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9th Cir. – Unpublished – Work Incentive Benefit Offset Allowed

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  • 9th Cir. – Unpublished – Work Incentive Benefit Offset Allowed

    Here’s a new case from the Ninth Circuit, unpublished, entitled Abrams v. Life Insurance Company of North America. The plaintiff brought suit alleging that LINA abused its discretion by offsetting his monthly benefit by 50% pursuant to the “work incentive benefit.” The court first rules that the plan is clear.

    The Plan’s SPD satisfies these requirements with regard to the Work Incentive Benefit. The SPD clearly explains how Abrams’s monthly benefit would be impacted by money he earned while receiving disability benefits:

    If you return to work while disabled, your monthly benefit will not be offset for employment earnings during the work incentive benefit period. . . . Work Incentive benefits for CIGNA . . . can continue for 24 months and apply only once to each period of disability. . . . After 24 months of disability, CIGNA will reduce your monthly benefit by 50% of your current earnings.
    The “circumstances . . . result[ing] in . . . [a] loss of benefits” are apparent from the language of the Benefit: after 24 months, the monthly benefit will be reduced by 50% of the beneficiary’s monthly income. Such language would “reasonably apprise” an “average plan participant” of her rights and obligations under the Plan and the circumstances under which her monthly benefit would be offset. 29 U.S.C. § 1022(a); Scharff, 581 F.3d at 904.

    That conclusion is not undermined by the SPD’s statement that “[t]he total of your group and individual policy coverage . . . will never be less than 60% of your LTD Benefits Base Salary.” While Abrams’s policy coverage would never be less than $300,000—60% of the policy’s maximum covered salary—the SPD does not state that his monthly benefit would never fall below the policy maximum. To the contrary, the SPD outlines a litany of circumstances under which a planparticipant’s benefits would be reduced, limited, or offset.
    Next, the court concludes that the work incentive benefit does not violate the reasonable expectations doctrine.

    2. For largely the same reasons, the Work Incentive Benefit, as described in the LINA policy, does not violate the “reasonable expectations doctrine.” The common-law doctrine of reasonable expectations requires that restrictive provisions in insurance contracts be “clear, plain, and conspicuous.” See Saltarelli v. Bob Baker Grp. Med. Tr., 35 F.3d 382, 386–87 (9th Cir. 1994). That requirement supplements ERISA’s express disclosure requirements. Scharff, 581 F.3d at 904.

    Abrams concedes that the words of the Benefit are clear, and—as we concluded above—the Benefit plainly describes how monthly benefits are offset by income after 24 months of disability. The Benefit and its limitations are also sufficiently conspicuous in the policy: it is described in two different places, including in the “Schedule of Benefits” on pages 3 and 4 of the policy, which a beneficiary must read to understand how his benefits are calculated. Contrast Saltarelli, 35 F.3d at 385 (exclusion “bur[ied] . . . amidst definitions, rather than forthrightly stat[ed] . . . in the operative clauses of the plan description,” was not conspicuous). Because the Benefit was clear, plain, and conspicuous, it does not run afoul of the reasonable expectations doctrine, and is not thereby unenforceable. See id. at 387.
    The opinion is attached below.
    Attached Files