Financial Advisor Overcomes MetLife Gross Underpayment of LTD Benefits

It’s no secret that the disputed point that most commonly spawns long-term disability ERISA litigation is the core “disabled or not disabled” debate.  Indeed, over the course of ERISA’s history, thousands of federal lawsuits have been filed where the focus, or at least the principal focus, is just that.  Still, litigation centered on other “fringe” issues (“adverse benefit determinations” in ERISA parlance) is not unheard of, and one such issue relates to the amount of benefits awarded, which despite being formulaic by design, can nevertheless lead to disagreement.  Such was the case in recent decision out of the Southern District of New York.

The plaintiff, a financial advisor for Morgan Stanley, was diagnosed with major depressive disorder and generalized anxiety disorder in May 2014, and MetLife (Morgan Stanley’s group LTD insurer) readily agreed to his disabled status.  In dispute, however, was the amount of plaintiff’s benefit which, under the plan, was sixty (60) percent of “benefits eligible earnings” (“BEE”), defined as the higher of: (i) annualized base pay upon hire or prior to annual enrollment; or (ii) the prior year’s “eligible pay” (for the most part, W-2 earnings).

As plaintiff transitioned from STD to LTD, Morgan Stanley advised MetLife that plaintiff’s BEE was $34,527.20, on the basis of which MetLife computed a monthly benefit amount of $1,726.36.  Plaintiff (who was earning around $200,000.00) appealed, asserting that his BEE is much higher. No additional documentation was supplied. MetLife responded by reaching out to Morgan Stanley, which without elaboration adhered to its $34,527.20 figure.  MetLife then denied plaintiff’s appeal. Plaintiff submitted another appeal, again supplying no supplementation documentation. That appeal was also denied, again on the basis of Morgan Stanley’s statement concerning the correctness of the $34,527.20 figure.  Plaintiff appealed a third time, attaching his W-2s for 2013 and 2014, and MetLife responded by reaching out the third-party vendor that performed BEE calculations for Morgan Stanley. When that vendor failed to respond, however, MetLife again turned down plaintiff’s third appeal, and the matter went to litigation.

Deciding, in the context of MetLife’s motion for summary judgment, that the matter needed to be remanded back to MetLife, the Federal Court held that “it could not be more clear” that “MetLife’s determination was made in an arbitrary and capricious manner.”  The Judge observed that “no one who works at Morgan Stanley, or any other investment bank, in a position like plaintiff’s makes just over $34,000 a year,” and that “a representation that a highly paid employee in the financial services sector has a very low BEE should set off alarm bells.”  She slammed MetLife for never performing its own calculation of or otherwise questioning “a number that seems on its face ridiculously low,” and in the face of the suggestion that MetLife only needed to consider what it was given, she pointed to case law holding that an administrator cannot “willfully blind” itself to reasonably available information that might provide clarification.

What’s disturbing about decisions like this are that insurance companies like MetLife are supposed to be behaving as fiduciaries to plan beneficiaries like Mr. Ricciardi, and fiduciaries and supposed to operate in the bests of interest of plan beneficiaries like Mr. Ricciardi.  It’s the fox in charge of the hen house nightmare for beneficiaries like Mr. Ricciardi.

Ricciardi v. Metropolitan Life Ins. Co., 2019 WL 652883 (S.D.N.Y., Feb. 15, 2019)


Evan S. Schwartz
Founder of Schwartz, Conroy & Hack