Fifth Circuit Rules for ERISA Claimant Where Disability Claim Straddles Two Insurance Companies That Both Deny Coverage

What happens when an employee becomes disabled during a period when his employer switches long-term disability carriers and both carriers disclaim coverage? In Talamantes v. Metro. Life Ins. Co., No. 20-50953, __F.4th__, 2021 WL 2660251 (5th Cir. June 29, 2021), Plaintiff-Appellant Enrique Talamantes found himself in that scenario. Talamantes worked for Becton, Dickinson and Company (“BD”) as a Product Development Engineer when he became disabled due to trigeminal neuralgia and underwent microvascular decompression surgery. BD’s long-term disability plan was insured by Standard Insurance Company for calendar year 2016 and then by Metropolitan Life Insurance Company (“MetLife”) in 2017. Talamantes first went out on disability on November 9, 2016 and was on short-term disability through December 22, 2016. He returned to work on December 23, 2016, and then went out on disability again on January 12, 2017 due to a relapse in his symptoms.

After Talamantes exhausted his short-term disability benefits, he filed a claim for long-term disability benefits with Standard, which Standard denied based on its position that he was not covered under its policy. Talamantes then filed a claim with MetLife, but MetLife did not respond so he filed a lawsuit against Standard, MetLife, and the Plan. Talamantes ultimately settled with Standard and dismissed it from the lawsuit, as well as dismissed the Plan from the lawsuit. At the district court, Talamantes and MetLife agreed to bifurcate the trial on the issue of coverage and the merits of Talamantes’ disability claim. The district court then granted summary judgment to MetLife, concluding that “a harmonious reading of Standard’s and MetLife’s insurance policies shows that MetLife owes no payable benefits to Plaintiff.”

The Fifth Circuit disagreed with the district court and reversed and remanded the matter for further proceedings. The court rejected MetLife’s argument that the Standard policy is on the hook for Plaintiff’s claim. Specifically, the court found that Standard’s policy’s provision governing “Effect of Temporary Recovery” relieved Standard of covering Plaintiff’s claim because he became covered under the MetLife policy on January 1, 2017, which fell during his brief return to full-time work. The Standard policy states:

“No LTD Benefits will be payable after benefits become payable to you under any other disability insurance plan under which you become insured during your period of Temporary Recovery.”

MetLife argued that Talamantes’ benefits never became payable under its policy and his merely becoming eligible for coverage did not relieve Standard of its obligation to cover the claim. The court disagreed, finding that this interpretation is dependent on the merits of the disability claim and a claimant would be “in the dark” about whether he had coverage until he litigated his disability claim.

Ultimately, the court concluded that the plain language of the policies makes it clear that Talamantes’ benefits coverage shifted from Standard to MetLife based on the circumstances of his claim.