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January 16, 2002
Court Backs Interest on Late Disability Payments
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ederal appeals court has concluded that the Employee Retirement Income Security Act of 1974 allows for recovering interest on late disability payments, according to the New York Law Journal.

Joining two other circuits, the 2nd U.S. Circuit Court of Appeals said the interest on late payments cannot be deemed "extracontractual, compensatory money damages, which are generally not recoverable under ERISA."

The ruling overturned a decision by Southern District Judge Shira Scheindlin, who had dismissed the putative class action, Dunnigan v. Metropolitan Life Insurance.

The Journal reports that the plaintiff, Deloitte & Touche accounting firm employee Helen Dunnigan, had applied to MetLife for long-term disability benefits in July 1994, four months after being diagnosed with Chronic Fatigue Syndrome.

The request was denied by letter on Nov. 15, 1994, 35 days after the expiration of the 90-day response period allowed by law.

When Dunnigan's appeal was denied in August 1995, she sued, according to the Journal. But in 1999, almost five years after she first applied for benefits, MetLife gave her a lump-sum payment for 55 months of long-term disability without interest.

Dunnigan sought recovery of interest under ERISA § 502(a)(1)(B), contending that interest was part of the benefits due her under the plan. She also asserted a claim under § 502(a)(3)(B) for an injunction or "other appropriate equitable relief," alleging MetLife breached its fiduciary duties and was guilty of unjust enrichment.

MetLife sought to dismiss on the grounds that the request for interest constituted a claim for "extracontractual, compensatory damages."

On the appeal, 2nd Circuit Judge Pierre N. Leval said, "When benefits are paid only after the date on which the beneficiary was entitled to receive them under the terms of the plan, the beneficiary has not received the full value of what was promised and, to the same degree, the plan has realized an unjust enrichment (assuming the lateness was unjustified.)"

To read the New York Law Journal article, via, click here.

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