District Court Finds Reliance Standard Improperly Sought to Offset Social Security Earned Income Benefits from Long-Term Disability Benefits

In Aisenberg v. Reliance Standard Ins. Co., No. 1:22cv125 (DJN), 2024 WL 2154739 (E.D. Va. May 14, 2024), Virginia Eastern District Judge David J. Novak granted Plaintiff’s Motion to Determine Sum Certain finding that Defendant Reliance Standard had abused its discretion by determining that Plaintiff’s earned-income Social Security benefits, as opposed to the Social Security benefits received due to his disability, could be offset against Plaintiff’s long-term disability (LTD) benefits.

This matter commenced over two years ago, when Plaintiff appealed Reliance’s initial determination that he was not entitled to LTD benefits after having undergone a serious open-heart surgery in July of 2020, which rendered him unable to complete the material duties of his job as an attorney. The court granted partial summary judgment to Plaintiff and remanded the case on February 21, 2023, finding that Reliance had abused its discretion by failing to assess how the risk of future harm affected Plaintiff’s disability status and by not considering whether less stressful attorney positions existed in the national economy. On remand, Reliance maintained its position and again concluded that Plaintiff was not entitled to LTD benefits under the Plan. Plaintiff appealed for a second time, and the court found that Reliance had again abused its discretion. The court directed Reliance to “provide Plaintiff with payment of back benefits and interest dating to January 12, 2021, the first day that Reliance retracted benefits under the Plan.”

Disagreement over Plaintiff’s monthly net benefit led to the instant dispute, which the Court ordered the parties to brief. The parties did not agree that the court had jurisdiction to entertain Plaintiff’s Motion, as Plaintiff had not exhausted his administrative remedies with respect to Reliance’s determination regarding its offset policy. And the parties disputed whether Reliance “may properly offset and reduce his monthly gross benefit by retirement income he receives from Social Security.” Reliance claimed that, because Plaintiff began collecting Social Security benefits during the same year that he became disabled, those Social Security benefits resulted from the same disability for which he receives LTD benefits, thus rendering the offset proper. Plaintiff argued that his Social Security benefits are not Social Security disability benefits but are instead benefits from earned income, which does not result from long-term disability but vest with an individual irrespective of their disability status, if they have met certain work history requirements.

As an initial matter, the court found that it had jurisdiction over the motion as courts routinely retain jurisdiction to enforce their own judgments and Reliance had the opportunity to provide its own assessment of the benefits claim. Even if exhaustion were required, the Court found that exhaustion would be futile here where the question was a legal one of statutory interpretation.

Substantively, the Court concluded that Plaintiff’s earned income Social Security benefits did not constitute “other income” within the meaning of the Plan. It found that the Plan language was unambiguous allowing for the offset of Social Security benefits “resulting from the same Total Disability,” which required a causal relationship to the disability at issue. It found that Reliance’s interpretation that the benefits were offsetable simply because the timing of the award of earned income benefits coincided with Plaintiff’s disability was unconvincing. The court stated that practical realities as well as analogous case law supported the conclusion that a reasonable and straightforward interpretation of the Plan excludes earned income Social Security benefits. Applying the factors outlined in Booth v. Wal-Mart Stores, Inc. Assocs. Health and Welfare Plan, 201 F.3d 335, 342–43 (4th Cir. 2000), the court further found that Reliance’s interpretation of including the earned-income benefits was not reasonable.

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