A Drunk, Two Insurance Policies, and One Court’s InterpretationPosted January 10th, 2011
Why is this Topic Important to Wealth Managers? Presents planning opportunities for those selling long-term disability care coverage as a stand-alone, or in conjunction with other insurance products to either companies or individuals.
Robert Fier was employed as a gaming machine operator in Las Vegas, Nevada. He worked his way up through the company to be promoted to a managerial position. During this time, Fier enrolled in an insurance program offered by the company to managers. The enrollment entitled Fier to two insurance policies, a Long Term Disability Policy and a Group Life and Accidental Death and Dismemberment Insurance Policy.
The long term disability plan stated, in essence, Fier was entitled to payments upon the occurrence of disability if he earned less than 80% of what he had before the accident. Also, the policy payments terminated if he starting making over 80% of what he had before the accident. The group life and accidental death and dismemberment policy will be discussed in more detail below.
After five years with the company, Mr. Fier was shot in the throat during a hunting accident. The individual who shot Fier on that hunting trip (in the great state of Utah) was evidently intoxicated. The accident left Fier a quadriplegic for life.
Mr. Fier was then offered a position at the same company that was designed specifically to fit his new disability. The company continued to pay Fier the same amount as it had before the accident. However, after four more years, the company assigned Fier to a new position and lowered his salary by $20,000 annually. Mr. Fier then filed a claim under his long term disability policy.
After a year of his new position at a lower salary, Fier left the company to work elsewhere, earning what he had before the accident had taken place. He continued to collect payments, totaling $152, 069.02 over eight years, seven of which he had been employed at his original salary level. When the insurance company stopped payments, Fier filed suit.
The Ninth Circuit Court of Appeals held that Fier was not entitled to benefits other than those specifically stated in the insurance contract, i.e., when he was earning at least 80% of his pre-accident levels.  Further, the policy expired in full when Fier went to work for another company. Also, in an earlier ruling on the case, the District Court held the insurance company could not claim a refund of payments once they had been made.
Additional attention was given by the Circuit Court to the group life and accidental death and dismemberment policy. The court held, that even though Fier no longer had use of his arms or legs, the policy which stated to make payments only if a limb was “cut off”, required actual physical severance of bodily limbs. Nevertheless, since Fier hadn’t experienced “dismemberment by severance” of bodily limbs no payment was required contractually under the latter policy.
This week’s blogticle will be discussing wealth management and creation ideas for 2011.
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 Fier v. Unum Life Ins. Co.of America. — F.3d —-, 2011 WL 9571. C.A.9 (Nev.). 2011.