Great-West Health Coverage Suit Sent Back for More Hearings

April 14, 2009 (PLANSPONSOR.COM) - A federal appellate court has sent back for more hearings a suit filed by disabled employees of Great-West Life & Annuity Co., charging the firm with wrongdoing in connection with cutting off medical coverage for employees on disability leave.

The 8 th U.S. Court of Appeals said a lower court was wrong in ruling that Great-Westintended for employees to have vested health insurance coverage as long as they remained disabled or until age 65.

The three-judge appellate panel said they found ambiguous a plan provision allowing the employer to amend the plan and that the lower court judge needed to gather more evidence before resolving the ambiguity.

According to the ruling, Great-West notified its employees on long-term disability benefits in late 2004 that, effective January 1, 2005, they would no longer be eligible to participate in the company’s medical plan. Great-West relied on the letter announcing the change as a plan amendment because it was signed by an officer of the company, the court said.

In November 2007, the lower court found that the letter was not a valid plan amendment and that even if it had been effective, it was invalid because the disabled employees had vested medical benefits and ordered the medical coverage to be reinstated. Great-West appealed that ruling.

Turning to the employees’ claim that the welfare benefits at issue were vested, the appeals court agreed with the district court that the plan language was ambiguous as to Great-West’s intent.  The appellate court also agreed with the district court that the employees’ claims for past-due benefits were compensatory in nature and therefore unavailable under ERISA Section 502(a)(3).

The case is Halbach v. Great-West Life & Annuity Co.,8th Cir., No. 07-3865.