Court: Life Insurance Policy Never Activated

June 16, 2003 ( - The widow of an employer-sponsored life insurance plan lost her bid for $100,000 in insurance benefits because the plan participant called in sick on his last scheduled work day, a federal judge ruled.

>US District Judge James Carr of the US District Court for the Northern District of Ohio upheld the plan administrator’s benefits denial decision that was based on a plan rule about when the life insurance coverage would activate, according to Washington-based legal publisher BNA. If plaintiff Michael Baxter’s enrollment date fell on a holiday as it did on this case, the his coverage would begin if he was in the office on his last day of regularly scheduled work.Because the participant took a sick day on his last regularly scheduled work day, the policy never became active, Carr ruled.

>According to the ruling, Baxter was employed by Institutional Care Pharmacy Inc. and in 2000, signed an enrollment form to obtain $100,000 in life insurance benefits through a plan sponsored by his employer. Under the plan’s terms, Baxter’s coverage was scheduled to begin on January 1, 2001. However, because that date was a holiday, the plan provided that Baxter’s coverage would instead begin on his last regularly scheduled day of work, which was December 26, 2000.

>Baxter died January 9, 2001, and his widow filed a claim for benefits with the plan’s administrator, Guardian Life Insurance Co. of America. Guardian denied the widow’s claim after determining that Baxter was not covered because he was not actively at work on December 26, 2000.

>Baxter’s widow sued Guardian under ERISA challenging Guardian’s decision. Upholding Guardian’s denial of benefits, the court found that Baxter was not at work on December 26, 2000, because his employer’s human resource records indicated that he had called in sick that day.

“Guardian could, in light of the discretion given to it under the policy to interpret its terms and determine coverage, lawfully conclude that [Baxter] had not met the coverage precondition. This is a result that is as harsh as it is unfortunate; this court cannot, however, go beyond the limited inquiry that the law allow[s] it to make,” the court said.

The case is Baxter v. Guardian Life Insurance Co. of America, N.D. Ohio, No. 3:02CV7600, 5/30/03.