On September 27, Judge Mae A. D’Agostino (N.D.N.Y.) issued a decision in a case involving a rarely-covered subject: the propriety of a purported “offset.” An offset, for those who may not know, is a payment received by a claimant, from a source other than the disability insurer, that the disability insurer is permitted (under the terms of the plan or policy) to deduct from the monthly benefit payment that it would otherwise be required to remit. The most frequently encountered example is Social Security Disability Income (SSDI) benefits.
In the case, the plan authorized an offset for, among other things, Social Security disability benefits that the “employee or any third party receives on the employee’s behalf.” The employee in question was receiving SSDI, and there was no disagreement that the amounts received constituted a valid offset. Instead, the controversy arose in reference to the Social Security Administration’s payment of Dependent Social Security Disability (DSSD) benefits, which are payable when the recipient of SSDI benefits has one or more dependent children. Contending that DSSD benefits constitute Social Security disability benefits “that a third party receives on the employee’s behalf,” the insurer claimed an offset. The employee, however, disagreed.
Judge D’Agostino resolved the dispute in the employee’s favor, ruling that DSSD benefits are not benefits that a third party receives on the employee’s behalf, but rather benefits that a third party receives on his or her own behalf. In other words, the court held that while nothing prohibits an insurer from providing that DSSD benefits constitute an offset, the plan in question simply failed to do so.
Brutvan v. CIGNA Life Ins. Co. of N.Y., 2013 WL 5439151 (N.D.N.Y. Sept. 27, 2013)