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Is My “No-Fault” Auto Insurance Settlement an Offset Under My Long Term Disability Insurance Policy?

Attorney Stephen JessupAuthor: Attorney Stephen Jessup

If your policy is an employer provided group disability policy governed by ERISA, then any proceeds you receive from a settlement based on “No fault” auto insurance may very well be subject to repayment as “Other Income Benefits.” This situation came to light in a recent federal court case in Michigan against Life Insurance Company of America (LINA-more commonly known as Cigna) and serves as a warning to any claimant whose disability was due in part to an auto accident and who received any proceeds on account of same.

In the case of DeHart vs. Life Insurance Company of North America, DeHart brought an ERISA based lawsuit against LINA for what he argued was the wrongful termination of his disability benefits. In responding to the Complaint, LINA filed a counterclaim against DeHart to recover an overpayment for “Other Income Benefits” in the amount of $46,033.00 (the total amount of benefits paid) in light of a $1.5million dollar settlement DeHart reached as a result of auto accident case that resulted in his disability.

What are “Other Income Benefits?”

If you are covered under an ERISA governed disability policy, chances are you have seen language in the policy describing other sources of income that can be used to offset the amount your insurance company has to pay. The most common of these “Other Income Benefits” is Social Security Disability benefits. Other Income Benefit provisions also commonly encompass retirement benefits and proceeds from No Fault auto insurance, as was the situation in the DeHart case. The LINA policy at issue in DeHart specifically states with respect to Other Income Benefits that “any amount which the Employee receives (or is assumed to receive) under… any work loss provision in mandatory “No-Fault auto insurance” is an offset under the policy.

The Court Rules in Favor of LINA in Denying the Claim

Before the court addressed the issue of the overpayment, it first determined whether or not LINA had abused its discretion in denying DeHart’s disability benefit. Unfortunately for DeHart, the Court ultimately determined that LINA did not abuse its discretion when it denied DeHart’s benefit, effectively ending his fight for disability benefits. However, that was just the beginning of his problems.

The Court Determines That LINA Is Entitled to a Refund of All Benefits Paid

The Court then reviewed LINA’s counterclaim for repayment of all the benefits forwarded during the course of the claim. Adding what was surely insult to injury, the Court ruled in favor of LINA with respect to its counterclaim for a reimbursement of the $46,033.00 it had paid out in benefits. In doing so the Court noted that ERISA provided LINA the ability to commence a civil action “to obtain other appropriate equitable relief… to enforce any provisions of this subchapter (ERISA) or the terms of the plan.” Despite DeHart’s attorney’s arguments that LINA was entitled to proceeds from the settlement, the Court notes that LINA is not seeking a portion of DeHart’s settlement proceeds, but rather a return of the overpayment of benefits made under the applicable “Other Income Benefits” provision of the Policy. Based on the policy language and the applicable law, the Court determined that LINA was entitled to full repayment of all benefits paid. This was surely an artful use of semantics, but carried the same resultant effect of depriving DeHart of the $46,000.00.

Was Your Disability A Result of An Auto Accident?

If so, and you have a pending personal injury action against the parties responsible for the crash it is imperative to realize that any settlement or judgment may result in an overpayment being due to your disability insurance company. If you are concerned that these facts may apply to your claim for benefits, please feel free to contact Attorneys Dell & Schaefer at 1-888-776-3876 for a free consultation.

It should be noted that Attorneys Dell & Schaefer did not represent Mr. DeHart, nor had any involvement in any stage of his claim for benefits.

Read more CIGNA cases and user comments on this page.

There are 22 opinions so far. Add your comment now.

Rose:

Was DeHart terminated from LINA prior to being awarded the No Fault Accident Settlement? While a seemingly large amount for the Auto Accident Settlement often times the victim of a car accident ends up paying for all Medical etc. out of that settlement.

An Auto Accident and bad Surgeon caused my Disability. I had no idea at the time, but I really lucked out, if you can call anything post accident lucky, when my Auto Insurance settled 2 days after I officially returned to work. The Settlement from the Auto Accident was a sham and I didn’t even get enough to pay the medical bills incurred. That’s a whole nightmare Auto Insurance story I’ll skip for this comment. I was on and off of Disability for 2 years and it was the bad Surgeries (he eventually got his license pulled) that made things permanent. I initially tried, but failed to pursue action against the Surgeon – again glad after finding out if I had managed to survive this grueling experience, it would have to be all handed over to UNUM. They still tried initially to get the Auto Accident money. It’s been a hard lesson on how Insurance makes profits at the expense of the Insured and all Legal.

Andrea L. Wolfson, Esq.:

What if the disability policy is not an ERISA policy, because the employer is a municipality, but the policy is being treated as an ERISA policy?

Attorney Stephen Jessup:

Rose,

The DeHart case was very fact specific with respect to the application of the overpayment for the accident settlement. It isn’t always applicable, buy yes, you’re right- the insurance industry exists in a way that makes sure it makes a profit.

Attorney Stephen Jessup:

Andrea,

Even if the policy is not governed by ERISA, if it does have language with respect to the money received being an offset, the risk of overpayment will still exist.

Been Frauded:

The Hartford has done the same to me (they use the term other income benefits ). They will be trying to sue me under ERISA.

I pay the premiums 100% out of my pay check, the policy was sold to me as an extra policy. I thought it was a personal policy. The agent told me it was based on NY laws, but now finding out they are basing it on Rhode Island laws (because they are saying it is a group trust policy).

So what I am finding out is NY regulator says when it is a group plan they don’t have to show me any policy and they get to pick exclusions and provisions. According to US DOL they say I do have the right to see plan and that the employer should pay part of premium – which they don’t.

So a policy I pay for, I don’t get to see what I’m buying and then they can change my plan to different plans if they want.

On top of it all, this plan I pay for forced me to apply for NY workers comp. They wrongfully forced me to apply. I didn’t claim benefits for stress of work duties, I claimed stress from retaliation after I left work. Oh and I forgot to mention the Hartford withheld my disability money for over a year on my controverted claim; once the claim was controverted in NY they should of paid up. When you complain to Rhode Island they say they don’t handle NY state workers comp even though they are the policy situs state.

This has caused great humiliation to me for 2 1/2 years. They humiliated me by telling me if I don’t take their settlement offer than bad things are going to come out.

The employer also helped attack me. They went from saying the stress is personal to home to bad worker to oh she has pre-existing conditions.

Then I had a crooked attorney in the NY comp system that didn’t care about me or my policy (that is being investigated), he only wanted to get me to settle which then he would be paid.

The Hartford also took my husband’s SS number without his permission.

These ERISA policies are a joke and I can’t understand why we even pay any premiums, if they’re just going to take all their money back.

They keep shoving their policy book in my face and its not even signed by the employer or me and it states the employer pays part of premium, but they don’t.

My enrolment form says nothing about Rhode Island and I didn’t sign off on any exclusions because they weren’t available to see. It says 100% paid on a post tax basis, voluntary.

Oh and they also made me apply for SSDI at 12 months, which in turn they get all their money back that way as well, because SSDI is retro.

I’m not paying them a dime back.

Tara Boyd:

My name is Tara Boyd. I was hit by a drunk driver in the late 1980s. I have really bad back and neck problems. I have applied twice with no luck. They won’t send me for a MRI but would rather send me to quacks who I wouldn’t take my animals to. I promise you I am really bad off. It would be nice to nail this down and get it done.i just need help doing it. I appreciate your time.

Attorney Stephen Jessup:

Tara,

I am not quite sure as to what assistance you are looking for. Have you applied for a disability benefit from a private insurance carrier? Or this a claim for Social Security or a personal injury case? If your case is not related to a disability insurance policy I don’t believe we would be able to assist you.

Arnita:

I am currently receiving LTD benefits from Aon Hewitt. I was denied continuation of benefits after the initial 24 month period. I appealed the decision and was recently approved as being totally disabled from any employment. I received back pay and my benefit payments resumed. My question is as follows. If I sell my home and receive a profit from the sell. Will the profit from the equity in my home cause my LTD payments to be discontinued. My profit should be around $90,000. I intend to purchase a new home and put about $40,000 as down payment. I wanted to bank the remaining amount.

Attorney Stephen Jessup:

Arnita,

I have yet to see a situation where the sale of property would result in some offset to your benefit. Each policy has provisions that identify “Other Income” but those usually relate to benefits such as SSDI, Worker’s Compensation, work income, etc. You should not have an issue, but I would double check your policy as a precaution.

Kevin:

I reside in Pa. and am currently receiving LTD benefits of $100.00 from The Hartford. I am supposed to receive this for two more years. I am also receiving SSDI. My disability is due to a heart condition. Last year in September I was involved in a car accident… rear ended from an uninsured driver while stopped in traffic resulting in serious injury to my neck and low back. I have had two surgeries since the accident. Neck and low back surgery.

I am going to receive compensation under my underinsured motorist coverage. Today I received a call from my adjuster notifying me that she mailed the check, however she received notification from someone from The Hartford, my disability insurance company. She said she believed the call was about subrogation.

My question is: Can The Hartford legally take all or even part of my underinsured motorist compensation I am going to receive for medical bills and pain and suffering? This does not seem right as it is completely unrelated to my current disability and is actually not income.
Can anyone answer this?

Attorney Stephen Jessup:

Kevin,

Maybe. Some plans allow for clear rights to subrogation if your disability is caused by the negligence of a third party. If Hartford is trying to claim it is the neck and back injury then they may be trying to assert the right. However, if the claim is due to the heart condition even if there were a right to subrogation the settlement should be insulated. Furthermore, some policies do not draw a nexus clearly that would allow for it. We would need to see your policy to determine if a subrogation right exists, and also discuss the nature of your claim.

Pam:

My husband has just recently been awarded long-term disability through Aetna. We’re filling out paperwork to give them his SSDI, as well as any SS benefits they can get from our son. We’re doing our best, however, I have two questions. First 1) I were to die with my husband as the beneficiary, would Aetna take the life-insurance payout as an “offset”? Similarly, what about a “windfall” like inheritance from when his parents die? (I’m trying not to be paranoid, but the system is quite obviously rigged to make sure they get as much money as they can, at our expense.) And question two 2) Since they’re taking the SSDI to offset the LTD payment, are we still expected to pay taxes on the SSDI income? This doesn’t seem fair, but like I said earlier, this entire system is rigged, so it wouldn’t surprise me.
Thank you for your time.

Attorney Stephen Jessup:

Pam, life insurance benefits that your husband might receive in the future would not constitute an offset under the Aetna policy. With respect to the tax questions, you will need to consult with a tax professional, as we are not and therefore cannot provide any advice as to same.

Pam B.:

Thanks for your quick response about the life insurance and tax questions. However, what about the inheritance? Would that constitute an offset?

Attorney Stephen Jessup:

Pam, no, inheritance would not constitute income for purposes of an offset under the policy.

PAM B.:

Thanks.

Jackie:

I too have a Long Term Disability Carrier that was governed by ERISA and I was involved in a motor vehicle accident where my husband was driving and I was paralyzed and left with a head injury so I was payed the benefit from our policy and my LTD company was able to surrogate a chunk of money from that and on top of that a year into them paying me they notified me they were going to sue me for not pursuing lost wages from State Farm and I quite frankly did not know what they meant. They had checked out my policy better than me and knew I could receive lost wages in the amount of $1500/month for three years past accident so I had to apply for that so I didn’t get sued. They know all the loopholes to not pay. So yes my attorney looked it over well. If it is ERISA you have to give them your insurance settlement.

Attorney Stephen Jessup:

Jackie, please feel free to contact our office to discuss your situation and to review the policy to make sure the carrier is applying the policy language correctly.

Fred G.:

On LTD due to cancer treatment and serious side effects – chemo brain and severe fatigue. Then rear ended in auto causing neck and back injuries.

Can I settle the auto claim so I can pay off my neck and back medical bills, etc but not claiming any wage loss? Or would the Hartford look at that as Other Income? Or would it be best to wait til end of LTD and then make auto insurance claim?

Attorney Stephen Jessup:

Fred, arguably it would only be an offset under your policy if the auto accident is what led to the disability. The offset would typically be applicable for any settlements resulting in the negligence of a third party – that doesn’t necessarily seem to be the case with your claim. How is Hartford determining your disabling condition?

bml:

I’ve been on ltd with the Hartford for 20 years because of multiple injuries from a gunshot wound. I was in a car wreck last year that resulted in me receiving a settlement for pain and suffering. Will hartford offset my benefit because of this?

Attorney Stephen Jessup:

Bml, it would really depend on the language of the policy. However, given the nature of your disability and claim history I do not see a clear enough nexus for Hartford to assert an offset. However, this doesn’t mean they may not try. Although they are not known for negotiating lump sum buyouts, have you considered such an option with them? Please feel free to contact our office should you have any questions.

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