Court Solidifies Rights of Insured Under an Ambiguous Policy

The First Circuit recently affirmed the position that when a policy or plan is ambiguous, it should be interpreted in favor of the insured. The case that gave rise to the question is Ministeri v. Reliance Standard Life Insurance Company. The facts of the case concern a denial by the Defendant (“Reliance”) for life insurance benefits due to the widow of a Plan member, Renee Ministeri (“Plaintiff”). Reliance argued that the Plaintiff’s late husband, Anthony (the member of the plan at issue), did not have coverage under the policy because it had lapsed due to his absence from work caused by a severe medical condition. Anthony passed away in 2015, with Reliance claiming that the policy lapsed during the time he was not working.

The dispute revolved around unclear language in the policy regarding the definitions of “actively” working in the role of “corporate vice president.” Further, the facts were unclear about the amount of hours Anthony had worked during the relevant period. The Court held that “under a reasonable construction of the phrase, Ministeri could be regarded as an ‘Active … Corporate Vice President’ as long as he was a non-retired employee holding a job title matching the rank of Corporate Vice President.” Further, the Court’s ruling stated that no dispute existed as to whether Ministeri’s status as a current employee was terminated prior to his formal announcement of leave in 2014. Thus, the Court rejected Reliance’s argument concerning the interpretation of the ambiguous terms in this section of the policy.

Reliance proffered a second argument, opining that $500,000 in supplemental coverage was not available to Renee Ministeri in addition to the $592,000 in basic coverage provided by the policy. Reliance argues that Renee failed to apply for the portability provision of the policy, though it was noted during oral arguments that she had applied for supplemental coverage. Applying for supplemental coverage was the Plaintiff’s avenue to enacting the portability provision, against which Reliance did not argue. Judge Bruce M. Selya stated in his opinion that Reliance delayed their defenses to the Plaintiff’s claims in violation of ERISA; his opinion read, “[Reliance] chose to keep quiet about its discovered basis for denial until litigation ensued … that is precisely the sort of delayed reaction ERISA forbids.”

Reliance attempted a final argument to defend their denial of coverage, stating that since Anthony had stopped working a minimum of 20 hours per week as a result of his illness, a vital condition of the plan (required for coverage) was not met. It further argued that Anthony could have been eligible for benefits under the policy for one year if premiums had been paid, but since he passed 15 months after he stopped working, coverage was still unavailable. This argument was also rejected by the Court for the same ambiguity in the policy referenced in the denial of Reliance’s first argument. Judge Selya wrote, “The eligibility provision requiring Ministeri to work at least twenty hours ‘during [his] regularly scheduled work week’ could reasonably refer to his typical weekly workload before the chaos introduced by his medical condition.” Thus, due to the room for interpretation in the policy language, the policy must be interpreted in favor of the insured and Reliance’s argument denied.

The Court held that Renee was covered by the policy and entitled to $1 million, strengthening the insured’s right to coverage in circumstances of ambiguity.