Appeals Court Rules Against Health Insurer in Ark. Case

An Arkansas worker receiving disability benefits from a health-insurance company under settlement of a suit should not have his benefits reduced by disability-retirement money he is getting from his former employer, a federal appeals court says.

The 8th U.S. Circuit Court of Appeals at St. Louis decision reversed a ruling by a federal judge in Arkansas that had said Metropolitan Life Insurance Co. could deduct the employer’s disability benefits from back-benefits that were due to Harry N. Stone under a settlement of a previous suit over group health-insurance benefits he claimed.

The settlement states that MetLife can deduct disability payments received by Stone from the Social Security Administration, but makes no mention of benefits from the employer, Alltel Corp.

But the settlement refers to benefits due under the group policy covering Stone, and MetLife argued that the policy itself contained language allowing it to deduct disability retirement benefits received by Stone from Alltel.

The recent ruling cites two paragraphs of the settlement agreement that were cited by MetLife in arguing that deduction of the employer’s benefits were proper.

“Unfortunately for MetLife, paragraph 3(a) defines benefits under the policy differently than paragraph 3(b), which references one specific deduction (for Social Security disability payments),” the appeals court said. “While MetLife’s interpretation is reasonable, Stone’s is also reasonable.”

Arkansas law requires a determination of original intent if an agreement is ambiguous, the court said. Aside from one other document cited by MetLife, no other evidence that might indicate original intent was presented by either side, the appeals ruling said.

That additional document, signed by Stone, was a MetLife form that allowed the insurance company to offset group benefits by payments under several state and federal laws.

“Stone’s private disability retirement benefits are not included in any of these categories,” the appeals court said. “The MetLife form does not grant MetLife the rights of offset it claims.”