No. 92 Benesowitz v Metropolitan Life Insurance Company

Mitchell Benesowitz began working for the Honeywell Corporation in April 2002 and was immediately covered under Honeywell's long-term disability (LTD) plan, which is administered by the Metropolitan Life Insurance Company (MetLife). He had been treated for kidney disease during the three months prior to his hiring by Honeywell. In October 2002, Benesowitz decided he could no longer work and he applied for short-term disability benefits. MetLife paid the benefits for five months, but in April 2003 the insurer denied his application for long-term disability based on a provision of its policy that permanently excludes LTD coverage for a disability that is caused by a pre-existing condition and arises during the first 12 months of coverage.

Benesowitz ultimately filed this lawsuit in federal court to contest the denial, contending that MetLife's permanent exclusion of coverage for disabilities caused by pre-existing conditions violates New York Insurance Law § 3234(a)(2), which states, "No pre-existing condition provision shall exclude coverage for a period in excess of twelve months following the effective date of coverage for the covered person." U.S. District Court for the Eastern District of New York dismissed the claim, rejecting his argument that the statute permits an insurer only to withhold benefits during the first 12 months of coverage. The court agreed with MetLife that section 3234(a)(2) allows insurers to impose a permanent bar to coverage of disabilities that arise within that period.

The U.S. Court of Appeals for the Second Circuit, finding the statute "ambiguous," is asking the
New York Court of Appeals to resolve the issue. "Nothing in the plain text indicates that 'twelve
months' refers to a waiting period rather than to the time during which manifestation of a disability
forecloses future recovery," the court said. "Both interpretations are reasonable."

New York State, in an amicus brief filed in support of the plaintiff, said the Superintendent of
Insurance has consistently interpreted the statute to allow only a temporary waiting period, rather than a permanent bar to coverage, since the law was enacted in 1993. The Second Circuit said the State "has represented to this court that the Superintendent set allowable rates for disability insurance policies based on his understanding that disability benefits for a pre-existing condition will only be precluded for a twelve-month period. Conversely, MetLife contends that it has relied for years on the Superintendent's approval of its plan provision, which is now said to conflict with the statute, and that a change in the interpretation accepted in the insurance industry will 'create havoc in the employee disability benefit plan arena.' Thus, the issue central to this appeal is of exceptional interest to both insureds and insurers in New York, as well as to the state itself, which is
responsible for regulating the relationship between insurers and insureds."