Opinion ID: 2994484
Heading Depth: 2
Heading Rank: 1

Heading: Wyatt’s Eligibility Under the Federal

Text: Policy The question presented is whether Wyatt remained eligible for benefits under the Federal plan after he received the third-party settlement. It is uncontested that Wyatt will not receive any monetary payments from Federal until he exhausts the $4 million settlement, which would take roughly 5,970 weeks, or 115 years, from December 1992. In Federal’s terms, the payments are suspended until that time. UNUM contests strongly that one can still be eligible for benefits that one will, undisputedly, never receive, and that the cessation of payments to Wyatt by Federal is merely a fiction that we should disregard. In this view, Federal is still making payments to Wyatt, but Wyatt is immediately paying them back the same amount. Rather than engage in this routine every week, Federal and Wyatt agreed that Federal would stop making payments at all. UNUM asks us to look past this arrangement of convenience, this fiction, to the reality that Wyatt is still eligible for payments from Federal. We think this is a strange understanding of the word eligible. We agree that Wyatt is still covered by the policy, in that the policy has not been cancelled or voided. This is a far cry from saying he is eligible to receive payments. According to one definition, eligible means entitled to something. Webster’s Third New International Dictionary 736 (3d ed. 1986). The Federal plan indicates that Wyatt must pay Federal back for any money he received from third parties. He therefore is not entitled to anything from Federal since he must immediately give back anything they paid him. The UNUM policy directs us to the amount of any disability income benefits for which the insured is eligible. (Emphasis added.) Reading eligible as entitled, it becomes obvious that the amount to which Wyatt is entitled is zero. UNUM’s interpretation that one can be eligible to receive something that one has no right to possess in any sense, is clearly wrong. Federal’s use of the term suspend might reflect Federal’s view that Wyatt remained eligible, but only as to future payments. Sometime, perhaps in the 22nd century, Wyatt would again be entitled to a weekly benefit, so it could not be said simply that Wyatt was, in all circumstances, ineligible under the Federal plan. Thus Federal suspended payments until he again would be due to receive a payment that he would not be bound to immediately give back, rather than declare with finality that Wyatt is ineligible for benefits, either presently or in the future. UNUM points to three cases from other courts that purportedly hold that, in the interest of preventing double recoveries, insured parties remain eligible for benefits they are required to reimburse. See Sampson v. Mutual Benefit Life Ins. Co., 863 F.2d 108 (1st Cir. 1988); Zeller v. UNUM Life Ins. Co., 1997 WL 732420 (E.D. La. 1997); Snead v. UNUM Life Ins. Co., 824 F.Supp. 69 (E.D. Va. 1993), aff’d in part, remanded on other grounds, 35 F.3d 556 (4th Cir. 1994). Sampson involved facts similar to those of the case at bar. 863 F.2d at 108-09. The plaintiff in Sampson was covered by two policies: a workers compensation policy and a long-term disability policy. The long-term disability plan required an offset of benefits paid by a workers compensation plan, and the workers compensation policy required reimbursement from third-party settlements. After receiving a third-party settlement and reimbursing the workers compensation carrier, the plaintiff sued to prevent the disability carrier from withholding the offset amounts related to the period before the third-party settlement. The First Circuit held that to prevent the disability carrier from withholding the offset would violate the principle underlying both the [disability] policy’s offset provision and the reimbursement provisions of the Massachusetts workers compensation law, for it would allow Sampson to recover twice for the same loss. Id. at 111. In Snead, the injured worker retained the workers compensation benefits, but also wanted to keep the disability benefits despite UNUM’s offset provision which required a reduction in benefits for any amount payable under any Workmen’s Compensation Law, Occupational Disease Law, or any other legislation of similar purpose . . . . 824 F.Supp. at 72. The court held that public policy against double recoveries, as expressed in the state’s workers compensation law and the disability insurer’s offset provision, counseled against allowing the injured worker to recover from both the workers compensation and disability insurance providers for the same injury. 824 F.Supp. at 73 (quoting Sampson, 863 F.2d at 110-11). These cases are distinguishable. First, Sampson, and Snead in part, involved the disability insurer’s right to an offset for benefits paid before the third-party settlement. Wyatt does not contest that UNUM is entitled to the $670 offset for this period. Second, both involved workers compensation benefits under state law, in which the expressed policy was to prevent double recoveries. In such situations, workers compensation carriers are entitled to liens against any third-party settlements so that where possible, the burden of payment would be borne by tortfeasors rather than insurance carriers, which helps to keep rates down for state-mandated workers compensation insurance. By virtue of his partnership status in the firm, Wyatt was exempt from the state-required workers compensation insurance. His insurance was voluntary and not subject to the state requirements. Therefore, the state’s policy interest is inapplicable. Instead, the matter is simply one of contract interpretation, and on this ground, UNUM’s policy in this case differs significantly from UNUM’s policy in Snead. In Snead, the relevant offset provision looked to amounts payable under any Workmen’s Compensation Law, id. at 72, and the court determined that UNUM should receive an offset for the amounts the worker actually was paid and retained. The court’s language makes this clear: The Court finds, as did the court in Sampson, that the plain language of the policy provision permits the insurance company to offset disability benefits against workmen’s compensation benefits previously paid to the disabled employee. Thus, UNUM is entitled to offset workmen’s compensation benefits paid to Snead by Fireman’s Fund against disability payments UNUM must pay to Snead. 824 F.Supp. at 73 (emphasis added). The court focused on payments actually made to the injured worker and allowed an offset for that amount. The case did not involve offsets for payments that would never be made. Even if we were to find that a public policy against double recoveries applied here, UNUM could show no double payments similar to those in Snead or Sampson, and thus the policy interest is not implicated by requiring UNUM to make payments to Wyatt notwithstanding the thirdparty settlement./1 Absent state or other law on the matter, employees such as Wyatt are free to purchase on the open market insurance coverage of their choosing, including policies to protect them from long-term disability. They may even purchase more than one policy for the purpose of guaranteeing higher recoveries. Those employees and the insurance companies must agree to the terms of those policies and are free to include provisions preventing double recoveries involving third- party settlements. UNUM can point to no provision in its own policy regarding third-party settlements, but instead attempts to piggyback on the provision in Federal’s policy and the principle expressed by state legislatures to prevent a double recovery. The plain language of the policy does not allow for this result, nor do any cases cited by the UNUM compel it. The offset provision in UNUM’s contract does require a reduction for payments under other group benefit plans, but only to the extent that the insured is actually entitled to those payments. In this case, the employee, Wyatt, is entitled to no payments from Federal, and therefore the offset provision does not apply. The district court here made an additional point we find persuasive. Under UNUM’s reading of its policy, Wyatt actually would be worse off for purchasing the Federal policy then if he had not. Had Wyatt not purchased insurance from Federal, he would have received the $4 million settlement, against which UNUM had no claim because its policy did not contain a third-party settlement clause. He would continue to receive the full benefit under the UNUM policy, and there would be no talk of a $670 per week offset. By purchasing the Federal policy, UNUM argues that Wyatt cost himself $670 per week. Wyatt would have been very foolish to agree to this, and as the plain language of the policies indicates otherwise, we see no need to reach this irrational result.