Is my "no-fault" auto insurance settlement an offset under my long-term disability policy?

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 Dell Disability Lawyers for a free consultation.

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