My apologies for such a direct question for the New Year, but a new case raises the point:

Must a beneficiary have his/her hands or feet at least partially “cut off” to qualify for Accidental Death and Dismemberment benefits? What does the term “dismemberment by severance” in an ERISA plan mean? Isn’t paralysis enough? No.

Here’s the case of Fier v. UNUM Life Insurance Co., __F.3d __ (PDF)(9th Cir. January 4, 2011)(paralysis resulting from “severance of spine” insufficient to qualify for AD&D benefit).

FACTS: Fier was a beneficiary under the employer’s Long Term Disability (LTD) and Accidental Death and Dismemberment (AD&D) benefits. An accident in 1992 severed his spinal cord and he became a quadriplegic; the company tailored a new position for him, paying him the same salary. His salary was reduced $20,000 in 1997. UNUM paid benefits from 1997-2004.

In 2004 UNUM informed Fier he had not been eligible for disability payments (since 1998) because he earned greater than 80% of his pre-disability earnings.

Fier sued, seeking benefits from 1993-1997 and a continuation of benefits. Fier contended, among other things: although his hands and feet remain physically attached to his body, he has lost them from a functional standpoint due to “severance” of his spinal cord.

TRIAL COURT: Applied de novo review and affirmed UNUM’s decision to end benefits.

NINTH CIRCUIT: AFFIRMS with the following rationale.

“‘Dismemberment by severance’ has to mean some actual, physical separation.” This is “unambiguous draftsmanship by an abundantly cautious lawyer.” The court relied on the holding involving nearly identical facts in Cunninghame v. Equitable Life Assurance Society of the United States, 652 F.2d 306, 307 (2nd. Cir. 1981).