Del Gallego v. Wells Fargo & Co. Long Term Disability Plan
679 F. App'x 547
| 9th Cir. | 2017Background
- Plaintiff John Del Gallego claimed Wells Fargo & Company Long Term Disability Plan (the "Plan") and insurer Metropolitan Life (MetLife) improperly offset his permanent partial disability (PPD) workers’ compensation benefits against Plan long-term disability (LTD) benefits.
- The Plan (via a MetLife group Certificate of Insurance) states LTD benefits are "reduced by Other Income Benefits," defining "Other Income Benefits" to include "Workers’ Compensation or a Similar Law" and saying "periodic benefits and substitutes and exchanges for periodic benefits will be counted."
- Del Gallego received weekly PPD (periodic) workers’ compensation payments and also a lump-sum WC settlement (the Plan did not set off the lump sum).
- Del Gallego argued: (1) "Other Income Benefits" should be limited to payments compensating for lost wages (i.e., temporary disability), (2) periodic PPD for future earning capacity is not "income," (3) "periodic benefits" is ambiguous, and (4) only the portion of any lump sum attributable to lost income may be set off.
- The district court granted summary judgment for the Plan and MetLife; the Ninth Circuit panel affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "Other Income Benefits" includes workers’ compensation PPD | Del Gallego: only payments for lost wages (temporary disability) qualify; PPD for future earning capacity should not be set off | Plan/MetLife: definition explicitly includes "Workers’ Compensation" and periodic WC benefits | Affirmed: WC PPD falls within "Other Income Benefits" and can reduce LTD benefits |
| Whether "periodic benefits" excludes weekly PPD | Del Gallego: term ambiguous; could exclude weekly increments | Defendants: "periodic" plainly includes regular/weekly payments; lump sums are treated separately | Affirmed: "periodic benefits" unambiguously covers weekly payments |
| Whether lump-sum WC payments can be fully offset without isolating portion for lost income | Del Gallego: Plan requires proof of amount attributable to lost income for lump sums, so offset should be limited | Defendants: that proof provision applies only to lump sums; here Plan did not set off the lump sum | Affirmed: no unlawful setoff of lump sum occurred; proof rule applies only to lump sums |
| Whether "income" excludes compensation for lost future earning capacity | Del Gallego: PPD for future loss is not "income" | Defendants: precedent treats impaired earning capacity as diminution of income; Plan defines WC as "Other Income" | Affirmed: court rejects plaintiff’s distinction; PPD qualifies as income under the Plan |
Key Cases Cited
- Babikian v. Paul Revere Life Ins. Co., 63 F.3d 837 (9th Cir. 1995) (ERISA policy terms interpreted in ordinary and popular sense)
- Evans v. Safeco Life Ins. Co., 916 F.2d 1437 (9th Cir. 1990) (same interpretive principle)
- Peterson v. Am. Life & Health Ins. Co., 48 F.3d 404 (9th Cir. 1995) (reasonable-expectations doctrine not applied when policy is unambiguous)
- Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523 (U.S. 1983) (impaired earning capacity described as diminution of income)
- Russell v. Bankers Life Co., 120 Cal. Rptr. 627 (Cal. Ct. App. 1975) (interpreting contract language limiting "income from other sources" to payments for lost time)
- Ott v. Workers' Comp. Appeals Bd., 173 Cal. Rptr. 648 (Cal. Ct. App. 1981) (no ambiguity where plan states payments required by workers’ compensation laws offset benefits)