Yesterday, Jordan Weissman’s excellent article, “Disability Insurance: America’s $124 Billion Secret Welfare Program,” published March 25, 2013 in The Atlantic,  explains how the number of former workers enrolled in Social Security Disability has doubled in 20 years.  He states:

“Since the early 1990s, the number of former workers receiving payments under it has more than doubled to about 8.5 million, as shown in Planet Money’s graph below. More than five percent of all eligible adults are now on the rolls, up from around 3 percent twenty years ago. Add in children and spouses who also get checks, and the grand tally comes to 11.5 million.”

That rapid, under-the-political-radar expansion has turned the program into a massive budget item. As of 2010, its monthly cash payments accounted for nearly one out of every five Social Security dollars spent, or about $124 billion. In 1988, by comparison, it accounted for just one out of eight Social Security dollars. Because disabled workers qualify for Medicare, they also added $59 billion to the government’s healthcare tab.

Are disabilities just becoming more common? According to economists such as MIT’s David Autor, the evidence says no. The workforce is indeed getting older, and thus more ailment prone. But Americans over 50, who make up most disability cases, report much better health today than in the 1980s. And demographers have found that the percentage of Americans older than 65 suffering from a chronic disability has fallen drastically since then. In the end, economists Mark Duggan and Scott Imberman estimate that, at most, the graying of America’s workers explained just 4 percent of the increase in the rate of disability program participation for women, and 15 percent for men, through 2004.

Instead, it seems two things have happened: Qualifying for disability got easier, and finding work got harder. As the Planet Money piece puts it, “there’s no diagnosis called disability.” According to the letter of the law, disability recipients must prove they are too physically or mentally impaired to hold a job. And early in the program’s life, the most commonly reported ailments were easy-to-diagnose problems such as heart-disease, strokes, or neurological disorders. But after the Reagan administration began trying to thin out the program’s rolls in the early 80s, an angry Congress reacted by loosening its criteria. Suddenly, subjective measures like self-reported pain or mental health problems earned more weight under Social Security’s formula. Today, the most common diagnoses are musculo-skeletal issues, such as severe back pain, and mental illnesses, such as mood disorders — health problems where the line between a disability and a mild impairment is far blurrier.”

That subrogation claim you have might be governed by ERISA, at least in some circuits…

Here’s the case of Thurber v. Aetna Life Insurance Company,  __F.3d__ (2nd Cir. March 13, 2013) (Insurer’s counterclaim for return of overpaid benefits was an equitable claim for restitution, falling under ERISA’s jurisdiction).

FACTS. Sharon Thurber broke both legs in an auto accident.  She made a disability claim under an ERISA plan insured and administered by Aetna Life Insurance Company. She informed Aetna that she had received $7,213.92 in no-fault insurance payments. Under the plan, Aetna  could reduce benefits in the amount of other income received, like no fault insurance payments. After Aetna denied her long-term disability claim, and her administrative appeal was denied, Thurber filed a lawsuit challenging the denial. Aetna counterclaimed for equitable restitution of the overpaid short term benefits in the amount of the no fault payments she received.


(1) Aetna’s Counterclaim was denied because it was “legal” rather than equitable, and there was no ERISA jurisdiction.

(2) The Court granted Aetna’s denial of long term disability benefits.


1.   Aetna’s Counterclaim for Reimbursement is “Appropriate Equitable Relief” governed by ERISA.

  • What constitutes “appropriate equitable relief” under 29 U.S.C. §1132(a)(3) “continues to perplex courts despite efforts by the Supreme Court during the past decade to shed some light in the matter.” Op. at 8.
  • Aetna’s counterclaim was equitable in nature because it sought specific funds in a specific amount, as authorized by the plan, that had been entrusted to Thurber and had been in her possession and control. Op. at 10.
  • The court followed the analysis of  First and Third Circuits, rather than the Ninth Circuit. (The Ninth Circuit Bilyeu v. Morgan Stanley Long Term Disability Plan (2012) case held that a similar counterclaim was not equitable in nature because (a) the money being sought was not the actual third party payment, but rather the plan’s overpayment in that amount; and (b) the overpayment had been spent. Op. at 9.

2.         AFFIRMED entry of Aetna’ summary judgment on the benefits denial claim.

Here’s a unique twist:

Does that workers’ compensation settlement agreement release the ERISA disability claim?  Probably not, unless the release explicitly mentions ERISA claims and the ERISA Plan.

Here’s the case of Duncan v. Hartford Life and Accident Insurance Company, 2013 WL 506465 (E.D. Cal. February 8, 2013)(workers’ compensation release did not eliminate ERISA disability claim).  This case also has a nice discussion on the issue of standard of review and when the court should remand.  The court remanded, rather than changing the standard of review from discretion to de novo.

FACTS.  Teresa Duncan made an ERISA long term disability claim.  Hartford Life and Accident Insurance Company, administrator of Lorillard Tobacco Company’s plan, paid Duncan disability benefits from 2005 to 2010.

In 2008 Duncan settled her workers’ compensation claim.  She signed a release of all claims, which included language that she would “not be able to go back to the defendant for additional treatment or disability payments….”

Lorillard (not Hartford) contended that when Duncan signed this release she also released her ERISA long term disability claim “after the date” the release was signed.

TRIAL COURT HELD:  Lorillard’s argument went up in smoke:  The worker compensation release did not bar or limit Duncan’s ERISA disability claim.


1.     Federal law always governs the validity of releases of federal causes of action.  But state decisions “will furnish an appropriate and convenient measure of the governing federal law.”  Op. at 6.

2.     Standard language used in a workers’ compensation claim release applies only to those claims that are within the scope of the workers’ compensation system. Id.

3.     Lorillard has the burden of proving its affirmative defense that the release precludes liability for Duncan’s ERISA claim. Id.

4.     The compromise and release “neither references ERISA or the receipt of ERISA benefits, nor contains language otherwise indicating that the settlement was meant to encompass claims outside of the workers’ compensation system.” Id.

5.     The release does not explicitly mention the ERISA plan by name, nor does it mention ERISA by name Op. at 6-7.


What happens when an ERISA claimant submits contradictory statements to the Social Security Administration and the ERISA plan administrator? Can these contradictory statements be used to deny the ERISA claim?  YES.

What’s the difference between a “Commission” and a “Bonus” in calculating a claimant’s monthly benefit? The dissent in this new decision provides guidance

Here’s the recent case of Govrik v. UNUM Life Insurance Company,[PDF] __ F.3d __ (8th Cir. January 10, 2013).

FACTS: Sullivan sought ERISA disability benefits. The amount of disability payments depended on the claimant’s monthly earnings before disability.  To calculate monthly earnings, the plan included “commission” payments received over a 12 month period before disability. But “bonus” payments were counted only if received in the prior calendar year (January-December). The policy also did not define “commission” or “bonus.”

Sullivan claimed his pay was “commission” or “bonus” depending on whatever definition applied.  UNUM started paying disability benefits.  But later, Sullivan contradicted this and told the Social Security Administration (SSA) in a sworn statement that the $440,000 received was for the sale of his business.  When UNUM heard about this, UNUM reviewed the claim, recalculated (and significantly reduced) Sullivan’s monthly benefit, and sought reimbursement for overpayment. Sullivan appealed to UNUM, however, again claiming the large payments were actually “bonuses” (so he could have a higher monthly ERISA benefit).  UNUM denied the appeal, relying on Sullivan’s representations to the SSA that the payments were for the sale of his business.  Sullivan sued.

DISTRICT COURT: Granted Plaintiff Summary Judgment and Awarded Attorney Fees.


  1. “It was reasonable for UNUM to rely on information Sullivan submitted to the SSA, rather than Sullivan’s latter day claim to UNUM that the large payments [were salary or bonuses]….Given Sullivan’s shifting positions on how his income should be characterized, it was not unreasonable for UNUM to hold Sullivan to his formal declaration [submitted to SSA].”  Op. at 6.
  2. UNUM’s decision was correct because at the time UNUM denied the appeal, Sullivan had not recanted representations he made to the SSA that the payments were for the sale of his business. Op. at 6.
  3. The court “defers to the administrator’s interpretation of the plan ‘so long as it is reasonable, even if the court would interpret the language differently[.]’”  Op. at 8 (Dissent).
  4. UNUM provided no evidence what the terms “commission” and “bonus” meant, so the court relied on the dictionary. Recourse to the dictionary is “reasonable.” Op. at 9 (Dissent).
  5. “Commission,” according to the dictionary, is a fee paid to an employee for transacting a piece of business or performing a service.  Op. at 9 (Dissent).
  6. “Bonus,” according to the dictionary, is money given in addition to usual compensation. Op. at 9 (Dissent).
  7. The dissent concludes UNUM abused its discretion in determining the large payments to Sullivan were from the sale of a business and not compensation in the form of a bonus.  Op. at 9 (Dissent).

Courts had dismissed ERISA cases for lack of subject matter jurisdiction when the plaintiff was not a plan “participant, beneficiary or fiduciary.” Harris v. Provident Life Accident Ins. Co., 26 F.3d 930, 934 (9th Cir. 1994).

Not any more in the Ninth Circuit. The issue is now merely an element of the ERISA case. Rather than a subject matter motion, attorneys in the Ninth Circuit are advised to fashion their motions to dismiss as a “failure to state a claim.”

Here’s the case of Leeson v Transamerica Disability Income Plan, __F.3d__ (9th Cir. January 23, 2012)( “The issue of participant status goes to the merits of the claim and not to the subject matter jurisdiction of the district court.”)(Overrules prior Ninth Circuit precedent including Curtis v. Nevada Bonding Corp. (9th Cir. 1995) 53 F. 3d 1023, 1027)).

FACTS: This case has a long sordid history, but here are some key facts. While Leeson was employed with Transamerica, he participated in the long term disability ERISA plan. Plan documents provided that “if an Eligible Employee is on an unpaid leave of absence, his or her status as a Long-Term Participant shall be suspended and he or she shall not be eligible for Long Term Benefits.”

Leeson was injured in a car accident and applied for disability benefits in 1996. Prudential, the plan administrator, deemed him eligible and paid disability benefits for four years. Benefits were denied and Leeson sued. In 2008 the Ninth Circuit determined the de novo standard of review should apply, and remanded the case to the district court.

On remand the Plan argued for the first time that Leeson was not a plan participant because he had been on unpaid leave when he applied for disability benefits. The Plan then moved to dismiss the case for lack of subject matter jurisdiction, relying on Franchise Tax Bd. v. Const. Laborers Vacation Trust, 463 U.S. 1, 21 (1983)(district court lacked subject matter jurisdiction because ERISA is “limited to suits brought by certain parties….”).


ISSUE: Whether Plaintiff’s status as a plan participant goes to the merits of the ERISA claim, or implicates federal subject matter jurisdiction?

NINTH CIRCUIT REVERSES, OVERRULES PRIOR PRECEDENT and HOLDS: “The issue of participant status goes to the merits of the claim and not to the subject matter jurisdiction of the district court.” Op. at 8


  1. Federal courts have broad adjudicatory authority. A claim should not be dismissed for lack of subject matter if “the right of the petitioners to recover under this complaint will be sustained if the Constitution and laws of the United States are given one construction and will be defeated if they are given another.” Op. at 5.
  2. ERISA authorizes a plan participant to initiate a civil action. A “participant” includes former employees who have “a colorable claim that…she will prevail in a suit for benefits.” Op. at 6.
  3. The key case relied on by the court is Vaughn v. Environmental Management, 567 F.3d 1021, 1024 (9th Cir. 2009)(A motion for dismissal because Plaintiff is not a plan participant is properly viewed as a motion for failure to state a claim and not a dismissal for lack of subject matter jurisdiction.)
  4. Nothing in ERISA requires that a plaintiff assert anything more than a colorable claim that he or she is a participant to assert an ERISA claim. Op. at 7.
  5. “Because Leeson’s ERISA claim rises and falls on the district court’s determination of participant status, the construction of the term “participant” involves a merits-based determination, even if it results in dismissal.”