August 20, 2025 | New York, NY — MedLegalNews.com — A divided Second Circuit panel has reopened a worker’s disability benefits dispute against Sun Life Assurance Co. of Canada, ruling that a release she signed with her employer did not bar her from challenging the denial of her long-term disability benefits. The decision breathes new life into Kristen Schuyler’s ERISA disability benefits dispute, a case closely watched for its implications on releases and insurer liability.
Worker’s Disability Benefits Challenge Restored
In a 2-1 decision, the appellate court overturned a lower court’s summary judgment in favor of Sun Life. The district court had previously ruled that Schuyler’s separation agreement with her employer also blocked her from pursuing claims against the insurer.
The Second Circuit majority disagreed, finding that Schuyler only signed the release after receiving assurances from her employer that it would not prevent her from seeking disability benefits. The panel emphasized that she did not knowingly waive her right to sue Sun Life because the release explicitly applied to employment-related claims—not benefits disputes with third-party insurers.
The Core of the Disability Benefits Dispute
Schuyler, who sustained a traumatic brain injury in 2015, sought long-term disability coverage when her condition prevented her from continuing her job at a dental supply company. After Sun Life denied her claim, she filed suit in 2020 under the Employee Retirement Income Security Act (ERISA).
Her employer had promised that the release she signed as part of a separation agreement would not affect her ability to pursue a disability claim. Sun Life countered that the agreement barred lawsuits, though it might still allow administrative appeals. The appellate majority rejected this distinction, stating the contract’s terms did not support Sun Life’s interpretation.
Dissenting View
In dissent, Judge Debra Ann Livingston argued that Schuyler’s employer only promised she could file an administrative appeal, not a lawsuit. She further noted that the release extended to affiliated entities, which, in her view, should have included Sun Life as the insurer administering the benefit plan.
What’s Next
The case, Schuyler v. Sun Life Assurance Co. of Canada (No. 23-498), now returns for further proceedings. The ruling underscores the importance of clarity in settlement and release agreements, particularly when employees rely on assurances about their rights to pursue benefits.
For more background on ERISA disability rights and coverage disputes, see the U.S. Department of Labor’s ERISA resource page.
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FAQs: Sun Life Disability Benefits Dispute
What is the key issue in Schuyler’s case against Sun Life?
The dispute centers on whether a separation agreement signed with her employer barred Schuyler from suing Sun Life over denied disability benefits.
Why did the Second Circuit revive the case?
The appellate panel ruled that Schuyler did not knowingly waive her right to sue Sun Life, since her employer assured her the release would not affect her disability claim.
What does this ruling mean for future ERISA cases?
The decision highlights that releases tied to employment agreements may not automatically extend to third-party insurers, giving employees stronger grounds to pursue benefit disputes.
How does this ruling impact employees involved in a disability benefits dispute?
The Second Circuit’s decision makes clear that separation or release agreements tied to employment do not automatically waive the right to pursue a disability benefits dispute against an insurer. Employees may have stronger grounds to challenge claim denials if contract language is ambiguous.
What should employers and insurers do after this disability benefits dispute ruling?
Employers and insurers are encouraged to draft clear release agreements that specifically address benefit claims. Ambiguities may lead courts to side with employees in future disability benefits disputes, exposing insurers to renewed litigation.