Judge: Claims Release Doesn't Bar LTD Application

August 25, 2003 (PLANSPONSOR.com) - A former underwriting vice president at a Rhode Island insurance company didn't lose her right to apply for long-term disability (LTD) benefits by signing a legal release when she left her job, a judge ruled.

>US District Judge William Smith of the US District Court for the District of Rhode Island sent the issue of plaintiff Janis Cappello’s benefit eligibility back to Unum Life Insurance Company – the LTD plan administrator – to conduct further investigation into the matter. Smith said he was not convinced that the claims release agreement was intended to cover potential disability coverage under the Unum policy.

“Despite the fact that (Cappello) was represented by counsel and had ample time to read the Agreement, the evidence is indisputable that neither party gave any thought to the LTD benefits provided by Unum when they negotiated and signed the Agreement,” Smith wrote.

>According to Smith’s ruling, Cappello worked for the Allendale Mutual Insurance Company from 1975 to 1999, rising to the level of assistant vice president of underwriting. While returning to Boston’s Logan Airport from an August 1996 business trip, Cappello tripped on a handicap ramp and fell. She suffered hip and arm injuries, severe back spasms, neck pain, and loss of feeling in her hands. According to the ruling, Cappello underwent surgery and medical treatment for the injuries, but continued to suffer from their effects during her time at Allendale.

>In 1999, Cappello stopped working for the company because of her injuries and because her position was to be eliminated as part of a pending corporate merger. Her husband, a lawyer, began negotiations for a severance package, which culminated with the July 1999 signing of a separation agreement including a legal claims release. As part of the separation, Cappello was paid over $140,000, according to the agreement.

>Finally, Cappello submitted a LTD benefits claim under the Unum plan, which was denied because of the claims release.

>Smith said Unum should get a chance to look into whether Cappello’s injuries were covered under the LTD policy independent of the claims release. “The only action Unum has taken as of this point is to deny Cappello’s claim based on the existence of the Agreement,” Smith wrote. ” Unum is entitled, as plan administrator, to conduct an evaluation as to whether Cappello is otherwise entitled to receive LTD benefits under the Plan.”

The case is UNUM Life Insurance Co. of America v. Cappello, D. R.I., No. 01-252S, 8/18/03.