Is Reliance Standard Wrongfully Offsetting Your Disability Insurance Benefit?

If you are insured under or receiving disability benefits from an employer provided Group Disability Insurance Policy governed by ERISA your benefit is or will be subject to reduction for sources of “Other Income” benefits you receive while on claim. Of these sources of Other Income Benefits, Social Security Disability (SSDI) benefits are the most common. These provisions are legal and enforceable, but what happens when Reliance Standard, for its own financial benefit, misapplies the SSDI offset to the detriment of the insured?

Misapplying offsets for sources of Other Income

When our client first contacted our Office his claim for long term disability benefits had been approved for a period of several months and denied beyond that time. In the denial letter from Reliance Standard our client was advised that his claim would be subject to offset due to sources of other income- specifically referencing SSDI benefits. However, Reliance Standard had determined that it was unlikely that our client would receive benefits for more than 12 months due to his illness (evidenced by the denial) and as such Reliance Standard would not estimate the SSDI benefit to offset his monthly benefit when computing his past due benefits and current monthly benefit.

As the claim for long term disability benefits had been denied, Attorney Stephen Jessup filed a successful administrative appeal of the denial of our client’s claim, the details of which can be found here. Initially, upon overturning the denial Reliance Standard forwarded a back benefit check representing the full monthly benefit, which in accordance with the policy language, represented 60% of our client’s pre-disability earnings. However, after only several months after the claim was reinstated Reliance Standard began withholding what it deemed to be an estimated “Social Security Disability” benefit- depriving our client of nearly $2,000 a month in benefits Reliance Standard was contractually obligated to pay under the terms and conditions of the policy.

Reliance Standard provided no warning to our client that it intended to reduce his monthly disability benefit by the estimated SSDI benefit. In fact, it was two months later that Reliance Standard indicated in writing that it required proof of application for SSDI benefits or it would reduce the monthly disability benefit! This despite the fact proof of application for SSDI benefits had already been submitted to Reliance Standard.

Challenging the Offset

Attorney Jessup contacted Reliance Standard in order to get the offset lifted and our client reimbursed the benefits that were wrongly being withheld. It should be noted that most insurance carriers will not apply an estimated SSDI offset unless the insured fails to, or refuses to apply for SSDI benefits; and those that do will quickly lift the offset upon proof of filing for same. This is NOT the case with Reliance Standard. Instead of apologizing for violating the terms and conditions of the policy, Reliance Standard actually had the audacity to require a written request to have the offset lifted and explanation as to why our client wanted the full monthly benefit amount! Considering our client is not receiving SSDI benefits, the loss of the $2,000.00 in monthly income has resulted in severe financial hardship as the monthly benefits are relied upon to not only pay monthly expenses but also to be able to afford medication and medical care.

It was pointed out to Reliance Standard that our client’s claim for long term disability benefits was being administered under an “own occupation” definition of disability and not the much more stringent “any occupation” definition used by the Social Security Administration. Additionally, for purposes of determining SSDI benefits, our client is considered young, which adds to the likelihood that the SSDI claim will be denied, requiring appeals and a potential hearing – all of which could take several years to be completed. Attorney Jessup reminded Reliance Standard that our client had satisfied the requirements under the policy to apply for SSDI; that our client was aware of the obligation to repay any overpayment resulting in receipt of SSDI; and that in light of the preceding Reliance Standard was in breach of the policy requirement to issue a benefit representing 60% of our client’s pre-disability earnings in accordance with the policy language.

Regardless of these facts, Reliance Standard has taken it upon itself to only lift the offset for months going forward and refuses to reimburse our client the benefits it has withheld. Attorney Jessup is still fighting this issue with Reliance Standard and stands prepared to file suit under ERISA should this matter not be resolved.

Is Reliance Standard paying you the full benefit you are owed?

If Reliance Standard is attempting to reduce or is reducing your benefit by an estimated SSDI amount know that you are not alone. If this is happening to you, and you have complied with all policy requirements as it relates to applying for SSDI benefits please feel free to contact any of our disability insurance lawyers to discuss how we can assist you in securing what is rightfully yours.

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There are 13 comments

  • Tracee,

    Denial of SSDI in and of itself is not grounds for Reliance to terminate your claim. That being said, it can be used by Reliance as evidence in its review that you are no longer eligible for disability.

    Stephen JessupOct 9, 2015  #13

  • If I get denied SSDI…does Reliance cut me off before the appeal process to SSDI? (Social Security Disability)

    TraceeOct 8, 2015  #12

  • I appreciate the thoughtful and succinct response.

    When one signs up for these programs, the only info that shows is: “Provides 60% of annual salary for 3 years”. Part of the problem is that you now sign up for these on-line through workplace portals. Although convenient, there is absolutely no disclosure to the SSDI contingency. And although your analogy of base model contract is taken….they only pay for three years. Three years is not a real long time when you advertise the policy they way they do. I don’t think they are going to go bankrupt on a three year window. At least give the option of a premium for full payout for those three years. That makes this deal transparent and I’m not sold that it would be terribly astronomical…..so they don’t make as much profit….but people will still go with the other option by and large.

    So the three year window was not a surprise…the SSDI contingency was. And although it might be more affordable, that doesn’t make the deck fair in my opinion…that is my wife paying into Soc Security for 22 years, the premium for 22 years, but has the amount that she paid into removed from the advertised 60% salary. And it is more vexing dealing with this when the disability comes at 45 years old with many more years of medical bills and simple basic needs.

    This might not seem too unfair to those who confine themselves simply to policy language, but that policy language is huge when you are told the hidden fine print. This is the kind of disingenuous contracting that is the norm rather than the exception.

    I think it’s unfair for lawyers, that have nothing to do with this, to be the ones who have to explain it after the fact. But I’m glad you did and I have a lot of respect for those who make nothing for patiently explaining what the policy makers seem unwilling to divulge. Thanks and God bless. Richard

    Richard C.Sep 9, 2015  #11

  • Richard,

    I understand your feelings, but unfortunately the policy works as a contract. The coverage you paid for or that was provided by your employer is contingent on the terms and conditions of the contract. These offsets provisions are one of the main reasons why the cost of coverage under an employer provided policy is so low. Had you purchased equal income protection by way of a privately insured policy that does not contain such provisions there stands a chance the premiums would be too high to be feasible. An adequate analogy for disability insurance policies would be buying a car- you can get the base model that doesn’t cost much money or you can pay for all the upgrades you want. Employer provided policies are the base model, individual policies are the upgraded high end models.

    Stephen JessupSep 9, 2015  #10

  • “These offset provisions have been deemed legal and enforceable.”

    That, sir, is the problem. It’s legal highway robbery of the disabled….period!

    Richard C.Sep 8, 2015  #9

  • KK,

    If a court had previously determined you were not disabled, I do not know what rights to back pay you would have. If you are speaking as to the SSD determination you will need to consult with your SSD attorney.

    Stephen JessupAug 21, 2015  #8

  • I have just been approved for SSD and am no longer receiving LTD from Reliance. They paid me for the total of 15 months with the overage for SSD. The first case I filed was denied. I reapplied with another attorney on a separate case. I was deemed disabled from 5/1/2013 on, not before then due to court previously denying my case. Reliance paid me until 10/31/2012. Do have a right to my back pay?

    KKAug 20, 2015  #7

  • Richard,

    The simple answer is that the policy language allows them to do so. These offset provisions have been deemed legal and enforceable. If Reliance is trying to terminate your wife’s claim we would be more than happy to discuss her situation further.

    Stephen JessupApr 29, 2015  #6

  • How is it that Reliance can reduce their benefit by the amount of SSD? To me it’s simple, we pay the premium, they provide the benefit. What does SSD benefit have to do with their promise to pay and the amount they should pay? We don’t negotiate our premiums by scrutinizing how many tax credits they receive. We were told that our LTD was 60% of salary for 3 years by our benefits department. So how is it that the premium paid is a flat rate but the benefit payout is contingent? And there is absolutely no educational process, written or otherwise, by they or the employer to help the client understand the process. No contract stating the logistics of benefit payout or contingencies. Also they give only 45 days to gather medical records and complete forms. So my wife pays into this for 22 years and they give her 45 days? The whole thing smacks of the usual ‘deck stacking’ against clients with an absurd amount of latitude purchased in the back rooms of legislative venues. They know how overwhelmed the medical profession is, and how these forms are a lower priority than say, tangible medicine. The more I read the more I felt my wife being ‘re-victimized’ by a system that allows these companies to arbitrarily set the rules. My wife paid into SSD through tenure of employment, why does she have to pay for it again by having another benefit shorted by the amount she would receive from what she paid into? Just because it’s ‘common’ doesn’t make it right. It was common for security brokers to sell off equity loans to make themselves rich at the expense of the borrower. I can get away with a lot by using that word myself, but there’s that little thing called integrity that prohibits many a decent citizen from doing so. I guess we’ll see what happens here. Stay tuned.

    RichardApr 28, 2015  #5

  • Robin,

    Your policy allowed for the offset of your benefit by the amount you received from SSDI- this is common to all employer provided policies. Have you filed your appeal? If not, please feel free to contact our office to discuss how we may be able to assist you with same.

    Stephen JessupApr 25, 2015  #4

  • Reliance Standards is a big joke. I paid into it for years before I had to use them. It took forever before they sent the check. Everytime I would call and check on it they would lie and brush me off. I finally started receiving my checks and then I was told I had to apply for SSD. As soon as I got on that I had to send reliance over 2000.00 which I don’t understand due to they were separate and I had to pay my premiums each month to reliance. Once they received my SSD check they dropped me even though I was getting ready to have another surgery. I received very poor service from Reliance.

    RobinApr 24, 2015  #3

  • Insurance companies should have the pay the taxes on the offset income they take from me. My disability claim payment is a tax free benefit. My insurance company (let’s call them Metlie to keep their name a secret) offsets the full gross amount of my Social Security payment and then I have to pay taxes on Social Security when I file. Why can the insurance company take the gross amount of my Social Security when that is not the amount I actually keep due to taxes. Also the insurance company forces me to take Medicare and pay addition $140 month for health insurance without any premium reduction on my family Health Insurance policy. Insurance is becoming more of a scam than the safety net it is supposed to be when unexpected circumstances arise. Insurance companies do everything to reduce their payouts but never mention any of these offset details when asking for the policy payment.

    ScottApr 15, 2015  #2

  • Why is it so common for certain disability insurers to engage in this kind of reprehensible conduct? Guess it is all about the money. I went through a somewhat similar battle with my own disability income insurer and it almost drove me to see a shrink because of all the nonsense it threw at me.

    The United States Department of Veterans Affairs found that I was 100% P&T service connected disabled due to a number of debilitating chronic conditions including Meniere’s with loss of hearing. Despite that my private disability income insurer was throwing up silly roadblocks to recovery of benefits saying things like “Your hearing tests were not valid because you were not wearing hearing AIDS during those tests.” What? No one tests someone for hearing loss while the patient wears hearing AIDS. Absolutely ridiculous.

    RichardApr 14, 2015  #1

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Steve Dell has done an exceptional job with my disability application process. The firm is extremely well managed. They have acquired an incredible amount of experience over many years. I recommend them for disability insurance claims without reservation. 

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I called this firm a few months ago completely disparaged due to a company cutting off disability benefits at a time that nearly caused me to lose everything.

Attorney Alex Palmera and Danielle worked hard to reach an amicable settlement and my case was settled a few months later. This is a good firm and the specific expertise in disability claims saved me countless hours of hassle at a time when an already fragile state existed.

Thank you Mr. Palamara and Danielle.

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