McCulloch v. Hartford Life and Accident Insurance Company

Background

Kristin E. McCulloch brought a claim under Section 1132(a)(1)(B) of the Employee Retirement Income Security Act to clarify her rights to future benefits under an employer-sponsored long-term disability group plan. Hartford Life and Accident Insurance Company administered the plan’s claims, while Truist Financial was the plan sponsor and administrator. The court had previously determined that McCulloch was disabled from her “own occupation” and entered partial judgment in her favor. The bench trial addressed whether she was a Class 1 or Class 2 insured under the plan.

The plan provided different benefit durations for the two classes. Class 1 employees could receive benefits until age 65 as long as they remained unable to perform the essential duties of their prior occupation. Class 2 employees could receive benefits for 36 months under that standard, but benefits would then stop unless they were also unable to perform any occupation for which they were qualified by education, training, or experience. The plan defined Class 1 as employees with a salary grade of 19 or higher and Class 2 as employees with a salary grade less than 19.

McCulloch worked for Truist as a Senior Vice President and was assigned a Job Grade of “E00” or “00.” She received substantial commission-based compensation, including a $270,000 annual commission draw. She argued that her compensation was consistent with some salary grades above 19 and therefore qualified her for Class 1. Hartford relied on the company’s records and evidence showing her job grade as 00.

Legal standard

Because California and Washington prohibit discretionary clauses in disability insurance policies, the court reviewed the benefits issue de novo. De novo review requires the court to decide the correctness of the benefits determination itself, without deferring to the plan administrator. McCulloch had the burden to prove by a preponderance of the evidence—meaning that it was more likely than not—that she qualified for Class 1 benefits.

The court interpreted the plan under federal rules for ERISA insurance contracts. It first considered the plan’s language in its ordinary meaning and then considered other evidence only if the language was reasonably open to more than one interpretation.

Court’s analysis

The court held that “salary grade of 19 or higher” was not ambiguous. In context, the phrase referred to a specific internal company designation rather than an employee’s gross compensation. The court reasoned that focusing only on the words “salary grade” and ignoring “of 19 or higher” would make part of the plan’s language meaningless. The overlapping salary ranges for adjacent grades also supported using the assigned grade rather than an employee’s actual pay as the classification standard.

The evidence showed that McCulloch’s position was not assigned a grade through Truist’s ordinary compensation grading process because it was highly commission-based. Nevertheless, company employees testified that “salary grade” and “job grade” were used interchangeably and that McCulloch’s Job Grade of E00 operated as a grade of 00 for this purpose. The court found that McCulloch’s compensation did not establish Class 1 eligibility because salary, rather than the assigned grade, was not the controlling factor.

The court also rejected McCulloch’s alternative argument that she had no salary grade and therefore fell into neither class. It found that the Class 2 definition’s reference to any salary grade less than 19 could include 00. The court described the evidence supporting Class 2 status as not especially strong, but found it more persuasive than the evidence supporting Class 1 status.

Disposition

The court found that McCulloch failed to establish that it was more likely than not that she was a Class 1 insured. It ruled that Hartford’s determination that she was a Class 2 insured under the long-term disability policy was correct. The opinion was signed by United States District Judge Susan Illston on June 14, 2022.