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

Comments (36)

  • VSS, I’m not sure what you mean by reimbursed. I assume you mean that Sun Life would consider the Tort settlement as “other income” and offset it against you monthly benefit. The details of other income would be found in your employer’s group policy, which you should request a copy of and provide to your personal injury attorney. I also suggest you contact our office and speak with one of the attorneys to address your specific situation and what can be done to minimize the impact of the offset to the extent possible.

    Jay Symonds Jun 5, 2019  #36

  • I was put on FMLA due to bi-lateral osteoarthritis, I have had both ACL’s and Minuscus repaired. The left 14 years ago and the right 3 years ago. My physician put me on FMLA and submitted an ADA request to have my position at my school district changed because of the physical demands that came along with it. My SunLife disability insurance kicked in after 2 weeks, I was put on FMLA May 8… May 25th on my way to a PT evaluation for my knees, my car was t-boned on the drivers side by an uninsured motorist, who ran a stop sign. I have since gone through therapy for my neck and back, chiropractic care, several different medications surgery to my lumbar spine and am currently awaiting surgery to my c spine.

    I had to retire from teaching after 20 years in January as I ran out of TD… so I receive TRS and a smaller part from SunLife.

    Allstate wants to settle, but SunLife wants to be reimbursed…

    VSS Jun 5, 2019  #35

  • Miriam, you need to review your policy carefully under other income, but the carrier is usually permitted to take offsets for 3rd party settlements for lost wages. They can relate back to the date your case was settled if it covered the same time period as your LTD claim covers.

    Rachel Alters Mar 14, 2019  #34

  • Thank you Rachel, so they will not take pain and suffering as long as my attorney separates loss wages from the pain and suffering.

    Also I am not approved for LTD yet. If my case auto-accident case closes before the LTD appeal is submitted and approved does this mean they cannot try to offset any of my recovery?

    Miriam Mar 14, 2019  #33

  • Miriam, the disability carrier is usually permitted to take an offset for any other income you receive as a result of your disability. If you settle the claim make sure your attorney separates out in the settlement agreement how much is for lost wages and how much is for pain and suffering.

    Rachel Alters Mar 11, 2019  #32

  • My name Miriam:
    I was in a car accident which caused my disability. I can understand having to give my LTD provider any lost wager recovery but do I also have to give them recovery from my pain and suffering?

    Miriam Mar 11, 2019  #31

  • Jean, thank you for reaching out to us. As to question 1: That is a tough one as it is possible an LTD carrier could try to make some type of claim that they would have rights to subrogation under the policy for any lump sum settlements from a third party related to your disability, but I believe it would be a stretch. In my opinion, your situation is not like the typical scenario where an accident (car or otherwise) caused by a third party results in the disability and a settlement is reached on the accident case. The LTD carrier should not have a right to offset any funds associated with medical care and often are limited to being able to only offset for funds attributed to lost wages. As to question 2: The most likely way would be if the expressly ask if you have received any other sources of income or awards of money.

    Stephen Jessup Jan 25, 2019  #30

  • Went on LTD through my employer benefits in ’07 as a result of Lyme Disease. The Lyme Disease was contracted while working as a volunteer for the Forest Service. OWCP accepted the claim for Lyme Disease and covered the medical treatment. Since I was considered an unpaid employee obvious not entitled to any continuation of pay through OWCP. Returned to work mid ’08, but due to severe arthritis triggered by the Lyme disease went on permanent LTD Jan. ’10 and have been since and will continue to be for life. Currently collecting LTD benefits from employer, offset by SSDI.

    Have been fighting with OWCP since ’10 to cover resulting sever rheumatoid arthritis. Due to resulting bone destruction have had several surgeries; both knees replaced, right shoulder replaced, left foot fused, left hip replaced, still need more surgeries. Finally just this month OWCP accepted the condition of rheumatoid arthritis. Yippee! My lawyer tells me I am entitled to schedule awards for the joint replacements, probably lump sum. Schedule awards are a pain and suffering provision, NOT a work loss provision; obviously I am not entitled to any work loss compensation from OWCP since I did not earn a wage from the government for my services. I am pretty sure though that my benefits provider will want to claim otherwise though, I do find in my benefits description that they list schedule awards as offset, and try to offset or collect back pay. I don’t think the benefits provider is aware of the OWCP claim at all. They questioned me about Worker’s Comp when I first filed under the Lyme Disease claim, but when I told them I was a volunteer and not entitled to wage compensation they lost interest.

    Question #1. Is my LTD benefits provider entitled to an offset that is for pain and suffering?

    Question #2. How would my LTD benefits provider find out if I were given a schedule award? The award isn’t tax deductible, but I am pretty sure OWCP notifies Social Security of the award because there are times when SSDI will offset an award for federal employees that don’t pay into Social Security. I know they (my benefits provider) have in the past investigated me: I had a contractor doing some remodel work when I bought this house, he was contacted twice by someone wanting to know if I was an employee of his. Around the same time, right after I moved into the house, someone very suspicious came to my door under the pretense of looking for someone who didn’t live here. He had backed his car up my driveway and someone else was in the car with the car running, it was so obviously a ruse, so I know I was being investigated.

    Thank in advance for your time.

    Jean Jan 24, 2019  #29

  • Eric, arguably, no. As your disability is not due the accident, then it should not fall under a source of other income that would subject your claim to an offset. If Prudential does try to raise that issue (or gives you any other difficulty), or you have additional questions please do not hesitate to contact our office.

    Stephen Jessup Jan 1, 2019  #28

  • My name is Eric. I was diagnosed with Parkinson’s disease, dystonia, brain tumor. I underwent brain surgery for my brain tumor and had a deep brain stimulator put in in 2016. I was approved for social security, long term disability by Cigna but I was able to return to work in April 2016. I was involved in auto accident in April this year and injured my knee and will be having surgery on that knee on January 25 and probably have settlement. My boss wants me to apply for disability due to my speech difficulty from my Parkinsons. Our long term disability is thru Prudential now. Can prudential make a claim on my auto accident settlement which is not related to my parkinsons. I will apply for LTD this Jan 2019 due to my speech difficulty because of my Parkinsons, dystonia and brain tumor. Please advise.

    Eric Dec 31, 2018  #27

  • Al, unfortunately, I do not have any suggestions. We only handle claims for short and long term disability insurance policies provided by private insurance companies. The only other avenues I could suggest would be state disability and SSDI, but those avenues have already been ruled out. Does your personal injury attorney know any attorneys that handle NY State Disability he can get you in touch with?

    Stephen Jessup Mar 22, 2018  #26

  • Dear Mr. Stephen: My name is Al D. I was going home from work and stopped at red light on left turn lane and suddenly without any warning, struck in rear resulting in lower back and neck injuries. My insurance company and the other drivers insurance company were the same company, Allstate Insurance. Allstate insurance paid me for lost wages as well as the doctor bills for the first 6 Months under no fault and Aetna Insurance paid the other 50 % for lost wages through my employers insurance Co, Aetna.

    Allstate stopped any payments to my doctors based on an examination by their doctor which was strictly a phony examination. It is now a total of one and one half years since I received any lost wages and I am in desperate financial condition at this time. I was cleared to return to work by my doctor in august of 20176 but not allowed to work as warehouse worker because of my injuries. So I am still out of work and cannot find employment. I contacted NYS Disability and they said I am too old, that once you pass retirement age of 66 you cannot apply for disability. I have excellent accident coverage on my own policy including Supplementary including SAUM Coverage of 250,000.00 each person and 500,000.00 each accident. This is in additional to the PIP Coverage of 50,000.009 each person and 100,000.00 Medical each person. Where do I go from here, my accident attrorney claims to know nothing about my disability iNYS SSDI said I’m too old.

    Al D. Mar 21, 2018  #25

  • BA M, potentially, if the your policy has subrogation provisions or if the injury sustained in the accident results in a level of disability the insurance company may have grounds to argue a potential source of other income to offset your benefit (due to the negligence of a third party). Without the benefit of your actual policy language we would not be able to determine the impact of the settlement on your LTD claim.

    Stephen Jessup May 2, 2017  #24

  • I receive Ltd and have been for several years duebto low back and leg problems and was just hit by a uninsured motorist and my neck seems to be injured and my insurance company is talking a settlement. Will that offset my Ltd as the injury is in my neck not low back and legs? I paid for my policy out of pocket while employed by a big box company and is not taxable.

    BA M Apr 30, 2017  #23

  • 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.

    Stephen Jessup Apr 18, 2017  #22

  • 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?

    bml Apr 13, 2017  #21

  • 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?

    Stephen Jessup Feb 9, 2017  #20

  • 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?

    Fred G. Feb 4, 2017  #19

  • 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.

    Stephen Jessup Aug 23, 2016  #18

  • 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.

    Jackie Aug 22, 2016  #17

  • Thanks.

    PAM B. Feb 21, 2016  #16

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

    Stephen Jessup Feb 11, 2016  #15

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

    Pam B. Feb 10, 2016  #14

  • 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.

    Stephen Jessup Feb 9, 2016  #13

  • 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.

    Pam Feb 8, 2016  #12

  • 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.

    Stephen Jessup Apr 30, 2015  #11

  • 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?

    Kevin Apr 29, 2015  #10

  • 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.

    Stephen Jessup Mar 9, 2014  #9

  • 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.

    Arnita Mar 8, 2014  #8

  • 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.

    Stephen Jessup Oct 5, 2013  #7

  • 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.

    Tara Boyd Oct 4, 2013  #6

  • 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.

    Been Frauded Oct 3, 2013  #5

  • 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.

    Stephen Jessup Oct 3, 2013  #4

  • 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.

    Stephen Jessup Oct 3, 2013  #3

  • 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?

    Andrea L. Wolfson, Esq. Oct 2, 2013  #2

  • 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.

    Rose Oct 2, 2013  #1

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