Don't Ignore SSDI

Why should disability income insurers be allowed to ignore the decisions of Social Security judges, yet take their share of the claimant’s money and run?

This vexing question was raised in Austin v. Life Insurance Company of North America, (2010 LEXIS 38294 (C.D.Cal. 2010), with the court coming down hard on the insurer for its cavalier attitude toward a Social Security decision. In that case the insurance company didn’t have the “couth” to even mention the SSDI decision favoring its policyholder in denying the disability benefits claim.

In the court’s words the failure of the insurer to mention the SSDI decision indicates “…complete disregard for a contrary conclusion without so much as an explanation and raises questions about whether an adverse benefits determination was the product of a principled and deliberative reasoning process.”

It has become common practice for group disability insurance companies to require their insureds to make a claim for benefits to the Social Security Administration if they want to keep on receiving their long term disability income benefits. In fact, this tactic is so important to insurers that they will many times supply free of charge professional assistance to claimants to pursue these SSDI claims.

Why this considerate conduct by insurance companies, you might ask? Because, if the insured claimant is successful in receiving disability benefits from Social Security, the insurer is fully reimbursed from the first SSDI monies received for prior payments it has already made to claimant and, is an offset against future benefits.

What is so unfair about these disability policy “claw back” provisions is that the insurer usually disregards the SSDI judgment in defending its denial of policy benefits to its own insured without considering in any way the SSDI decision. This is a common practice and should be dealt with as sternly as the California District Court did in Austin.

As those who practice in the SSDI world know, a claimant has no walk in the park when pressing a claim for benefits. SSDI judges require convincing proof of disability before they make long term awards. And, once such an award is made, it should be carefully considered by a private insurer in determining a claimant’s case for long term benefits under the terms of its policy.

An SSDI ruling is not res judicata in an ERISA matter. The policy language, procedural matters and a truly different determination by the insurer’s medical experts may affect the decision. But, what must be required by all judges in support of the insurer’s decision, is a reasoned denial, citing the basis for differentiating between the SSDI ruling and the private insurer denial.

Simply ignoring the SSDI decision should be anathema to any judge considering an ERISA appeal. Disability carriers should not be allowed to disregard contrary SSDI judgments without explanation. This is particularly so because insurance companies recoup benefits paid to the insured from the proceeds of the insured’s SSDI award.

Further, Federal District Courts should always keep in mind that SSDI judges have no conflict of interest. Both sets of judges are sworn to uphold the law of the United States.

Insurance companies, on the other hand, have a definite conflict of interest. Why should such a conflicted party have the ability to ignore an unconflicted judge’s finding without having its feet held to the fire?

It makes no sense.


 

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