Opinion ID: 199905
Heading Depth: 2
Heading Rank: 2

Heading: The Policy as Applied to Dandurand's Case

Text: 13 Although Unum initially determined that Dandurand was eligible for benefits and paid such benefits between July 20, 1994 and August 19, 1999, in 1999 Unum informed Dandurand that, due to an error in its calculation of his 1995 earnings, it had overpaid him by almost seventy thousand dollars. 2 The claimed error, which was made by an Unum employee and went undetected by at least three other Unum employees, derived from the fact that Unum had not included bonus income received by Dandurand in 1995 when calculating his average monthly earnings for that year. 3 With the bonus income included, Dandurand's average monthly earnings for 1995 exceeded 80% of his indexed pre-disability earnings, as calculated from his 1993 earnings. Dandurand was therefore not disabled in 1995, according to the income definition of the Policy. 14 Having determined that Dandurand was not disabled in 1995, Unum proceeded to analyze whether he was entitled to benefits in 1996. Unum did so by treating 1996 as a potential new disability period. Unum thus compared Dandurand's 1996 average monthly earnings to his basic monthly earnings in 1995, the calendar year immediately preceding the date of the potential new disability, and not to his earnings in 1993. Unum determined that Dandurand was in fact disabled during that year, because his average monthly earnings for 1996 were less than 80% of his average monthly earnings for 1995. However, the fact that Unum treated 1996 as a new period of disability had several adverse consequences. First, Unum imposed a new 180-day elimination period on Dandurand at the beginning of 1996, during which he was not entitled to receive any benefits. Second, because Unum had established 1995, instead of 1993, as the benchmark year — and because Dandurand's average monthly earnings had been lower in 1995 than in 1993 — Unum calculated that Dandurand's monthly benefit for 1996 would be lower than it had been in 1994. Third, and just as importantly, Unum's recalculation of Dandurand's indexed pre-disability earnings based on the 1995 earnings resulted in a lower benchmark for comparing average monthly earnings in subsequent years. Unum consequently determined that Dandurand's 1997 earnings had exceeded 80% of his indexed pre-disability earnings and that he therefore was not disabled in 1997 under the Policy and not entitled to any benefits. Comparing his 1998 average monthly earnings to his 1997 average monthly earnings, Unum then also concluded that Dandurand was not disabled in 1998 and not entitled to any benefits that year. Finally, Unum determined that, although Dandurand was once again disabled under the Policy in 1999, when his 1999 earnings were compared to his 1998 earnings, Unum could impose another 180-day elimination period at the beginning of the year and calculate Dandurand's benefits based on his earnings in 1998, which were lower than both 1995 and 1993. 15 Having thus concluded that it had overpaid Dandurand from 1995 to 1999, 4 Unum informed him that it would offset his future monthly benefits in their entirety until the overpayment had been recovered. Dandurand consequently brought the present action under ERISA, 29 U.S.C. §§ 1132(a)(1)(B) and (a)(3), seeking reinstatement of his monthly benefit, repayment of the benefits withheld, a ruling on the parties' conflicting interpretations of how the monthly benefit should be calculated, and a ruling that Unum should not be allowed to recover the overpayment. Dandurand did not contest that he was not disabled in 1995. Instead, he objected to Unum's determination that 1996 and 1999 constituted new disability periods, with the consequences we have discussed. He argued that a reasonable interpretation of the Policy would treat his disability in 1996, and thereafter, as a recurring disability that was part of a prior disability and therefore not subject to a new elimination period or a recalculation of the indexed pre-disability earnings. Unum answered with a counter-claim seeking recovery of the overpayment, to which Dandurand raised the affirmative defense that it would be inequitable to allow recovery of any overpayment. 16 Upon a motion by Unum, the district court granted partial summary judgment on the question of the reasonableness of Unum's interpretation of the Policy's terms. Dandurand v. Unum Life Ins. Co. of Am., 138 F.Supp.2d 30 (D.Me. 2001) (hereinafter Order). The court found that Unum did not engage in an unreasonable application of the Policy by regarding Dandurand's 1995, 1997, and 1998 basic monthly earnings as his indexed pre-disability earnings and that its decision to do so was a straightforward application of the Policy's express language. 138 F.Supp. 2d at 36. 5 This is the holding which is before us on appeal. 17 The district court subsequently held a bench trial on Unum's counter-claim for recovery of the overpayment. The district court denied the counter-claim on the basis that it was inequitable, ordered Unum to cease deducting money from Dandurand's monthly payments, and directed Unum to refund the money it had deducted to date in an effort to recoup the claimed overpayment. Dandurand v. Unum Life Ins. Co. of Am., 150 F.Supp.2d 178 (D.Me. 2001). Unum did not appeal this ruling. 18 Following the entry of final judgment, Dandurand timely appealed the partial summary judgment ruling that accepted as reasonable Unum's interpretation of the Policy under which 1996 and 1999 were considered new disability periods with monthly benefits thereafter calculated based on Dandurand's earnings in 1995 and 1998, respectively.