The Impact of Social Security

Disability on ERISA

Long Term Disability Claims

Most working people in the private sector have paid into the Social Security system and thus have the right to file a Social Security Disability Insurance (SSDI) claim in the event disability strikes. If they also file an LTD claim under their employer-provided plan, they may find that they actually have an obligation to also file an SSDI claim.  Some LTD plans even require that a claimant pursue all available appeals to the Social Security Administration (SSA) to qualify for LTD benefits.  The reason is simple.  Every dollar a claimant receives of “other income” benefits, including SSDI, will be offset against (i.e. deducted from) any LTD payments.  Insurers aggressively pursue such offsets, seeking to shift the as much of the burden as possible for paying disability benefits to the SSA (i.e. the taxpayers). Some even offer “assistance” in providing representation before the SSA. This is done by referring claimants to Social Security “advocates”.  A claimant would be well advised to decline this assistance and find an experienced Social Security lawyer on his own for reasons I’ll explain below.


Usually, insurers will have claimants sign reimbursement agreements before even agreeing to pay an LTD claim. Some of them track SSDI claims and follow up with claimants periodically to assure that they will be immediately notified of any award. Some even assume that the claimant will be awarded SSDI benefits when they calculate the amount of the monthly LTD benefit.  In one of my cases, the insurer actually stated in a letter to my client that it “expected (that) Social Security would ultimately pay” his SSDI benefit and thus, it effectively “advanced (him) the money” that it expected would be repaid out of his SSDI award.  If in fact the insurer expected that Social Security would pay, then it must necessarily have considered the claimant to be so severely impaired, as to meet the stringent standards for “disability” under the Social Security Statute. Ironically,  later on when it was in that insurer’s interest to take the opposite position and disregard the SSDI award, it did exactly that.  Two months after sending him that letter, it terminated his LTD benefits, making no effort to even understand why the SSA awarded benefits.


Although LTD carriers are quick to aggressively snatch up the advantage of an SSDI offset, they usually make no effort to ascertain the basis for a favorable SSA decision.  They also sometimes conveniently ignore that decision, when assessing a claimant’s eligibility for LTD benefits. Seldom do they bother to take steps to obtain the SSA file. As a result, the LTD file may have little or no information in it, pertaining to the award itself, the evidentiary basis for it or the rationale for the decision.  For that reason it is important to make sure the entire SSA file is submitted to the insurer.  That may require personally going to the local SSA office to obtain a copy of the file.

Many times insurers will try to shrug off a favorable SSA decision, by contending that the definitions of LTD and SSA disability are entirely different, with different standards for each.  That’s a crock of crap and they know it.  The case law is well developed, establishing that a favorable decision by the SSA is a relevant factor to an LTD claim and in fact, in several circuits an LTD insurer is required to consider a favorable Social Security decision in making its LTD determination.  [1]  The reason for this is crystal clear.  “Disability” under the Social Security statute is  defined as a “physical or mental impairment or impairments.  .  . of such severity that he is not only unable to do his previous work, but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists in the immediate area in which  he lives, or whether a specific job vacancy exists for him or whether he would be hired if he applied for work.”  [2]  The courts have long held this to be a very stringent standard. The Fifth Circuit described it as a standard “so stringent that it borders on being unrealistic.” [3]   By comparison, even the most onerous definitions of disability found in most LTD policies are much less exacting.   Therefore, it would be inconsistent to say that a person, found disabled under the SSA rules would not meet a plan’s definition of disability.  It may even be an abuse of discretion to disregard the SSDI determination, in light of the fact that the Social Security determination is based upon the exact same set of operative facts giving rise to the LTD claim.  At a minimum, the LTD carrier would have to articulate a rationale for disregarding the favorable SSDI determination.   


In Ladd v. ITT Corp. and Metropolitan Life Ins. Co., [4]   MetLife was reprimanded by the Seventh Circuit for taking inconsistent positions regarding Social Security and LTD disability. MetLife's policy entitled it to offset SSDI benefits against LTD benefits.  After Ms. Ladd was awarded SSDI benefits, MetLife referred her file to a reviewing physician, who without examining her concluded in a perfunctory report that she had sufficient “residual functional capacities” to work a full eight-hour day at a sedentary job. MetLife then obtained a vocational assessment based on the reviewing doctor’s biased conclusion that Ms. Ladd was able to do sedentary work.  Based on those two reviews MetLife denied her LTD claim.  The Court found that, “In the circumstances that we have outlined, the denial of Ladd's claim must be adjudged arbitrary, and even irrational.”  The court noted that while MetLife was not a “party” to the proceeding before the SSA, it nevertheless “prevailed” in that proceeding because the award of SSDI benefits reduced the amount of her LTD claim.


The Sixth Circuit reached a similar result in Darland v. Fortis Benefits Ins. Co., [5]  stating that it was inconsistent for Fortis to ignore the SSDI award, noting that “it is plainly evident that the Social Security standard for a disability determination is much more stringent than that required by Fortis’ insurance policy,” as well as “totally inconsistent for Fortis to request that Darland apply for Social Security disability benefits, yet avail itself of that Social Security determination regarding disability to contend, at the same time, that he is not disabled.”  [6]  


Likewise, in Montour v. Hartford Life & Accident Ins. Co., [7]   the Ninth Circuit noted that the SSA had awarded Montour SSDI benefits and that “Hartford benefited from this award significantly, as it received a dollar-for-dollar financial offset, nearly halving its liability.” But two years later, Hartford concluded that he was no longer disabled, even though the SSA considered his disability to be “continuing”. Montour forwarded the notice of continuing disability to Hartford, but it ignored it. The court held that “(C)omplete disregard for a contrary conclusion without so much as an explanation raises questions about whether an adverse benefits determination was ‘the product of a principled and deliberative reasoning process.’.  .  .   In fact, not distinguishing the SSA’s contrary conclusion may indicate a failure to consider relevant evidence.”  [8]  


Although insurers will tenaciously latch onto an adverse decision by the SSA as a basis for denial of an LTD claim, just as quickly as they try to wash their hands of a favorable one.  Although case law may require that an insurer consider the basis of a favorable SSA decision, I am not aware of any cases holding that an adverse Social Security decision is in any way relevant to an ERISA LTD decision.  As noted above, the burden that a claimant must meet to be awarded SSDI benefits is high one.  By comparison, LTD definitions of “Disability” are much less exacting. So while a favorable SSA decision is relevant to an LTD claim, an unfavorable one is not.   


Another aspect of the relationship between SSDI and LTD eligibility involves the relationship between the insurer and various Social Security “advocacy” companies, who represent claimants.  These outfits often come with a ringing endorsement by the insurer for the “high quality” of assistance they provide.  Often, the image conveyed is that of a highly experienced, dedicated group of seasoned professionals, who would have the claimant’s best interest at heart.  Although some of them may be effective, my experience is that many are not.  In my opinion a person would be better off hiring his own SSDI lawyer. In one such case the advocacy company did provide an attorney to represent the claimant at the Social Security hearing.  The Administrative Law Judge (ALJ) completely butchered the case.   Her decision was utterly inconsistent with the facts of the case; she misstated the medical diagnosis; she improperly discounted the claimant’s subjective accounts of pain, which runs afoul of the Social Security regulations; she disregarded the “Treating Physician Rule” of the Social Security Administration (SSA) guidelines (which has since been abolished); [9]  and she failed to take into account the claimant’s advanced age, in disregard of the regulations. [10]  

Throughout this entire fiasco, the “advocacy” attorney sat silent. The ALJ gave the attorney two weeks to file a post hearing brief.  The attorney filed nothing.  But worst of all, despite the glaring errors in the SSA record, the attorney failed to discuss with her client his options, which included a further appeal to the U.S. District Court.  Despite the advocacy company’s firm assurance that it would be with the client “every step of the way” and that it would provide representation “throughout the entire process”, the company later informed him that it did not handle legal representation in court.  Not just that it didn’t want to handle his case.  It didn’t handle anyone’s case in court.  It did not involve itself in any kind of litigation at all, beyond a hearing before the ALJ.  And it didn’t bother to disclose that fact to the client until five days before his deadline for filing a district court action, leaving him little time to go out and hire a real Social Security attorney. As could be expected, this “advocacy” company promptly transmitted the unfavorable ALJ decision and the entire SSA file to the insurer, who then promptly denied the LTD claim.   


        [1]   See e.g., Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 695 n. 11 (7th Cir. 1992); Torix v. Ball Corp., 862 F.2d 1428, 1431 & n. 6 (10th Cir. 1988); and Helms v. Monsanto Co., 728 F.2d 1416, 1420-21 & n. 6 (11th Cir. 1984).  (Although Social Security findings are not “binding” on LTD carriers, they are to be considered instructive.)  See also, Palmer v. Univ. Med. Grp & Std. Ins. Co., 994 F.Supp. 1221 (D.OR 1998). (looking to Social Security analytical tools for ERISA cases);   Monroe v. Pacific Telesis Group Comprehensive Disability Benefits Plan, 971 F.Supp. 1310, 1315 (C.D. Cal. 1997) (finding Social Security precedent useful in ERISA cases);  Durr v. Metropolitan Life Ins. Co., 15 F. Supp. 2d 205, 213 (D. Conn. 1998) , (citing Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 695 n. 11 (7th Cir. 1992); Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 628 (9th Cir. 2009).  Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243 (2nd Cir. 1999) [from S.D.N.Y. June 15, 1999], citing  Kirwan v. Marriott Corp., 10  F.3d 784, 790 n. 32 (11th Cir.1994)  (finding that although Social Security findings are not “binding”, they are nevertheless instructive);  and see, Hines v. Unum Life Ins. Co., 110 F.Supp. 2d  458 (W.D. Va. 8/11/00), citing . Elliott v. Sara Lee  Corp., 190 F.3d 601, 607 (4th Cir. 1999).


        [2]   42 U.S.C. § 423(d)(2)(A).


        [3]   Laffoon v. Califano, 558 F.2d 253, 256 n. 6 (5th Cir.1977), quoting, Williams v. Finch, 440 F.2d 613, 615 (5th Cir.1971); and see: Helms v. Monsanto Co., 728 F.2d 1416, 1421 (11th Cir. 1984).


        [4]   Ladd v. ITT Corp. and Metropolitan Life Ins. Co., 148 F.3d 753 (7th Cir., 1998).


        [5]   Darland v. Fortis Benefits Ins. Co., 317 F.3d 516, (6th Cir., 2003).


        [6]   Id. at 530.


        [7]   Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623 (9th Cir. 2009).



        [8]   Id. at 635.


        [9]   Lester v. Chater, 81 F.3d 821, 830 (9th Cir. 1995).  (“As a general rule, more weight should be given to the opinion of a treating source than to the opinion of doctors who do not treat the claimant.”);   § 404.1520c. “How we consider and articulate medical opinions and prior administrative medical findings for claims filed on or after March 27, 2017.  .  .  .  (a) How we consider medical opinions and prior administrative medical findings. We will not defer or give any specific evidentiary weight, including controlling weight, to any medical opinion(s) or prior administrative medical finding(s), including those from your medical sources. .  .  .” [Source:].


        [10]   20 C.F.R. §404.1568.

By: Michael A. McKuin


ERISA Disability Lawyer