The Disability Coordination Puzzle
Oftentimes, when a person becomes disabled as a result of an injury, there are various forms of disability or wage replacement benefits available to that person. Nearly all of the benefit systems that exist in our society have provisions built in to prevent “double-dipping” by claimants. In other words, there is a limited amount of income a disabled person can derive from these benefit systems combined. As a result, there can be questions about which system pays first and which pays second, or third.
Untangling these coordination questions can be very complicated. Here is a very brief and simplified run-down of how just a few of these system inter-connect:
Worker’s Compensation - When you’re disabled from an on-the-job injury, worker’s compensation pays first. Even if the injury arises from an auto accident, work comp pays first and then Auto/PIP pays second. In other words, work comp will pay wage loss benefits and Auto/PIP will pay any benefits you’re entitled to above and beyond the work comp rate. Short term disability will pay secondary to work comp, but sometimes might not pay at all if there is an exclusion in the STD policy. Long term disability pays secondary to work comp. Finally, Social Security Disability Insurance pays secondary to work comp and your monthly SSDI rate will be reduced by the receipt of weekly work comp benefits (and sometimes as a result of a work comp settlement).
Auto/PIP - Auto/PIP work loss benefits are primary if you are in an accident on personal business (as mentioned above, if the accident happens on the job, work comp pays first). Most auto policies allow for the reduction of Auto/PIP work loss benefits against the receipt of any equivalent government benefit that is paid as a result of the same injury. So, if an injured motorist becomes entitled to Social Security Disability Insurance due to the disabling nature of the injuries suffered in the auto accident, Auto/PIP work loss will be reduced per the monthly receipt of SSDI. Furthermore, Auto/PIP will be entitled to reimbursement for an overpayment when the SSDI award is received—i.e., the accrued SSDI (or backpay lump sum award) will be at least partially paid back to Auto/PIP instead of the injured motorist. What’s more, most Auto/PIP policies that allow for such coordination actually require the claimant to apply for SSDI or other applicable government benefits.
Short Term/Long Term Disability - Lots of people who are covered by STD and/or LTD have those policies through work. Many STD policies will have an exclusion for workplace injuries, and therefore work comp might be the only initial option for the injured claimant. Most LTD policies treat work comp benefits as a reduction, so the LTD is reduced per the receipt of work comp wage loss benefits. Most LTD policies also treat SSDI as a reduction and even required the claimant to apply for SSDI once a certain amount of time has passed. In this way, LTD carriers protect themselves by pushing those costs of onto SSDI, repaying their overpayment from the backpay lump sum award, and reducing monthly payouts against SSDI going forward. LTD may be primary against Auto/PIP or it may be secondary to Auto/PIP. It depends upon the language in both policies (many Auto/PIP policies are coordinated against other forms of work loss/wage loss). If there is competing language in the policies, the result will often depend upon whether the LTD plan is an ERISA plan (i.e., self-funded by the employer and controlled by federal law), in which case the LTD policy trumps and Auto/PIP pays first.
Social Security Disability Insurance - SSDI is primary over Auto/PIP and STD/LTD, but it is secondary to work comp. Again, many forms of private insurance, such as Auto/PIP and/or STD/LTD will require application for SSDI benefits.
Confused yet? I haven’t even brought up other potential benefit systems, such as duty disability pensions, privately purchase disability and dismemberment insurance, federal benefit systems such as federal work comp, railway workers benefits, longshore and harbor worker’s compensation, and others.
Importantly, if you are receiving multiple forms of benefits, you will want to save any lump sum award (or settlement) in order to ensure some other benefit payor doesn’t claim entitlement to reimbursement for an overpayment. Bottom line: Don’t spend that money until you know it’s yours. Also, consult with an experienced attorney who has familiarity with all (or at least some) of these systems.
