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Michigan Court Rules Orders Reliance Standard to Pay Past Due Disability Benefits, Attorney's Fees, and Costs

A Michigan District Court ordered Reliance Standard to pay past due disability benefits, attorneys’ fees, and costs finding the insurance company was wrong when it concluded she was not disabled under the terms of the disability insurance policy.

In Wallace vs. Reliance Standard Life Insurance Company, the Court had entered summary judgement in favor of Wallace in November, 2017 and rejected Reliance Standard’s reasons for denying her long-term disability benefits. The Court went so far as to note the claim file undisputedly reflected Wallace was disabled and entitled to benefits under the policy. At the end of its decision, the Court directed the parties to try to agree on the amount owed to Wallace in past due benefits, interest, and any other amounts she sought under ERISA. Despite several extensions of time, the parties could not agree.

Wallace then submitted a proposed judgment, which triggered motion practice between the parties. The Court then referred the matter to a Magistrate judge hoping the parties could settle the dispute, however, no settlement was reached. In July 2018, Wallace submitted a supplemental statement with an updated calculation of past benefits due, attorney’s fees, and costs incurred as a result of the extra briefing. This, once again, triggered motion practice between the parties.

The court, in its discretion, may award reasonable attorneys’ fees and costs in ERISA cases at its discretion. To be eligible for an award the party need not be the prevailing party but, rather, simply must have achieved some success on the merits. In Wallace, aside from noting Wallace achieved success on the merits it also found Reliance Standard was culpable and acted in bad faith by unreasonably denying her disability benefits and unnecessarily delaying litigation. The Court noted it was undisputed Reliance Standard had the ability pay the fee award presented by Wallace’s attorney, which it found to be reasonable. Finally, the Court held Wallace was entitled to postjudgment interest by law and prejudgment interest to compensate for wrongful deprivation of her disability benefits.

Ultimately, the Court ordered Reliance Standard - as a result of its unreasonableness and bad faith - to pay Wallace’s attorney’s fees, costs, as well as prejudgment and postjudgment interest.

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