In Stiso v. Intl. Steel Group, 2015 WL 3555917 (6th Cir. June 9, 2015), the court reversed a ruling by the district court that dismissed a claim for make-whole relief, and directed the district court “to grant an equitable remedy [against the employer and insurer] equivalent to the promised increase in benefits to plaintiff.”
The decision was written by Judge Merritt, a senior judge who did not participate in the en banc decision in Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364 (6th Cir. 2015), which rejected a claim for make-whole relief in the form of disgorgement of profits. The Stiso panel also included Judge Boggs, who was in the majority in Rochow, and Judge Stranch, who had issued the lengthy dissent in Rochow.
The dispute centered around a fairly common provision in a disability plan that contemplates payment of benefits while a claimant is working. The plan contained the following provision:
Indexed predisability earnings means your predisability earnings increased by 7%. The first increase will take place on the date the 13th Monthly Benefit is payable. Subsequent increases will take effect on each anniversary of the first increase. You must have been continually receiving Monthly Benefits under This Plan. [emphasis by the court]
The employer, International Steel, issued an SPD that stated:
The predisability earnings on which your LTD replacement income is based are indexed—that is, increased annually by a percentage. After you have received LTD benefits of [sic] 12 months, your predisability earnings are increased by 7%. If you continue receiving LTD benefits, your predisability earnings for purposes of the plan are increased 7% annually on the anniversary of your previous increase. [emphasis by the court]
Practitioners will recognize this language as relating to the determination of the percentage loss of income attributable to a disability when a claimant is disabled but working. That situation requires a comparison between post-disability and predisability earnings, and it is common for plans to index – increase – pre-disability earnings by some factor (often cost-of-living, but here a flat percentage).
International Steel argued that the SPD language concerned this issue, but the Sixth Circuit disagreed, and found that the language would cause a plan participant to believe that his disability benefit would increase by 7% each year:
The language refers only to an increase in benefits after continually receiving benefits for a certain...
