This California class action alleges that Metropolitan Life Insurance Company sold Short-Term Disability (STD) policies whose benefits were “false and illusory” because of the conditions in the policies. The complaint claims the policies provided “no increased value” over California’s State Disability Insurance (SDI) program, which residents of the state already participate in through mandatory payroll deductions.
The class for this action is all persons in California who, between August 13, 2015 through the date of trial in this case, bought STD insurance policies from Met Live through group insurance policies offered through private employers which did not formally opt out of the California SDI program.
Met Life offers the STD policies through employers’ group insurance, claiming it will “help you protect your income and lifestyle.”
Plaintiff George Gavitt enrolled in a Met Life STD insurance policy through his employer, for which he paid $1,536.86 per year in payroll deductions. He was also paying for the California SDI program.
When Gavitt suffered a disability in March 2018, he filed claims with both programs. While Met Life originally made payments to him, it later claimed it had the right to deduct the amount of California SDI payments from the amounts it paid him. It therefore claimed it had overpaid him by @2,687.34. Furthermore, it said that his total benefits for his period of disability amounted to only $665, or around $50 per week.
How could this be? The complaint quotes the company as saying, “The Short-Term Disability benefit replaces a portion of your pre-disability earnings, less other income that was actually paid to you during the same disability from other sources (e.g., state disability benefits, no fault auto laws, sick pay, vacation pay, etc.). The Benefit amount is 70% of your pre-disability weekly earnings; subject to the plan’s maximum weekly benefit of $2,300.”
It pays these benefits for up to thirteen weeks.
However, California’s Employment Development Department (EDD) has an SDI program supported by a 1% tax with a current maximum yearly cost per employee of $1,149.67. The benefits for this program include either 60% or 70% of pre-disability income for up to fifty-two weeks.
When the benefits for California’s SDI program were subtracted from the Met Life benefits, very little was left over. In the end, his total benefit was less than half of what he’d paid in premiums for a single year and far short of a substantial replacement of income.
While employers are allowed to opt out of the California plan if they have a private plan that meets certain requirements, Met Life’s plan did not meet those requirements, so Gavitt’s employer did not opt out.
The complaint alleges unfair business practices, fraud, and breach of the implied covenant of good faith and fair dealing.