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Blankenship v. Liberty Life Assur. Co. of Boston, 486 F.3d 620, 40 Employee Benefits Cas. 2239, 07 Cal. Daily Op. Serv. 5482, 2007 Daily Journal D.A.R. 7076

Facts

Vorris Blankenship, an attorney for KPMG, developed cancer and was initially approved for long-term disability benefits by Liberty Life. However, Liberty Life later terminated his benefits, claiming he could pursue alternative treatments. After appealing the decision and being terminated from KPMG, Blankenship rolled over his retirement benefits into an IRA. Liberty Life contended that these retirement benefits should offset his disability benefits, leading to the lawsuit under ERISA.

The facts are not in dispute. Vorris Blankenship, an attorney employed by KPMG LLP (“KPMG”), developed cancer.

Issue

Whether the retirement funds rolled over to Blankenship's IRA constituted 'received' benefits under the Disability Plan, thus allowing Liberty Life to reduce his long-term disability benefits.

The issue here is whether Blankenship “received” his retirement funds when they were transferred to his Vanguard IRA under the terms of the Disability Plan.

Rule

The term 'receives' in the context of the Disability Plan is interpreted to mean actual possession of funds, and the doctrine of contra proferentem applies to ambiguous terms in ERISA plans.

We begin by recognizing that the term “receives” is not defined in the Disability Plan.

Analysis

The court analyzed the definition of 'receives' and determined that Blankenship did not gain possession of the retirement funds when they were transferred to his IRA. The court emphasized that the funds remained under the control of a trustee and that Blankenship's ability to withdraw them did not equate to having received them as income. The court applied the rule of contra proferentem, concluding that the term should be interpreted in favor of the insured.

We therefore conclude that Blankenship did not obtain possession of his retirement funds through the trustee-to-trustee transfer from KPMG to Vanguard.

Conclusion

The Court of Appeals affirmed the district court's ruling that Blankenship's disability benefits were not subject to reduction by the retirement funds transferred to his IRA, as he did not 'receive' those funds under the terms of the Disability Plan.

Therefore, the district court properly concluded that Blankenship's award of disability benefits was not subject to reduction based on the distribution of his retirement benefits under the PAR and Pension Plans.

Who won?

Vorris Blankenship prevailed in the case because the court found that the retirement funds transferred to his IRA did not constitute actual receipt, thus Liberty Life could not reduce his disability benefits.

By the principles of law distinguishing trusteeship and agency, Vanguard was an agent, not a trustee.

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