If I have two different disability insurance policies and I am approved for Social Security Disability, can both disability companies deduct my monthly benefit by the amount of the SSDI payment?
Author: Attorney Gregory Dell
The answer unfortunately is: depending on the language of the insurance policy, mostly likely yes, each disability insurance company can deduct the full amount of the SSDI payment from each of the disability benefit payments.
Unless there is substantial ambiguity in the language of the policy provision that permits the SSDI offset, the courts will more often rule in favor of enforcing the provisions of the disability insurance policy, regardless of whether such an application seems harsh or unfair.
In a California case brought against Unum, the claimant had two separate disability insurance policies that were provided by two separate employers, but both policies were administered by Unum. The claimant was approved for disability benefits that were paid out by both of the Unum policies. However, when the claimant was approved for Social Security Disability benefits, Unum offset each of the disability benefit payments by the full amount of the SSDI payment – essentially applying a “double” offset.
The trial court found in favor of Unum and upheld the “double” offset of the SSDI payment. The claimant appealed and the appellate court also found in favor of Unum. The appellate court held that the plain language of both of the disability insurance policies expressly permitted Unum to reduce the monthly disability benefit by “deductible sources of income” which included the amount the claimant was entitled to receive under Social Security Disability. Because neither policy contained language that made an exception for a case where a claimant was covered by two separate disability insurance policies, Unum was permitted under the policies to apply the SSDI offset to each disability benefit payment individually.
In another case out of Michigan, the claimant was covered by two separate disability insurance policies. However, the policies were administered by two different disability insurance companies. When the claimant was awarded SSDI benefits, each disability insurance company offset the full amount of the SSDI payment from the disability benefit. The court held there was nothing in ERISA (the federal law that governs employee welfare benefit plans such as long term disability) or in the claimant’s disability insurance policies that precluded a double offset of the claimant’s SSDI benefit. Further, the court held that it was within each plan administrator’s authority to determine whether the claimant’s benefits under the policy were to be offset by the SSDI benefit.
Therefore, if each of the disability insurance policies contain provisions which allow an award of Social Security Disability benefits to be offset/deducted from the benefit amount paid under the disability policy, then the courts will likely enforce this policy provision, even if it means that the full SSDI benefit amount is, in reality, deducted twice.
Attorneys Dell & Schaefer did not represent either the California or Michigan claimants in their claims for disability benefits or in their lawsuits.