It seems unfair that an insurance company can underpay a claim and then hide behind time limit defenses when challenged in court. After all, it would seem that the company causes harm to the long-term disability claimant each time it underpays a monthly benefit amount. However, some courts have held that the claimant must challenge the benefit calculation within a limited period of time once the insurer starts paying the wrong amount in order to get legal relief.

In a decision dated April 9, 2019, Federal Judge Terry Doughty in Lafayette ruled for Unum Life Insurance Company of America that a claimant had waited too long to challenge his benefit calculation, and thus he was stuck with Unum’s calculation for the duration of the policy. The case is Vizinat v. Unum Life Insurance Company of America, No. 6:14-CV-00953, 2019 WL 1548653 (W.D. La. Apr. 9, 2019). In this case, Unum pro-rated a third-party tort settlement over the life of the policy and deducted a sum attributable to the tort settlement each month. The claimant appealed this calculation way back in 2003, and the calculation was upheld during Unum’s administrative appeal process. The court applied the three-year deadline for filing suit found in the policy, even though the three-year limitations period does not directly appear to apply to miscalculations of benefits. The court relied in part on the fact that the deadline for filing suit under Louisiana law would be even less than three years.

The court applied Supreme Court precedent and precedent of several other federal courts of appeal finding that an ERISA calculation violation is not a continuing harm that gives rise to a new cause of action each time an improperly calculated benefit is paid. It remains to be seen if the plaintiff will appeal to the Fifth Circuit. The court stated in its decision that the Fifth Circuit does not yet have precedent directly on point.

This case shows the importance of paying attention to deadlines in ERISA long-term disability cases (and the importance of consulting with a good ERISA attorney as soon in the process as possible). Courts tend to apply policy deadlines strictly in favor of the insurer.