Tuesday, September 08, 2015

To be (at work) or Not to be (at work)

Here's an interesting dilemma:

"In late 2009, Sequeira applied for life insurance his employer planned to offer ... A tragic series of events followed: Sequeira paid premiums twice in 2009, did not work the January 1 paid holiday, was suddenly hospitalized on January 2, and died January 6 before returning to work ... Lincoln denied benefits because of a policy provision stating, “[y]our insurance is effective on … the day you resume Active Work"

We generally see the "actively at work" clause on group health plans, but it makes sense that other employer-based benefits are affected, as well. In this case, the carrier - quite reasonably, it would seem - applied the clause to a yet-to-be-issued life insurance policy.

Unfortunately for  Lincoln National Life, their no-doubt carefully crafted verbiage was deemed deficient by the California Court of Appeal:

"[T]he court recited the canon of contract interpretation that ambiguities should be interpreted against the drafter to protect the insured’s reasonable expectations"

This is old, settled law: if there's any ambiguity in a policy, it's generally to be interpreted to the favor of the insured (a sort of "the customer is always right" clause). But what's ambiguous about "actively at work?"

Well, I can think of a number of circumstances that might apply: being on vacation or a bad winter snow-storm, to name just two. But the court found that the carrier's verbiage carried the seeds of its own destruction:

"[A] reasonable insured could interpret the policy’s effective date to be tied to employment status, rather than whether an employee was actually working on a certain date, particularly when the latter interpretation would lead to bizarre results elsewhere in the policy."

That is, one qualifies simply by being an employee, not necessarily on-the-job at a particular time or day. That makes sense, and one wonders if it will be used in cases where group health benefits are denied folks who have an inconveniently-timed day off.
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