What happens when an ERISA claimant submits contradictory statements to the Social Security Administration and the ERISA plan administrator? Can these contradictory statements be used to deny the ERISA claim? YES.
What’s the difference between a “Commission” and a “Bonus” in calculating a claimant’s monthly benefit? The dissent in this new decision provides guidance…
Here’s the recent case of Govrik v. UNUM Life Insurance Company,[PDF] __ F.3d __ (8th Cir. January 10, 2013).
FACTS: Sullivan sought ERISA disability benefits. The amount of disability payments depended on the claimant’s monthly earnings before disability. To calculate monthly earnings, the plan included “commission” payments received over a 12 month period before disability. But “bonus” payments were counted only if received in the prior calendar year (January-December). The policy also did not define “commission” or “bonus.”
Sullivan claimed his pay was “commission” or “bonus” depending on whatever definition applied. UNUM started paying disability benefits. But later, Sullivan contradicted this and told the Social Security Administration (SSA) in a sworn statement that the $440,000 received was for the sale of his business. When UNUM heard about this, UNUM reviewed the claim, recalculated (and significantly reduced) Sullivan’s monthly benefit, and sought reimbursement for overpayment. Sullivan appealed to UNUM, however, again claiming the large payments were actually “bonuses” (so he could have a higher monthly ERISA benefit). UNUM denied the appeal, relying on Sullivan’s representations to the SSA that the payments were for the sale of his business. Sullivan sued.
DISTRICT COURT: Granted Plaintiff Summary Judgment and Awarded Attorney Fees.
EIGHTH CIRCUIT COURT OF APPEALS: REVERSES
- “It was reasonable for UNUM to rely on information Sullivan submitted to the SSA, rather than Sullivan’s latter day claim to UNUM that the large payments [were salary or bonuses]….Given Sullivan’s shifting positions on how his income should be characterized, it was not unreasonable for UNUM to hold Sullivan to his formal declaration [submitted to SSA].” Op. at 6.
- UNUM’s decision was correct because at the time UNUM denied the appeal, Sullivan had not recanted representations he made to the SSA that the payments were for the sale of his business. Op. at 6.
- The court “defers to the administrator’s interpretation of the plan ‘so long as it is reasonable, even if the court would interpret the language differently[.]’” Op. at 8 (Dissent).
- UNUM provided no evidence what the terms “commission” and “bonus” meant, so the court relied on the dictionary. Recourse to the dictionary is “reasonable.” Op. at 9 (Dissent).
- “Commission,” according to the dictionary, is a fee paid to an employee for transacting a piece of business or performing a service. Op. at 9 (Dissent).
- “Bonus,” according to the dictionary, is money given in addition to usual compensation. Op. at 9 (Dissent).
- The dissent concludes UNUM abused its discretion in determining the large payments to Sullivan were from the sale of a business and not compensation in the form of a bonus. Op. at 9 (Dissent).