In lawsuits challenging an ERISA plan’s denial of long-term disability benefits, can claimants who have qualified for Social Security disability benefits use that as evidence in their case? Or, to put it another way, can a decision from the Social Security Administration (SSA) on a claimant’s disability status be a factor in a court’s overall analysis of whether an ERISA plan improperly denied long-term disability benefits?
The answer to both questions is “yes,” although with caveats. Courts are mindful that the standards for determining disability under the Social Security requirements may vary considerably from the standards for determining disability under a private ERISA plan. However, as noted by the district court in Gellerman v. Jefferson Pilot Fin. Ins. Co. (S.D.Tex.2005) “no court has held that an SSA determination is completely irrelevant” in an ERISA dispute over disability benefits.
In Glenn v. Metlife (2006), the Sixth Circuit found that the insurer’s failure to give any weight to the claimant’s SSA disability determination was “perplexing” and a “significant factor” in its analysis of the claimant’s claim for long-term disability benefits. (The Sixth Circuit includes the federal district courts in Tennessee.)
In Glenn, the claimant qualified for the first phase of long-term disability benefits under her ERISA plan after she showed that she could not complete the material duties of her regular job. In order to reduce the amount of disability payments it had to make to the claimant, the insurer hired a law firm to help her with her disability claim with the SSA. The claimant then qualified for total disability benefits through the SSA, and the insurer deducted those government benefits from the disability payments that it was obliged to pay, as provided for under the policy. (All long-term disability policies this author has seen and is aware of allow the insurance company a credit for Social Security benefits.)
After receiving long-term disability benefits for two years, the claimant then had to meet the more difficult standard in phase two of her disability plan. Now, she had to show that she could not perform the material duties of any gainful occupation, as opposed to the specific material duties of her prior job. Despite receiving repeated and detailed correspondence from her physician supporting her claim, the insurer determined that she failed to meet the “any gainful occupation” standard and terminated her benefits. The claimant filed a lawsuit in district court challenging the decision, and the district court ruled in favor of the insurer. She then appealed her case to the Sixth Circuit.
The Sixth Circuit overruled the district court, and decided in favor of the claimant. A major reason for this decision was that the Sixth Circuit believed that both the district court and the insurer downplayed the SSA finding that the claimant was totally disabled. Specifically, the Sixth Circuit noted that the insurance company benefitted financially from the government’s determination that claimant was totally disabled (by virtue of receiving a credit for Social Security payments). As a result, the court stated that the insurer “obviously should have given appropriate weight to that determination.” Citing a similar case in the Sixth Circuit, the court noted that an ERISA plan administrator’s failure to address the Social Security Administration’s finding that the claimant was “totally disabled” is yet another factor that can render the denial of further long-term disability benefits arbitrary and capricious.
It is critical to remember that an SSA finding of total disability is merely relevant to a court’s analysis of an ERISA dispute over long-term disability benefits. An SSA finding will not, by itself, make or break a case. For example, in Tracy v. Pharmacia & Upjohn Absence Payment Plan, (2006), the Sixth Circuit re-iterated that while “some weight is to be given” to an SSA determination of total disability, “it is not binding.” Consequently, the Tracy court determined that the claimant was not entitled to total disability benefits under his ERISA plan even though he received benefits through the SSA.
It is also important to remember that failing to qualify for SSA benefits will not necessarily sink a long-term disability case. Take this illustrative example: An account executive was making $100,000 before incurring a disability that prevents her from travelling to meet out-of-state clients. As a result of her disability, she can only perform routine administrative tasks causing her annual salary to drop to $20,000. Despite her substantial reduction in income, the account executive will not qualify for SSA benefits because she is earning more than the required minimum amount under the SSA disability rules ($1,1170). However, she may qualify for total disability benefits under most ERISA plans because she cannot perform the material and substantial duties of an account executive.