Opinion ID: 808364
Heading Depth: 3
Heading Rank: 2

Heading: Stephan’s Claim

Text: On April 18, 2007, TWP offered Stephan a position as Managing Director in its Institutional Sales department. Stephan’s offer letter stated, in relevant part: Your salary rate will be $200,000 annually. Your salary will be paid semi-monthly, less payroll deductions and all required withholdings. You will be eligible to participate in Thomas Weisel Partners’ discretionary bonus program. Although bonuses are generally discretionary, you will be guaranteed [a] $300,000 bonus for your first 12 months of employ- ment, provided you perform at the level both you and we anticipate and that you have not voluntarily terminated your employment or been terminated for cause prior to the relevant payment dates. When he accepted his new position, Stephan became insured under TWP’s policy, underwritten by Unum. Four months later, Stephan suffered a severe spinal cord injury in a bicycling accident, as a result of which he became quadriplegic. Shortly thereafter, he applied for disability benefits under the Plan. On December 3, 2007, Unum sent Stephan a letter stating that his disability claim had been approved and specifying that Stephan would receive disability benefits of $10,000 per month. Unum based this amount on Stephan’s annual salary of $200,000 per year. Later that month, TWP paid Stephan the $300,000 bonus promised in his offer letter. Stephan appealed Unum’s benefits determination, arguing that his benefits should have been based not on his annual salary of $200,000 per year but on an annual income of $500,000 — his base salary plus the annual bonus guaranteed to him in his offer letter. In support of his appeal, Stephan pointed to the disability claim form submitted by TWP 11084 STEPHAN v. UNUM LIFE INSURANCE Human Resources, which stated that Stephan’s annual earnings were $500,000; the insurance premiums TWP paid Unum based on that rate of compensation; and Stephan’s offer letter guaranteeing him a bonus of $300,000. Stephan also attached several additional documents to his appeal: He provided Unum a memo from TWP explaining that “in each month prior to the date of [Stephan’s] disability, TWP recorded compensation expense, associated with the cash component of [his] guaranteed bonus payment”; another memo from TWP explaining how the company calculated its insurance premiums; and a letter from accountant and former Unum Director of Financial Assessment, Carol Poulin, analyzing Stephan’s claim and finding that “Mr. Stephan’s monthly income,” on which his disability benefits should be based, “consists of both his pro-rated salary and pro-rated guaranteed bonus.” Unum rejected Stephan’s appeal, maintaining “that the original basic monthly earnings calculation was correct.” The letter from Unum rejecting Stephan’s appeal observed: As Mr. Stephan began working in April and stopped working in August he did not work a full 12 months and it is apparent that TWP went outside their own employment agreement when [Stephan] received a bonus in December 2007. This is consistent with the information provided in a December 14, 2007 con- ference call with TWP representatives when they indicated that they intended to morally honor his contract. Further, Unum stated that it did not appear [Stephan’s] bonus was a true accrual as indicated by TWP. If it were truly an accrual, the bonus would have been paid monthly, which would have been reflected in [Stephan’s] payroll records. STEPHAN v. UNUM LIFE INSURANCE 11085 Unum noted that contrary to Stephan’s claim that TWP paid insurance premiums on a salary of $500,000, Unum’s “premium billing department confirmed that premiums for [Stephan’s disability] coverage were based on earnings of $100,000; not his salary at the time of disability and not including any bonus.” Finally, Unum rejected the analysis of accountant Carol Poulin. Poulin, Unum stated, did “not take into account the fact that [Stephan’s] bonus [was] contingent on a level of performance over the 12 months of employment, which [Stephan] did not complete.” “Accordingly,” Unum continued, “we have determined that his analysis and conclusions are flawed.”