Insurer Must Take Into Account Award of Social Security Disability

Most long term disability benefit plans or policies require claimants to apply for Social Security Disability benefits in addition to applying for long term disability benefits. The reason being that the insurance is able to offset any SSDI award against any monthly long term disability amount that is owed to the claimant under the policy. The SSDI monthly benefit is a dollar-for-dollar offset against what your insurance company pays you in terms of a monthly long term disability benefit payment. For example, if you are receiving $2,000 a month in long term disability and you are subsequently awarded an SSDI benefit of $1,000 then your long term disability benefit payment is reduced to $1,000 according to the terms of the disability policy. Because this offset is so valuable to the insurance companies, they will be persistent in their demands that you pursue your claim for SSDI benefits.

Unfortunately, we see many individuals who are receiving long term disability benefits, are then awarded SSDI and subsequently their insurance company terminates the long term disability benefit claim. This happens despite the fact that the insurer may have hired a company, such as Allsup or the Advocator Group, to represent the claimant in the SSDI process. It seems unfair that the insurance company can represent to the Social Security Administration that you are totally disabled but then terminate your benefits claiming you are no longer disabled for purposes of the disability policy.

When we have clients in this position, we first of all point out to the insurance company that the definition of disabled for purposes of SSDI is more stringent than the definition of Disabled under the terms of the policy. The SSA defines “disability” as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. 42 U.S.C. §423(d)(1)(A).

Oftentimes, the insurance company will ignore the SSDI findings of total disability or fail to analyze or distinguish the SSA’s fully favorable decision in any of its denial letters. The courts have held that it is improper for the insurer to ignore the SSA’s decision of total disability given the fact that it is important proof that the claimant meets the definition of Disabled under the policy. “This definition is a stringent one, and an administrator’s failure to address a claimant’s SSA disability finding is thus especially questionable when the ERISA plan’s disability definition is less exacting.” Holzmeyer v. Walgreen Income Protection Plan for Pharmacists and Registered Nurses, 2014 WL 4388625, *18 (S.D. Ind. Sept. 4, 2014).

In order to provide a full and fair review, the Seventh Circuit “unambiguously requires a plan administrator to ‘address any reliable, contrary evidence presented by the claimant.'” Majeski, 590 F.3d at 484, citing Love v. Nat’l City Corp. Welfare Benefit Plan, 574 F.3d 392, 397-398 (7th Cir. 2009). If the plan administrator fails to address contrary evidence presented by the claimant, the plan administrator has abused its discretion and its determination is unreasonable. More specifically, an ERISA plan’s “failure to consider the [Social Security Administration’s disability] determination in making its own benefit decisions suggests arbitrary decision-making.” Holmstrom v. Metropolitan Life Insurance Company, 615 F.3d 758, 773 (7th Cir. 2010). In Demaree v. Life Insurance Company of North America, 789 F.Supp.2d 1002, 1014 (S.D.Ind. 2011) the court explained the rationale behind this rule as follows:

This is because the SSA’s definition of disability is very stringent;… Logically, then, it seems likely that a person who satisfies [the SSA’s] definition would also satisfy an ERISA plan’s definition of disability. But likely does not mean necessarily, which is why a plan administrator should consider the SSA’s disability finding, but is not automatically bound by it, as there could be valid reasons that it would reach a conclusion different from that reached by the SSA.

The claims administrator must, at a minimum, address the SSA’s findings and explain why it rejected the SSA’s determination of disability. Id. at 1015. “[A] plan administrator may not simply ignore this evidence but must address it and provide a reasonable explanation for discounting it…” Raybourne v. Cigna Life Ins. Co., 700 F.3d 1076, 1087 (7th Cir. 2012).

If your insurance company or claims administrator terminated your long term disability benefits, despite your award of SSDI, and does not provide any justification for the discrepancy between the SSA’s determination that you are unable to engage in any substantial activity and their opinion that you are able to return to work, contact the O’Ryan Law Firm at (855) 778-5055 to discuss you claim further.