First Circuit Finds Against Life Insurer for Ambiguous Plan Terms

On July 25, 2022, in Ministeri v. Reliance Standard Life Insurance Co., the US Court of Appeals for the First Circuit found an ambiguous term in an ERISA-governed life insurance policy should be held against the insurer and, applying an interpretation that favored the plaintiff, awarded full benefits with attorneys’ fees and interest.

The plaintiff in this case, Renee Ministeri, sued Reliance Standard Life Insurance Company (Reliance) for life insurance benefits totaling $1,092,000 following Reliance’s denial of her late husband’s coverage on eligibility grounds. The case originated with Anthony Ministeri’s life insurance which was obtained through his employment as a construction services executive beginning on April 1, 2014, and working 24 hours per week. Six weeks later, Mr. Ministeri was diagnosed with glioblastoma, an especially aggressive type of brain tumor. Through the first few months of treatment, he was unable to perform travel-related work duties but continued to work and receive his full salary with approved timesheets reflecting a normal 24-hour work week. Then, after suffering a massive pulmonary embolism, Mr. Ministeri became completely unable to work, necessitating a formal medical leave beginning August 8, 2014. He continued to pay life insurance premiums until his death on October 2, 2015.

Following her husband’s passing, Mrs. Ministeri filed a claim on his life insurance policy with Reliance. The policy contains a provision allowing continued coverage by payment of premiums for twelve months following termination of eligibility due to illness. After twelve months, a sixty-day conversion period applies under which benefits are payable if the insured dies during that period. Linking these continuation and conversion periods together would allow benefits to be payable only if Mr. Ministeri remained eligible until the date his medical leave began. If Mr. Ministeri’s eligibility terminated prior to August 2014, his coverage would have lapsed.

Reliance denied the claim based on the policy’s eligibility criteria which required Mr. Ministeri remain an “Active…Corporate Vice President” working a minimum of 20 hours during a “regularly scheduled work week.” Reliance reasoned that the term “Active…Corporate Vice President” required Mr. Ministeri to continue the normal job duties of his position, which included travel. In addition, Reliance reasoned Mr. Ministeri was no longer completing at least 20 hours of the “regularly scheduled work week” as of May 2014, when he required extensive treatment and short periods of hospitalization. However, the terms “Active…Corporate Vice President” and “regularly scheduled work week” are not defined in the policy. Further, Mr. Ministeri’s employer maintained that while treatments interfered with his ability to travel, Mr. Ministeri’s role with the company shifted to accommodate, and he continued working 24 hours per week until his medical leave began.

In considering the benefits denial, the First Circuit found the terms Reliance relied on – “Active… Corporate Vice President” and “regularly scheduled work week” – were ambiguously stated in the policy. Following its sister circuits, the First Circuit ruled that such ambiguous terms must be construed against the drafter here, Reliance. The court then found that, under a reasonable interpretation of the phrase, Mr. Ministeri could be regarded as an “Active…Corporate Vice President” if he was a non-retired employee holding a job title matching the rank of corporate vice president. Since it was undisputed that Mr. Ministeri was a current employee and had not received a change in job title through the beginning of his treatments, he met the “Active…Corporate Vice President” eligibility criteria until his formal medical leave began on August 8, 2014. As to whether Mr. Ministeri maintained a “regularly scheduled [part-time] work week” of at least 20 hours, the court found that a reasonable interpretation of the phrase would allow for employer-sanctioned schedule flexibility from week to week if a typical part-time workload is maintained. To this point, Mr. Ministeri’s employer repeatedly represented to Reliance that he continued working despite his impairments. Having found Mr. Ministeri met the policy’s eligibility criteria until his medical leave began on August 8, 2014, the court tacked on the policy’s one-year continuation and sixty-day conversion periods to find his life insurance coverage was in effect when he died on October 2, 2015.

While focused on the interpretation of specific terms in the Reliance life insurance policy at issue, the Ministeri case serves as a broader illustration of the risk imposed by imprecise plan language. Where disputed plan terms are found to be ambiguous, a reviewing court will likely interpret those terms against the drafter, whether that be the insurer or plan administrator. As a result, employers should review eligibility provisions in their benefit plans to ensure they are clearly written, faithfully applied, and consistently conveyed in all plan documents and benefit communications. This is especially important with regards to part-time workers and employees on medical leave whose eligibility is more likely to be in flux.

Ministeri v. Reliance Standard Life Insurance Co. »