Academic journal article Journal of Risk and Insurance

Employee on Leave Remains a "Full-Time" Employee for Purposes of Benefit Plan and Was Entitled to Death Benefit Coverage

Academic journal article Journal of Risk and Insurance

Employee on Leave Remains a "Full-Time" Employee for Purposes of Benefit Plan and Was Entitled to Death Benefit Coverage

Article excerpt

Tester v. Reliance Standard Life Insurance Company, 228 F.3d 372 (4th Cir. 2000) (applying federal common law)

Annie Ruth Tester began working for Bibb Company as a full-time employee on June 1, 1993. In August 1993, Bibb obtained group accident coverage for its employees, with death benefit coverage of $50,000 provided through a group policy with Reliance. The policy provided that it covered full-time and part-time employees, with "part-time" defined as working at least 20 hours per week; temporary or seasonal workers were excluded. On January 8, 1995, Tester took an approved medical leave because of health problems. On February 15, 1995, she died from injuries sustained in an automobile accident (she was a passenger, and the accident was not related to her health problems).

Reliance refused to pay the accidental death benefit to Tester's husband, arguing that she was no longer covered under the policy because she was not actively working at the time of the accident. The U.S. Court of Appeals for the Fourth Circuit (which covers Maryland, Virginia, North Carolina, South Carolina, and West Virginia) rejected the insurer's defense and found coverage for the Testers. Applying the federal common law of contract interpretation applicable to employee benefit plans under the Employee Retirement Income Security Act of 1974 (ERISA), the court found that the policy was ambiguous as to whether the taking of a leave made the employee "inactive" and therefore ineligible for coverage.

The policy's eligibility provision, however, does not include the phrase "actively at work" or "active work," and we will not read those terms into that provision. The policy does contain provisions that incorporate the phrases "actively at work" and "active work." But they are used with respect to effective date, not eligibility .... Thus the policy incorporates "actively at work" and "active work" to establish when an individual's coverage initially will begin. It does not incorporate those terms to determine if an employee is eligible for coverage. …

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