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Stein v. Garen & Associates Erisa Plan

January 24, 2007

ROBERT STEIN, PLAINTIFF,
v.
GAREN & ASSOCIATES ERISA PLAN DEFENDANT.



The opinion of the court was delivered by: Michael T. Mason, United States Magistrate Judge

MEMORANDUM OPINION AND ORDER

This matter is before the Court on cross motions for summary judgment filed by plaintiff Robert Stein ("plaintiff" or "Stein") and defendant Garen & Associates Erisa Plan ("defendant" or "the Plan"). For the reasons set forth below, defendant's motion for summary judgment is granted and plaintiff's motion for summary judgment is denied. Background*fn1

Stein was the sole shareholder and President of Garen & Associates (later Stein Garen and Associates), a tax consulting and accounting firm located in Skokie, Illinois. Stein ceased working at the firm on July 12, 2002 due to multiple sclerosis. Garen & Associates established the Plan in order to provide long term disability insurance coverage to its employees, pursuant to the terms of a group disability insurance policy ("Group Policy") issued by Unum Life Insurance Company of America ("Unum") to Garen & Associates in June 1990. The Group Policy was issued with a retroactive effective date of January 1, 1990.

Patricia Lee, a Unum employee, faxed a letter to Stein dated April 11, 1990 stating as follows:

I have faxed the material showing you how we handle income from a K-1 in determining LTD benefits.

For the past, since you did not file your taxes this way, we need a letter from you stating what your ordinary income would have been for the past 2-3 years so we could use this in our calculations should you become disabled prior to the filing of next year's tax return.

On April 16, 1990, Stein provided Ms. Lee, at Unum's Chicago, Illinois office, with a letter stating as follows:

Factoring out amortization from my Financial Statements, (amortization is an intangible non cash expense), my cash flow for the years 1987, 1988, and 1989 are as follows:

1987: $118,435.00 1988: $107,076.00 1989: $99,937.00 These amounts are net of rents received.

The Group Policy contains the following provision for calculating a Plan participant's monthly disability benefit:

MONTHLY BENEFIT

To figure the amount of monthly benefit: 1. Take the lesser of:

a. 60% of the insured's basic monthly earnings; or

b. the amount of the maximum monthly benefit shown in the policy specifications; and 2. Deduct other income benefits, shown below, from this amount.

The Group Policy's provision for "other income benefits" provides for a deduction of the amount of disability benefits received under the Social Security Act. The Group Policy specifications also provide for a maximum monthly benefit in the amount of $5,000.00. The Group Policy contains the following definition of Basic Monthly Earnings ("BME"):

Definition of Basic Monthly Earnings

For Owner/Employee(s) "Basic monthly earnings" means the insured's average monthly salary in effect just prior to the date disability begins. It also includes earnings from schedule K-1 of the federal income tax return.

Monthly salary will be averaged for:

a. the 12 month period of employment; or

b. if employed for less than 12 months, the period of employment; and K-1 income will be averaged over:

a. the 3 most recent years; or

b. the period of employment, then divided by 12.

For All Others "Basic monthly earnings" means the insured's average monthly earnings as figured:

a. from the W-2 form (from the box which reflects wages, tips and other compensation excluding bonuses) received from the employer for the calendar year just prior to the date disability begins; or

b. for the period of employment if no W-2 form was received.

The Group Policy contains the following provision for modifying or ...


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