California Appeal Court Disagrees with Sunlife’s Disability Policy Interpretation

California federal appeals court concludes ambiguous terms in Sun Life’s disability policy must be construed in favor of the claimant, but employer is not a proper defendant.

In Anderson v. Sun Life, a registered nurse presented the Ninth Circuit court of appeals with three issues she asserted were wrongly decided by the lower court. The Ninth Circuit agreed with her concerning two of the issues and upheld the district court’s decision on a third. The case did not mention Anderson’s disabling condition, but ruled in her favor and agreed she was entitled to disability benefits.

Employer is Not a Proper Defendant

Plaintiff filed her ERISA lawsuit against the insurer and her employer, Community Health Systems, Inc. (CHS). The Ninth Circuit noted that under ERISA, proper defendants are those “formally designated as plan administrators.” They are the ones that are responsible for awarding or denying and paying benefits. It was undisputed that CHS delegated all authority to Sun Life to administer the plan. CHS had no involvement “in the payment or denial of benefits.” Therefore, it was not a proper defendant in this law suit.

Ambiguous Terms in Policy Interpreted in Insurer’s Favor

Anderson was denied benefits based on terms of the insurance policy that were ambiguous and subject to interpretation in two ways. The district court’s interpretation of two separate terms, which resulted in the denial of benefits to Anderson, was reversed on appeal. The Ninth Circuit held, because the policy was susceptible to two interpretations, one of which denied her benefits and the other one an interpretation “under which Anderson was eligible for benefits, the district court erred in adopting the more restrictive interpretation.”

The court, relying on precedent, noted, “Subject to certain exceptions that do not apply, ambiguous terms in an insurance policy governed by ERISA are interpreted in the insured’s favor.” Accordingly, the Ninth Circuit held that the ambiguous terms of this plan must be construed in favor of Anderson. The case was remanded with instructions to the district court to grant Anderson’s Motion for Summary Judgment. The district court was also ordered to calculate “the past and future benefits to which Anderson is entitled.”

This case was not handled by our office, but it may be instructive to those who are struggling to interpret the ambiguous terms of their disability policy. If you have any questions about your disability claim, feel free to call one of our attorneys for a free consultation.