By A. Christopher Wieber, Esq. (Law Office of Mark Scherzer)
In Schuyler v. Sun Life Assur. Co. of Canada, 2025 U.S. App. LEXIS 20752 (2d Cir. Aug. 14, 2025), the Second Circuit Court of Appeals allowed a claimant for long term disability (“LTD”) benefits to narrowly escape the broad release language contained in a severance agreement. Ms. Schuyler negotiated and, in December, 2019, signed a severance agreement with her former employer, Benco Dental Company (“Benco”), that contained a broad release of ERISA claims (the “Release”): “Employee of her/his own free will, voluntarily releases . . . any and all known and unknown actions . . . arising out of or in any way connected with Employee’s employment with Benco . . . including, but not limited to, any alleged violation of . . . the Employee Retirement Income Security Act of 1974 (‘ERISA’).” The Release contained language extending its reach to Benco’s “officers, directors, trustees, shareholders, partners, parents, subsidiaries, and any related or affiliated entities . . . and parties-in-interest.” Prior to the Release, in May, 2019, Ms. Schuyler had submitted a claim for LTD benefits that was denied by Sun Life Assurance Company of Canada (“Sun Life”), the insurer of the LTD Plan, on October 17, 2019. In January, 2020, after signing the Release, Ms. Schuyler appealed Sun Life’s denial of her claim, but Sun Life rejected that appeal on August 31, 2020, and Ms. Schuyler subsequently filed a lawsuit in the U.S. District Court for the Southern District of New York, in December, 2020, seeking to overturn Sun Life’s denial of her LTD benefits. Because these insured LTD benefits were sponsored by her employer, Ms. Schuyler’s claims were subject to, and governed by, ERISA.
In March, 2023, the District Court held that Ms. Schuyler was barred from suing for her ERISA-governed LTD benefits because Sun Life could be considered a “related or affiliated entity” and/or a “party-in-interest. Schuyler v. Sun Life Assur. Co. of Canada, 2023 U.S. Dist. LEXIS 38162 (S.D.N.Y. Mar. 7, 2023).
Two and a half years later, in August, 2025, the Second Circuit Court of Appeals reversed the District Court, holding that because (1) “the Agreement stated that it released all ‘related entities,’” but “Benco affirmatively told Schuyler on two separate occasions that Sun Life was an independent entity,” and (2) “undisputed communications establish that Benco, the only counterparty to the Agreement, expressly told Schuyler that the release would not waive her LTD claim,” therefore, Schuyler “did not knowingly waive her LTD claim against Sun Life when she signed the Agreement.” Schuyler v. Sun Life Assur. Co. of Canada, 2025 U.S. App. LEXIS 20752 (2d Cir. Aug. 14, 2025). As summarized by the Court:
Sun Life’s argument might be persuasive if the question before us was whether Schuyler knowingly and voluntarily entered into the Agreement with Benco, or whether she knowingly and voluntarily waived her ERISA claims against Benco. But the relevant question here is whether Schuyler knowingly and voluntarily waived her ERISA claim as to Sun Life. The fact that the Agreement explicitly releases Schuyler’s ERISA claims does not answer that question because Sun Life is neither a party to nor expressly mentioned anywhere in the Agreement.
We don’t here decide as a matter of contract interpretation whether the Agreement on its face does or does not release Schuyler’s claims against Sun Life, or whether it is ambiguous such that additional evidence or interpretive tools are required to determine its scope. But we do conclude for purposes of the knowing-and-voluntary analysis that the Agreement does not so clearly waive Schuyler’s claims against Sun Life as to override Benco’s express assurances that it does not….
[T]he question is not what the release in the Agreement means. The question is whether, notwithstanding Benco’s express assurance to Schuyler that the Release Provision did not extend to Sun Life, the Release Provision by its plain terms so clearly extends to Sun Life as to create a genuine dispute as to whether Schuyler knowingly and voluntarily relinquished her LTD claim against Sun Life. We conclude that it does not.
While this was the ruling by two members of the 3-judge panel, the third judge filed a strong dissenting opinion: “Schuyler should not be able to circumvent a waiver giving up all ERISA claims ‘arising out or in any way connected with [her] employment,’ by saying she did not know the release would extend to the party responsible for administering her employer’s insurance plan” — “the totality of the circumstances, fairly considered—indicates Schuyler knew exactly the bargain she was making.” The dissent argued that “[t]he majority’s construction of the release provision is designed to generate ambiguity where none exists”:
An “entity” is defined as “[a]n organization (such as a business or governmental unit) that has a legal identity apart from its members or owners.” Entity, Black’s Law Dictionary (12th ed. 2024). The plain meaning of a “related entity” in the context of this Agreement, then, is an organization with an independent legal identity that is in some way connected to or has a relationship with Benco. The contract requiring Sun Life to serve as Benco’s insurer and claims administrator thus qualifies Sun Life as a “related entity” under the Agreement
The dissent also rejected the relevance of the assurances made by Benco that the majority relied upon to find that Ms. Schuyler’s release was not knowing and voluntary. First, the dissent argued that the assurance by Benco’s lawyer — “I am sure your lawyer told you this as part of his/her advice to you, but this agreement should have absolutely no effect on your ability to appeal your LTD . . . .” — extended only to the “administrative,” i.e., internal, appeal to Sun Life, not the “filing [of] a federal lawsuit under ERISA.” According to the dissent, “[t]here is simply nothing in the record to support Schuyler’s assertion that she ‘understood [Benco’s] response to mean that nothing about my disability benefits would be affected by the separation agreement” — as opposed to solely her internal administrative appeal rights.
The majority, in its opinion, countered this argument:
But this effort to parse Benco’s assurances to suggest that Schuyler “misunderstood” them, runs headlong into the terms of the Agreement itself. The Agreement expressly releases “any and all known and unknown actions, causes of action, suits, claims, debts, dues, accounts, bonds, covenants, charges, complaints, contracts, agreements, promises, judgments, and demands whatsoever, in law or equity, arising out of or in any way connected with Employee’s employment with Benco . . . . ”
Whether pursued in court or administratively with the insurer, a claim for disability benefits is a “claim,” and the right to those benefits arises from a “contract,” “agreement” and “promise.” Either the Agreement released Schuyler’s LTD claim altogether, in which case Schuyler could neither appeal it administratively with Sun Life nor pursue it in court, or it didn’t, in which case she could do both
The majority concluded she could do both. Although not mentioned by the majority, it should be noted that courts frequently frame ERISA benefit actions as lawsuits for judicial review of the claim administrators’ denial/termination decision. In this framework, a district court sits in appellate review of the claim administrator’s decision-making. Under the circumstances, the dissent’s narrow interpretation of appeal to mean solely the internal “administrative” appeal, exclusive of the external judicial appeal, is not nearly so persuasive.
The dissent also focuses on Ms. Schuyler’s business acumen (“Schuyler is indisputably well-educated and has substantial practical business experience”) and her receiving counsel by a lawyer (“Schuyler acknowledges that she had a disability attorney review the agreement, specifically with reference to her claim with Sun Life”), as factors supporting her knowing and voluntary waiver. However, as the majority responds:
Schuyler’s education and business experience and the amount of time she had access to the Agreement before signing it, … might be relevant considerations if the Release Provision so clearly extended to Sun Life that Schuyler could not reasonably rely on Benco’s representations. But for the reasons set forth above, in the face of Benco’s assurances, there is no reason to conclude that a more thorough or sophisticated review of the Agreement would have undermined Schuyler’s confidence that she was not releasing her LTD claim against Sun Life….
Schuyler’s role in negotiating the terms of the Agreement doesn’t undermine our analysis. She did participate in deciding the terms of the Agreement by getting Benco’s assurance that the Agreement would not cut off her LTD claim. If anything, this factor supports her argument.
The fact that Schuyler consulted with an attorney does not shift the analysis either. Given the express assurances by Benco’s lawyer and the lack of clarity of the Agreement on the critical question, the fact that Schuyler consulted with counsel doesn’t create a disputed issue….
It might also be added that the dissent conveniently ignores the very substance of Ms. Schuyler’s disability claim, which, as summarized by the District Court, was that “she fell down a flight of stairs and sustained traumatic brain injuries” that caused her to suffer from “confusion, difficulty with concentration, memory problems, mental and physical fatigue, sleep problems, sensitivity to noise, and sensitivity to light.”
As the Schuyler case underscores, the broad release language of a severance agreement can be extremely dangerous to the viability of an LTD lawsuit. Ms. Schuyler was (barely) able to escape the broad release language in her severance agreement, but this was based on very specific assurances by her employer about the meaning of the release language — assurances which other claimants may not receive. She was able to persuade 2 of the 3 judges on her appellate panel, but a change of just one vote could have converted the dissent into the majority opinion. Moreover, Ms. Schuyler was embroiled in 2-1/2 years of litigation to overcome the Release — undoubtedly, at great cost and expense. At the end of the day, her success before the Second Circuit Court of Appeals in August, 2025, means only that she is now able to return to the District Court to try to prove that Sun Life improperly denied her claim for LTD benefits in October, 2019. Since many LTD Plans change from an Own Occupation disability standard to an Any Occupation standard after 24 months, there’s a good chance that even if Ms. Schuyler wins in front of the District Court and that decision is not appealed — perhaps within another 12 to 24 months — she may only receive benefits from 2019 through 2021, and may still need to seek Sun Life’s internal “administrative” determination for Any Occupation benefits from 2021 to the present.
Ms. Schuyler would undoubtedly have been better served to request that Benco include language in the Release that specifically preserved her ability to enforce all her rights with regard to her ERISA-governed LTD benefits. That way, she could have avoided 2-1/2 to 3 years of additional litigation time and expense.
For a more extended discussion of the interplay between severance agreements, releases, and ERISA long term disability claims, please refer to my earlier post: Lay-Offs, Severance Packages and Long-Term Disability Claims: Compatible or Mutually Exclusive?
Chris Wieber is a New York Long Term Disability Lawyer with over 30 years’ experience in ERISA short- and long-term disability claims.
