A Pennsylvania court determined Reliance Standard Life Insurance’s interpretation of ambiguous policy language was reasonable and complied with the Plan’s goals.
In McGlynn v. Reliance Standard Life Insurance Company, a Pennsylvania federal district court was faced with determining whether the policy language requiring disability benefits to be offset and reduced based on an estimate of other benefits to which the claimant was eligible to receive was ambiguous. If so, did Reliance act reasonably when it required McGlynn to exhaust her appeal rights after Social Security denied her application for disability benefits. The court agreed with Reliance, stating, “I cannot say that their interpretation is unreasonable in light of the stated policy goals.” Accordingly, McGlynn was not entitled to receive the estimated amount of other benefits which had been withheld from her monthly disability payment.
The Court Found the Policy Language Was Ambiguous
Although both Reliance and McGlynn argued the policy language was unambiguous, the court disagreed. The policy language at issue allowed Reliance to estimate an amount of other benefits to which the claimant was eligible to receive. The estimated amount that was withheld would be adjusted when Reliance received proof “that benefits have been denied and the denial cannot be further appealed.”
McGlynn was granted disability benefits for two years. The monthly amount paid to her was reduced by the amount Reliance estimated she was eligible to receive from Social Security. When her request for SS benefits was denied, she allowed the time to appeal to expire without appealing the denial. She claimed this fulfilled her obligation and Reliance should pay her the amount it had withheld since she provided proof that she could not further appeal the denial.
Reliance asserted this language meant that McGlynn had to exhaust her appeal rights, not just let the time run out and decide not to appeal. Reliance argued that the estimate would not be refunded until she could prove that the “social security has been denied at the highest level and cannot be further appealed.” Since she had not appealed the denial of benefits, Reliance refused to pay her for the estimated amount it had withheld from her when paying benefits.
The court found the policy language ambiguous since it did not define, “cannot be further appealed.” Since the language was ambiguous, the court was required to determine if Reliance’s interpretation and refusal to pay was reasonable.
Court Analyzes Five Factors and Determines Reliance Acted Reasonably in Refusing to Pay McGlynn the Estimated Benefits that had Been Withheld
When language is ambiguous, the court must analyze five separate factors to determine if the plan’s interpretation is a reasonable one:
– Is the plan’s interpretation consistent with the goals of the plan?
– Will the interpretation render any other policy language meaningless?
– If there is any conflict with the procedural requirements of ERISA?
– Has Reliance consistently interpreted the language in the manner it is now interpreting it?
– Is the interpretation “contrary to the language of the Plan?”
The court found that Reliance met all five prongs of the analysis and held that, “I have determined the language is ambiguous and the challenged interpretation by Reliance was reasonable and therefore will not be overturned. Ms. McGlynn has not demonstrated she is entitled to judgment as a matter of law because she has not demonstrated that the interpretation by Reliance was unreasonable.
This case was not handled by our office, but it may provide claimants guidance in their pursuit of full compensation when their policy has a provision for withholding estimated amounts of other benefits. If you need assistance with a similar matter, please contact any of our lawyers for a free consultation.