintiff’s benefits, she filed a lawsuit alleging breach of contract and breach of the covenant of fair dealing. Liberty responded and, among other arguments, relied on published cases citing the Employees’ Retirement Income Security Act (ERISA) in a motion to dismiss the lawsuit. The California federal court labeled Liberty’s citations of ERISA law as a “red herring” in that ERISA specifically exempts government employers from its provisions.
The termination of long term disability came after three independent medical examiners determined the plaintiff could work in some capacity. Liberty tried to convince the court to apply the ERISA definition of disability instead of using the definition of disability as it was defined in the policy terms. The California federal court had no patience with Liberty stating, “ERISA cases are irrelevant to California insurance law.”
Since the question of whether or not the plaintiff was totally disabled under the terms of the contract required resolution under California insurance law, and not by the definition of disability found in inapplicable ERISA law, Liberty’s motion to dismiss the lawsuit was denied.
If you have questions regarding your claim for disability benefits, or if your disability claim has been denied, call Disability Attorneys Dell & Schaefer for a free consultation.