Posted in Insurance Law
A recent federal lawsuit filed in the Northern District of California raises a recurring issue in long-term disability claims. The case involves a refinery operator who alleges his insurer excluded years of mandatory overtime when calculating his monthly benefit.
What the Lawsuit Involves
The team at The Law Office of Bennett M. Cohen regularly sees disputes like this, where a San Francisco, CA ERISA disability claimant’s benefits reflect only a portion of their actual income.
According to InsuranceNewsNet, the claimant worked at Valero’s Benicia refinery beginning in 2009 and became disabled in December 2024. His insurer approved his long-term disability claim but allegedly calculated benefits using only his base schedule. Mandatory overtime, which accounted for roughly half or more of his monthly income, was left out entirely.
The insurer’s policy included scheduled overtime in pre-disability earnings but did not define the term. The complaint argues that overtime assigned in advance to cover known vacancies and pre-planned absences qualified as scheduled and should have been counted.
How Earnings Miscalculations Reduce Benefits
The method an insurer uses to calculate pre-disability earnings determines the monthly benefit. When legitimate income is excluded, the policyholder receives less than the policy provides for. Several factors can contribute:
- Excluding regularly scheduled overtime from earnings calculations
- Relying on base salary alone when the worker consistently earned more
- Failing to define key policy terms like “scheduled” versus “unscheduled” overtime
- Ignoring payroll records supporting higher earnings
A San Francisco, CA ERISA disability lawyer can review policy language and payroll records to determine whether benefits were correctly calculated.
Insurance companies sometimes use bad faith tactics to minimize payouts, and vague policy definitions create room for those tactics.
ERISA Administrative Exhaustion
Under ERISA, claimants generally must exhaust administrative remedies before filing suit. The claimant here notified his insurer in March 2026 and submitted payroll records, an employer overtime policy, and a signed declaration. More than sixty days passed without a decision or the required extension, and the claimant was deemed to have exhausted his remedies.
Insurers that deny disability claims or underpay benefits often rely on policyholders not knowing their rights under federal law.
ERISA requires insurers to consider job duties and actual earnings when processing claims. Policyholders who follow the administrative process and receive no timely response can take their case to federal court.
Why Policy Language Matters
Ambiguous terms in a disability policy give insurers room to interpret coverage in their favor. When a policy refers to “scheduled overtime” without defining it, the insurer may exclude income that should count. San Francisco, CA long-term disability claimants dealing with underpaid disability benefits should have an attorney review the policy language and earnings records.
Mistakes when filing a disability claim can be difficult to reverse, but an underpayment based on miscalculated earnings should be challenged. If your long-term disability benefits appear lower than expected, The Law Office of Bennett M. Cohen can evaluate your claim and determine whether your insurer properly accounted for your full pre-disability income.
