The Impact of Social Security
Disability on ERISA
Long Term Disability Claims
If you have paid into the Social Security system and you are currently disabled, you have the right to file a Social Security Disability Insurance (SSDI) claim. In fact, under many ERISA LTD plans, you will have an obligation to apply for SSDI. Under some LTD plans you may even be required to pursue all available appeals to the Social Security Administration (SSA). Some LTD insurance companies even offer “assistance” in providing representation before the SSA. (although you would be well advised to find an experienced Social Security lawyer on your own). The reason for this is simple. Every dollar of SSDI benefits you receive will be offset against (i.e. deducted from) your LTD payments and LTD carriers aggressively pursue that offset. Usually, they will have LTD claimants sign SSA reimbursement agreements, before even paying an LTD claim. Some carriers “track” SSDI claims and follow up with claimants periodically, to assure that the carrier will be immediately notified of any SSDI award.
Although LTD carriers are quick to snatch up the benefit of the SSDI offset to minimize any LTD benefit amount they might have to pay, they tend to conveniently ignore the SSA decision itself, when assessing a claimant’s LTD disability, demonstrating they are more concerned with protecting their own interests than with protecting the interests of their insureds. Seldom do they bother to obtain the SSA file on their own. As a result, the LTD file may have little or no information file pertaining to the actual SSA decision itself, the evidentiary basis for it or the rationale for the decision.
However, given ERISA case law developments, the SSA decision should not be ignored. It has been well-settled for some time that a disability determination by the SSA is a relevant factor to an LTD claim. 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).
In fact, under more recent case law, an LTD insurer is required to consider a favorable Social Security decision in making its LTD determination. The reasons for this are simple. “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.” 42 U.S.C. § 423(d)(2)(A). The courts have long held this to be a very stringent standard. See Helms v. Monsanto Co., 728 F.2d 1416, 1421 (11th Cir. 1984). By comparison, most “Any Occupation.” definitions of “Disability” set forth in various LTD policies are much less exacting. Therefore, it would be inconsistent to say that a person, who is found disabled under the SSA rules would not meet a Plan’s definition of disability. It could also constitute an abuse of discretion to disregard the SSDI determination. This is especially true, in light of the fact that the Social Security determination is usually 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. 148 F.3d 753 (7th Cir., 1998), MetLife was reprimanded by the Seventh Circuit for taking inconsistent positions regarding Social Security disability 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, Dr. Bertrand, who without even 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 Dr. Bertrand’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 stated:
“The grant of social security disability benefits to Ladd has an additional significance. It brings the case within the penumbra of the doctrine of judicial estoppel--that if a party wins a suit on one ground, it can't turn around and in further litigation with the same opponent repudiate the ground in order to win a further victory. . . . The doctrine is technically not applicable here, because MetLife and ITT, the defendants in this suit, were not parties to the proceeding before the Social Security Administration. Yet they ‘prevailed’ there in a practical sense because the grant of social security benefits to Ladd reduced the amount of her claim against the employee welfare plan. If we reflect on the purpose of the doctrine, which is to reduce fraud in the legal process by forcing a modicum of consistency on a repeating litigant, . . . .
. . . . To further lighten that cost, it then turned around and denied that Ladd was totally disabled, even though her condition had meanwhile deteriorated. In effect, having won once the defendants repudiated the basis of their first victory in order to win a second victory. This sequence casts additional doubt on the adequacy of their evaluation of Ladd's claim, even if it does not provide an independent basis for rejecting that evaluation. The judgment is reversed with directions to enter judgment for the plaintiff.”
The Sixth Circuit reached a similar result in Darland v. Fortis Benefits Ins. Co., 317 F.3d 516, (6th Cir., 2003) stating
“It is equally inconsistent in the present case for Fortis to ignore the Social Security Administration's determination that Darland is disabled. . . . Although Fortis claims that the statutory criteria and factors considered by the Social Security Administration may be markedly different from the criteria and factors considered by an insurer in determining whether a claimant is disabled, it is plainly evident that the Social Security standard for a disability determination is much more stringent than that required by Fortis' insurance policy. (3) Moreover, after the Social Security Administration determined on July 8, 1998 that Darland was totally disabled as of July 15, 1996, Fortis then requested that Darland reimburse it for overpayment of insurance benefits, even though Fortis terminated payment of disability benefits to him under its policy on August 16, 1998. As in Ladd, it is 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. Ladd, 148 F.3d at 753. Though not directly applicable in this case, the principles of judicial estoppel certainly weigh against Fortis taking such inconsistent positions.” Id at * 40, citing Ladd supra at 753-756.
The Ninth Circuit reached a similar result in Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 628 (9th Cir. 2009). (“Hartford's decision was based on numerous mistakes, including a disregard for the fact that the Social Security Administration considered Montour to be ‘totally disabled’.”) The Montour court observed:
“In March 2004, the SSA concluded that Montour was disabled and awarded him disability benefits retroactively to January 2004. Hartford benefited from this award significantly, as it received a dollar-for-dollar financial offset, nearly halving its liability. As of April 2005 and December 2006, the SSA considered Montour's disability to be ‘continuing.’ In August 2006, Hartford nevertheless concluded that Montour was no longer disabled. Although Montour had immediately forwarded the SSA's April 2005 notice of continuing disability to Hartford, the plan administrator made no mention of the SSA's contrary determination in its initial termination decision. In its decision denying Montour's appeal, Hartford acknowledged the SSA's decision but did not articulate why the SSA might have reached a different conclusion. See MetLife I, 461 F.3d at 671 n. 3 (noting that there is a distinction between mentioning a contrary determination and discussing it).
While ERISA plan administrators are not bound by the SSA's determination, complete 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.’ See MetLife I, 461 F.3d at 674; see also MetLife II, 128 S.Ct. at 2352; cf. id. at 2361 . . . In fact, not distinguishing the SSA's contrary conclusion may indicate a failure to consider relevant evidence. See MetLife II, 128 S.Ct. at 2355 . . .).” Id at 635.
“. . . the SSA deploys a more stringent standard for determining disability than does the governing ERISA plan. . . . .” Id at 636.
Since the LTD carrier will likely do little or nothing to investigate a favorable SSDI award, it is important for the claimant to make sure the entire SSA file is submitted to the carrier. If the file cannot be obtained from a claimant’s Social Security lawyer, he or she may have to go to the local SSA office and obtain a copy of the file.
By: Michael A. McKuin
ERISA Disability Lawyer