Employees in Chicago who stop working and claim long term disability insurance benefits under an employer sponsored plan usually stop being actively at work on the day that they stopped working. Assigning a date last worked can be a little bit more complicated than it seems, especially in today’s working environment where employees do not always have to track their personal days or vacation days, but instead treat paid time off as borrowed time. The same amount of work must be done per year. Consider a situation where the employee takes several weeks off work for the holidays, and claims disability prior to returning. Often the date last worked will not be of much importance, unless it affects another aspect of benefits, such as calculating the pre-disability earnings. Also, for Social Security Disability benefits, claimants often use the earliest possible date, which may not be in their best interest under an insurance policy.
This turned out to be a contentious issue in a local case, Cheney v. Standard Insurance Company, No. 13-4269 (N.D. Ill. Mar. 13, 2015), where the plaintiff sued for disability benefits under ERISA § 502(a). There, the exact last day worked for purposes of disability insurance was so critical because the policy uses the claimant’s earnings in the prior calendar year upon which to base the disability insurance benefit. The plaintiff took a large unpaid leave of absence in 2010, severely reducing her earnings. Naturally, the insurer attempted to argue the last day worked fell at the end of 2011, rather than the beginning of 2012. In Cheney, the Plaintiff was a partner of a large Chicago law firm who battled medical conditions much of her career. During most of 2011, Cheney worked from outside of the office much of the time. Near the end of December 2011, she stopped performing any billable work. Though she ceased working after December 19, 2011, she did not cease being a partner of the firm, or a Member within the meaning in the insurance policy, until January 3, 2012. The court wrestled with the facts and the insurance policy, but ultimately held that Cheney did not cease being actively at Work until January 3rd, 2012.
While the plaintiff had told the insurer she was disabled since December 19, 2011, she alleged to have taken a couple weeks off work for the holidays, explaining her lack of billing. Moreover, she had previously scheduled a leave of absence with the law firm to commence on January 3, 2012, to address her medical condition. The Court held it would be a “stretch” to determine the plaintiff, who was a lawyer with her firm for over 20 years, stopped being a Member two weeks before she scheduled her leave of absence. This holding significantly impacted the amount of the disability benefit Standard had to pay. The litigation over this point possibly could have been avoided with planning and counseling earlier in the disability claim process.
If you have a claim for long term disability benefits, call an experienced ERISA attorney.