Is Cigna seeking to offset disability benefits by Social Security survivor benefits?

I recently spoke with a gentleman who called into our office who has been receiving long term disability benefits from Cigna for several years and is also receiving Social Security disability benefits. Employer provided disability policies contain what is known as an “Other Income” provision that identifies all the sources of income that will offset your monthly benefit- the most common of which is Social Security Disability Insurance (SSDI). Under the Other Income provisions an insurance carrier can require you to apply for Social Security disability benefits and failure to do so will result in the insurance company being able to estimate what you would receive an then offsetting your benefit by that amount. In addition to being allowed to offset your monthly benefit by the amount you receive (or are estimated to receive in the event you fail to apply for SSDI upon request of the insurance company) the policy will also allow the insurance company to and if you receive same your disability insurance benefit through your insurance company to further offset your monthly benefit by the amount your dependents receive “or would be eligible to receive” from Social Security on account of your disability, known as Dependent Social Security Disability insurance (DSSDI). Personal feelings aside as to the fairness of this latter provision, these policy provisions are legal and enforceable.

Typically, when a person is awarded SSDI benefits their dependents are entitled to receive DSSDI benefits equal to one half the amount you receive from Social Security. However, as is the case with the person I spoke to recently, despite receiving SSDI benefits, Social Security has advised him his dependents are not entitled to DSSDI. This is due to the fact that the dependents are receiving Social Security survivor benefits stemming from the passing of their mother. According to Social Security, as the survivor benefit is greater in amount than what the DSSDI benefit would be and as such Social Security will not “switch” the benefit from a survivor to dependent disability benefit.

Needless to say, Cigna is not pleased with this and is requesting documentation from the insured as to the amounts received by his dependents on account of the survivor benefits; the amount the dependents would receive or “be entitled to receive” in dependent disability benefits; and verification from Social Security as to same. From what I have been advised by the potential client, Social Security will not provide any “hypothetical” information to satisfy Cigna’s request and has advised the insured that his children are not entitled to dependent disability benefits.

It is my opinion that Cigna is looking to make an argument that (1) but for the fact the insured’s children are receiving a Social Security survivor benefit from their mother’s social security number they would be “entitled” to receive Dependent Social Security benefits on account of their father’s Social Security Disability benefit and (2) under the terms of the policy they are allowed to offset the insured’s monthly benefit by the amount his dependents would receive or “would be entitled to receive.”

This will ultimately hinge on this idea of “would be entitled” to receive. Cigna will likely argue the above but/for scenario and claim their interpretation of the policy is it relates to “would be entitled to receive” and seek to estimate this amount and reduce the insured’s monthly benefit by same. It is my opinion that the language in the policy is clear – Cigna can offset only if the dependents are entitled to receive a dependent disability benefit. Per the Social Security Administration and its rules, the caller’s dependent children are not entitled to a dependent disability benefit, and as such there is nothing Cigna can offset.

The gentleman who called our office is gathering the correspondence he has received from Cigna on this matter to provide for my review to determine the proper cause of action. If Cigna is trying to enforce a potential offset to your monthly disability benefit and you have a question regarding same please feel free to contact our office to discuss.