Can Sun Life deduct Veterans' Benefits from a monthly disability insurance benefit payment?
The case of Marco Martinez v. Sun Life Assurance Company of Canada (Sun Life) provides guidance in determining whether Sun Life, can deduct Veterans’ Benefits from its monthly disability insurance benefit payment to the Plaintiff. In this case, Plaintiff, who was covered under a disability insurance policy issued by his employer and governed by ERISA, began receiving long-term disability (LTD) benefits from Sun Life in November 2012 due to his diagnosis of multiple sclerosis (MS).
According to the Plan, Plaintiff’s monthly disability insurance benefits were calculated at 60 percent of his total monthly earnings less “Other Income Benefits” which were defined as including essentially any “Disability benefits the Employee is eligible to receive.” The Policy listed examples of “Other Income Benefits” an employee might be eligible to receive, including those under the “Compulsory Benefit Act or Law.”
In November 2013, Plaintiff submitted a claim to the United States Department of Veterans’ Affairs (VA) for service-connected disabilities, which included his diagnosis of MS as being aggravated by his military service. His claim was approved retroactive to July 19, 2013. Shortly thereafter, Sun Life informed Plaintiff his benefits under its policy would be reduced by the amount he received from the VA, plus he owed Sun Life $32,560 for overpayments.
When Plaintiff’s administrative appeal was denied, he filed an ERISA lawsuit in the U.S. District Court for the District of Massachusetts. That Court agreed that the offset in benefits provisions of the Policy concerning “Other Income Benefits” was valid. Plaintiff then filed an appeal with the United States Court of Appeals for the First Circuit. The Circuit Court upheld the decision of the District Court.
In making its decision, the Circuit Court relied on several factors that may be helpful for those who have similar questions about their LTD benefits that may be offset by “Other Income Benefits.” First, the Court analyzed the terms of the policy itself. It held since the payment of Veterans’ Benefits was compulsory, Sun Life’s offset of those benefits from its own LTD benefit payment was correct. The Court also held that Sun Life did not discriminate against the Plaintiff based on his military service.
VA Benefits are Paid According to the Compulsory Benefit Act and are Therefore “Other Income Benefits” According to the Policy Terms
The Circuit Court analyzed the policy language and found the two clauses challenged by the Plaintiff, “Other Income Benefits” and “Compulsory Benefit Act or Law,” were not ambiguous and could be interpreted “by common sense principles of contract interpretation.”
It was unambiguous that Sun Life’s benefit payment would be reduced by any “Compulsory Benefit Act or Law.” Since the VA was “required by law to provide Veterans’ Benefits to Martinez once it determined his eligibility, his Veterans’ Benefits are clearly ‘compulsory.'” Thus, according to the “Other Income Benefits” clause, the Court held that Sun Life’s reduction of benefits under the policy based on Plaintiff’s veterans’ benefits was appropriate.
Sun Life Did Not Discriminate Against Plaintiff Because he was a Veteran
Plaintiff argued that Sun Life’s “offset of Veterans’ Benefits discriminates against employees who have served in the uniformed services in violation of USERRA” as codified at 38 U.S.C. § 4311. The Court noted that in order to prevail on such a claim, “an employee must plausibly allege that military status was a ‘motivating factor’ in the adverse action taken by the employer.”
The “simple fact” that his benefits were reduced because he received Veterans’ Benefits was not enough to prove that his military status was a motivating factor. If that were true, then any time an insurance company would allow a veteran to collect LTD benefits under his employer’s disability policy as well as veterans’ benefits for the same disability would be to allow a “double collection” for veterans for the same disability.
The Court noted that “[Plaintiff] concedes that Sun Life also offset his Social Security disability benefits because, like his Veterans’ Benefits, they were awarded for the same disability for which he received Plan Benefits.”
The Court concluded that “the only role that [Plaintiff’s] military status allegedly played in Sun Life’s decision to offset his Plan benefits is that the source of his ‘Other Income Benefit’ was the VA. That fact alone is not enough to plausibly allege a violation of USERRA. Accordingly, we hold that the district court properly granted judgment on the pleadings for Sun Life on [Plaintiff’s] USERRA claim.”
This case was not handled by our office, but we believe it can be instructive to those who have had their benefits under their disability policy reduced due to “other income benefits.” For questions about this issue, or any question about your disability claim, either for short-term disability (STD) or LTD benefits, contact one of our attorneys at Dell & Schaefer for a free consultation.
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