Federal District Court Judge Finds Long-Term Disability Insurer May Take Setoff for Social Security Retirement Benefits

Published by The Pellegrin Firm January 5, 2020

In a ruling dated December 27, 2019, a federal district court judge affirmed The Hartford’s decision to offset a disabled Atlas Air, Inc. employee’s long-term disability benefits with Social Security Retirement benefits. Disputes over offsets for Social Security Disability benefits are common in ERISA long-term disability cases, but disputes over Social Security Retirement benefits are somewhat rarer in that eligibility for long-term disability benefits and eligility Social Security Retirement benefits will only overlap for a few years of a person’s life.

The case is out of the District of Alaska, which is a part of the Ninth Circuit. Even applying claimant friendly Ninth Circuit precedent, the court found The Hartford’s reding of the policy to be reasonable. The policy clearly allows for deduction of Social Security Retirement benefits and allows the insurer to require a beneficiary to apply for all Social Security benefits for which he or she may be eligible.

The plaintiff made several novel arguments based on confusing punctuation, a sloppily written “Other Income Benefits” clause in the policy, and some previous cases that did not allow a setoff for certain benefits. Plaintiff cited ERISA cases that require limitations and deductions from benefits to be written in a clear way that can be easily understood by the average beneficiary. Simkins v. NevadaCare, Inc. 229 F.3d 729 (9th Cir. 2000); Saltarelli v. Bob Baker Group Medical Trust, 35 F.3d 382, 383 (9th Cir. 1994). The court found that the offset language for Social Security Retirement benefits in the present instance was clear and obvious enough. Plaintiff also cited cases rejecting the deduction of certain benefits (VA benefits, Social Security ancillary benefits), but in those instances, the policy never explicitly mentioned the kind of benefits the benefits administrator sought to deduct.

The case is Ruppert v. Atlas Air, Inc. Long Term Disability Plan; Hartford Life and Accident Insurance Co., No. 3:19-CV-0152-HRH, 2019 WL 7212305 (D. Alaska Dec. 27, 2019).