Williams v. Group LTD Insurance

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Williams v. Group Long Term Disability Insurance, 2008 U.S.Dist.LEXIS 54622 (N.D.Ill. July 17, 2008)(Issue: Offsets).  This ruling concerns the propriety of an insurer (Reliance Standard) counterclaiming against a disability claimant suing for benefits to recover offsets relating to both Social Security and Veterans’ disability benefits.  Although the insurer won the right to pursue its claim for an overpayment created by a Social Security disability insurance award, the court denied Reliance Standard the right to claim an offset for Veterans’ disability benefits.

There is a split in the Northern District of Illinois as to whether Sereboff v. Mid. Atl. Med. Servs Inc., 126 S.Ct. 1869 (2006) applies in relation to Social Security disability claims.  In Mote v. Aetna Life Insur.Co., 435 F. Supp. 2d 827 (N.D.Ill. 2006), Judge Milton Shadur ruled the underpinning of Sereboff; i.e., the insurer’s lien rights, could not attach to Social Security disability benefits because of the inalienability of government benefits pursuant to 42 U.S.C. § 407.  Ruling the opposite way, Judge Robert Gettleman ruled in Smith v. Accenture United States Group Long-Term Disability Plan, 2006 U.S.Dist.LEXIS 68971 (N.D.Ill. 9/13/2006) that the lien can attach after the benefits are paid and put in the insured’s bank account.  The court sided with Smith and found:

Reliance Standard does not seek reimbursement of plaintiff's Social Security or Veterans benefits. Rather, Reliance Standard seeks reimbursement of the funds that it actually paid to plaintiff. Reliance Standard is not seeking to attach a lien to plaintiff's Social Security or Veterans benefits, but rather to recover the overpayment of funds plaintiff received as a result of collecting both Social Security and Veterans benefits at the same time he collected long-term disability benefits under the Plan. *5

Thus, the counterclaim in relation to the Social Security benefits was sustained.  As to the Veterans’ benefits, though, the court accepted the plaintiff’s argument that because VA benefits are not specifically mentioned in the plan as an offset, RSL had no right to take the offset.  The court disagreed with High v. E-Systems, Inc., 459 F.3d 573 (5th Cir. 2006) which allowed Reliance Standard to take an offset under a broad interpretation of its policy.  The court explained:

First and foremost, unlike benefits payable pursuant to the Social Security Act, Veterans benefits are not specifically included as Other Income Benefits in Reliance Standard's Plan. Moreover, Veterans benefits are different than and independent of benefits under a group disability plan, retirement benefits or workers' compensation benefits. We are hesitant to take away or decrease benefits, in particular Veterans' benefits, that an individual may be entitled to unless it is clear to the insured at the outset that there may be an offset of benefits. *7-*8.

Accordingly, the court granted plaintiff’s motion to dismiss in part.

(Mark DeBofsky litigated this case).

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