The opinion of the court was delivered by: Magistrate Judge Susan E. Cox
MEMORANDUM OPINION AND ORDER
In 2002, West Monroe Partners, LLC ("West Monroe") hired John Orlando ("plaintiff") to serve as a management executive. West Monroe offered its employees, including plaintiff, long-term disability benefits through a voluntary group insurance policy (the "Policy") issued by United of Omaha Life Insurance Company ("defendant"). In June 2003, plaintiff became disabled and filed a claim for maximum benefits under the policy. There is no dispute that defendant, as the plan administrator, approved and paid plaintiff's disability claim for two years, which was the policy's maximum benefit period. Plaintiff disputes, however, defendant's decision to pay him less than the full amount of benefits. The parties have each filed a motion for summary judgment. Plaintiff asserts that defendant incorrectly determined his monthly earnings, which resulted in an incorrect monthly benefit payment. Defendant's motion, however, argues that plaintiff agreed to accept a reduced salary during his first seven months of employment, which then reduced the amount of disability benefits he was eligible to receive. We grant defendant's motion [dkt. 116] and deny plaintiff's motion [dkt. 114].
Plaintiff had been a consultant for more than ten years when he left a large consulting firm to join several former colleagues at West Monroe.*fn2 His time there was, however, limited. After working there for close to nine months, on June 24, 2003, plaintiff was diagnosed with major depression and panic disorder and quit work.*fn3 Plaintiff had purchased long-term disability through defendant, paying a $42.50 premium each month (based on monthly earnings of $12,500 per month, or $150,000 "total annual insured payroll").*fn4 When plaintiff applied for disability coverage, defendant initially denied plaintiff's claim.*fn5 But, on May 7, 2004, defendant approved his application.*fn6 According to the Policy, plaintiff was entitled to, and received, the maximum of 24 months of monthly benefits.*fn7 Those benefits began on September 23, 2004.*fn8 The precise amount of those monthly benefits is what remains in dispute.
Under the Policy, the monthly benefit that plaintiff was entitled to receive was determined as follows:
If you are Disabled and earning less than 20% of Your Indexed Pre-Disability Earnings, the Monthly Benefit is the lesser of:
(a) 60% of Your Basic Monthly Earnings;
(b) 70% of Your Basic Monthly Earnings;
(c) $7,500 the Maximum Monthly Benefit.*fn9
The definition of "Basic Monthly Earnings" is required for purposes of determining the monthly benefit. The Policy defines it as:
Basic Monthly Earnings means Your average gross monthly earnings received from the Policyholder during the Calendar Year immediately prior to the year in which Your Disability began, or, if employed less than one year, Your average earnings for the number of months worked.
Basic Monthly Earnings includes employee contributions to Deferred Compensation plans received from the Policyholder. Basic Monthly Earnings does not include commissions, bonuses, overtime pay, Policyholder contributions to a Deferred Compensation plan, shift differential or other extra compensation received from the Policyholder.*fn10
Because plaintiff was employed for less than one year, the "average earnings for the number of months worked" was determined.*fn11 This brings us to plaintiff's compensation. Plaintiff's contract with West Monroe was in the form of a letter, sent in October 2002, which outlined the terms of his employment.*fn12 The letter provides that he would receive: a target annual "draw" in the amount of $200,000, but the "monthly draw will be 25%, 50%, 75% and 100% of your full monthly 2003 target draw for the months of January, February, March and April," and; 25,000 units of equity ownership in the company.*fn13 The letter also states that the company "may have to adjust these amounts depending on the circumstances of our actual cash flows."*fn14 There is no dispute that plaintiff's agreement "called for a 3 month 'ramp up' with no pay," followed by the payment schedule outlined above.*fn15
Separate from the pay schedule outlined in his October employment letter, beginning on March 16, 2003, plaintiff agreed to reduce his compensation by $25,000 over three months.*fn16 For this, West Monroe "granted [him] an additional 5,000 fully vested units."*fn17 There is also no dispute that the payroll records show that West Monroe paid plaintiff $49,669.58 in nine payments between June 20, 2003 and October 22, 2003.*fn18 But it is here that the parties' views on plaintiff's compensation diverge.
Plaintiff contends that his annual salary equates to a monthly salary of $16,666.67, which is calculated by taking plaintiff's "target annual draw" of $200,000 (provided for in his employment letter) and dividing it by 12 months of pay.*fn19 Using those numbers, plaintiff calculates that his salary, for the time that he worked for West Monroe, was $149,999.99.*fn20 He comes to this figure by multiplying his monthly salary of $16,666.67 by nine months.*fn21 Plaintiff claims those nine months to be October 2003 to June 2003.*fn22 It should be noted that the parties dispute whether plaintiff started in October or whether he started on November 1, 2002. The record reflects four possible hire dates, October 8, October 12, October 15, and November 1, 2002.*fn23 For purposes of this analysis, the Court will assume plaintiff started working sometime in October, or, worked for a total of nine months.
When plaintiff left work due to his disability, West Monroe initially considered plaintiff's monthly salary to be $16,666.67, or the equivalent of $200,000 per year for purposes of his eligibility for benefits.*fn24 But then defendant's Senior Benefit Analyst, Vicki Pruch, consulted John Gagnon from John Hewitt & Associates ("JHA"), the underwriting manager for defendant's reinsurer, to see if additional documentation was necessary.*fn25 Mr. Gagnon advised Ms. Pruch to obtain plaintiff's payroll records.*fn26 The payroll records reflect that plaintiff only received one paycheck while he was working for West Monroe, dated June 20, 2003, in the amount of $9,166.67.*fn27 The additional salary that plaintiff received came in the form of eight paychecks that were issued between July 7, 2003 and October 7, 2003, after plaintiff had left the company on disability.*fn28
Defendant's reinsurer, JHA, had their certified public accountant, Connie Cardamone, review the records.*fn29 In Ms. Cardamone's recommendation, she stated that the amount paid to plaintiff "in 2003 was the compensation that he deferred from 2002 and earlier in 2003."*fn30 This information came from West Monroe's human resources director, Paulette McKissic. A contemporaneous phone log from Ms. McKissic shows that she told Ms. Pruch that the executives donated their time without salary for 3 months, then in January 2003 plaintiff deferred his salary until June 20, 2003.*fn31 The salary he then received reflected compensation from January 2003 to June 2003.*fn32 In light of that information, Ms. Cardamone noted that "no Deferred Compensation plan under the Internal Revenue Code was established to allow him to defer his $200,000 salary" and that because the company was a small start-up, it was probable that "he wasn't paid any compensation prior to 6/20/03 because the funds were not available to pay him."*fn33 Ms. Cardamone next used the payments from 2003 to determine his monthly average income, noting that he received $49,669.58 for his time with the company. She divided that amount by 7 months and 23 days to come up with his average monthly earnings of $6,395.22.*fn34
Defendant followed Ms. Cardamone's recommendation, using her calculation of plaintiff's Basic Monthly Earnings, to determine plaintiff's disability benefits. As noted, the Policy provides that, the Monthly Benefit is the lesser of:
(a) 60% of Your Basic Monthly Earnings;
(b) 70% of Your Basic Monthly Earnings;
(c) $7,500 the Maximum Monthly ...