Challenging the calculation that Prudential Insurance Company made when reducing their private benefit payments, Kathleen Schultz and Mary Kelly filed a class action lawsuit in hopes of receiving a positive, definitive decision concerning their claims.
Per ERISA (the Employee Retirement Insurance Security Act of 1974), when a disability claimant qualifies for Social Security Disability (SSD) Benefits and receives those benefits, the private insurer can deduct the amount of that Social Security Disability Insurance (SSDI) benefit from its payment to the claimant. In the case of these two women, their children also receive SSDI benefits and the two contend that “the plans do not authorize Prudential to include in the offset calculation the benefits paid to their dependent children on account of the plaintiff’s disability.”
Claiming that the language in Prudential’s insurance policy terms and conditions concerning this calculation are ambiguous and “should be construed against Prudential,” Schultz, Kelly and their Illinois disability lawyer appeared on January 17, 2012 to be heard on the matter.
Did Prudential Correctly Calculate Disability Benefits?
The primary issue at bar in this case are whether the insurer correctly reduced the plaintiffs’ Private disability benefits “based on their children’s Social Security disability benefits” and whether a child’s Social Security disability benefits payment that are based on a parent’s disability qualify as “loss of time” disability benefits per their respective policies.
According to the Court’s opinion, the argument raised by the plaintiffs in this appeal concerned the purpose of Social Security payments to a “dependent child of a disabled parent is not to replace the income that the household has lost as a result of the parent’s inability to work. The purpose is instead to provide additional ‘support’ to the child.'” While the plaintiffs may have thought that the phrase “loss of time” is in reference to the loss of time to support their children, according to the Appellant Court, it means loss of time at work.
District Court Determine that Dependent Children’s SSDI is Subject to Offset
Stating numerous cases in which various courts have considered this issue and “found that dependent children’s social Security benefits were subject to offset under nearly identical policy language, the Illinois Circuit Court had to agree. And, while the plaintiffs’ attorney did find at least one case where “loss of time” was considered to be a term of art “that permits the offset of payments made to compensate for the insured’s lost income, but no to compensate for the insured’s disability or for support to the insured’s children,” the Appellant Court, in this case, found that case to be of little merit.(Carstens, 520 F.Supp.2d at 1166). Ultimately, the Court, after hearing oral arguments on this case stated that “we wish to make abundantly clear that the offset language in these plans would not apply to social security benefits paid because of the child’s disability. The result the plaintiffs seek is not a reasonable interpretation of the plans’ use of the phrase ‘loss of time disability benefits.'”
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