District Court Dismisses ERISA Action Finding Plaintiff Is Not Entitled to Pre-Litigation Attorneys’ Fees or Hardship Waiver of Social Security Disability Offsets

In Finley v. Reliance Standard Life Insurance Company, No. CIV-23-967-PRW, 2024 WL 3013841 (W.D. Okla. June 14, 2024), Oklahoma Western District Judge Patrick R. Wyrick granted Defendant Reliance Standard Life Insurance Company’s Motion to Dismiss an ERISA long-term disability action seeking recovery of attorneys’ fees and waiver of Social Security Disability Insurance (“SSDI”) offsets, finding that Plaintiff failed to allege she was entitled to receive them.

Plaintiff was employed at Provident Funding as a mortgage underwriter, when she suffered a sudden cardiac death event that resulted in a hypoxic brain injury. She was in a coma for several weeks before unexpectedly regaining consciousness. However, the brain injury caused lasting effects. Plaintiff applied for and was awarded LTD benefits from Reliance beginning in 2007. At that time Reliance informed Plaintiff that it would begin offsetting estimated SSDI from her monthly benefit in accordance with the policy. Plaintiff requested and was granted a hardship waiver by which Reliance refrained from offsetting estimated SSDI in exchange for Plaintiff’s execution of a reimbursement agreement. In 2009, when Plaintiff was awarded SSDI benefits, Plaintiff repaid the calculated overpayment and Reliance began offsetting her monthly benefit.

This continued for over a decade until April 2022, when Reliance determined that was no longer totally disabled and terminated benefits. Plaintiff retained an attorney who assisted with the preparation of her timely request for review. Shortly thereafter, Reliance reversed its decision and reinstated benefits. Plaintiff filed another request for hardship seeking: (1) payment of her attorney’s fee related to the request for review; (2) reimbursement for all SSDI deductions; and (3) waiver of all future offset of SSDI. Reliance rejected all three requests, and Plaintiff filed the instant action raising claims for relief seeking to recover benefits due and for breaches of fiduciary duty.

The Court found that none of the allegations stated a claim for which relief may be granted. First, while ERISA permits recovery of attorney’s fees and costs “of action” to any party, courts have consistently read that language to exclude costs incurred while exhausting pre-litigation administrative proceedings. The Court further rejected Plaintiff’s alternate argument that fees could be paid as a form of “surcharge” for breach of fiduciary duty as an improper effort to circumvent the bar on fees at the administrative level.

With regard to Plaintiff’s claims for reimbursement of past SSDI deduction and waiver of future SSDI offsets, the Court held that Plaintiff had failed to plausibly plead either a denial of benefits or a breach of fiduciary duty. It noted that the policy language requires deduction of other income benefits, including SSDI. And while Reliance’s administrative procedures manual allows for hardship waivers, that option is only available while other income benefits are estimated. Once awarded, no SSDI waivers are possible. As Plaintiff did not plausibly allege any claims for relief and amendment of the complaint would be futile, the Court dismissed the action with prejudice.

If Reliance Standard or your insurer has denied or otherwise limited your disability insurance claim, contact us for assistance.