New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on June 26, 2002, representing the position of the New York State Insurance Department.

RE: Group Long Term Disability Income Insurance Reduction in Benefits N.Y. Ins. Law §3221 (McKinney 2000 and Supp. 2002)

This is a response to a recent correspondence directed to this office. The inquirer represents of a certificate holder under a Group Long Term Disability Income Plan (the Policy) issued to XYZ Central Schools for the benefit of all full time teaching staff employed by the district. The Policy contains a provision (the offset provision) whereby the amount of benefits otherwise payable thereunder is reduced by various forms of defined "other income", including Social Security disability benefits payable (1) directly to the certificate holder and (2) payable to the certificateholder's spouse, child or children as a result of the certificate holder's disability.

Question Presented:

Does any applicable New York Insurance Law statute or regulation prohibit inclusion of a provision in a Group Long Term Disability Income Policy whereby benefits payable are reduced by the amount of Social Security disability benefits payable to the certificate holder and his or her spouse and child(ren) as a result of the insured's disability?

Conclusion:

No. N.Y. Ins. Law § 3221 (McKinney 2000 and Supp. 2002) establishes requirements relating to Group Long Term Disability Income policies delivered or issued for delivery in this state. Nothing in the statute or in 11 N.Y. Comp. Codes R. & Regs. § 52 (1999) (Insurance Department Regulation 62), which implements and/or clarifies the requirements of the statute, would prohibit inclusion of the offset provision in the Policy.

Facts:

A representative’s client is a certificate holder under the Policy issued to XYZ Central Schools for the benefit of all full time teaching staff employed by the district. The Policy contains the offset provision whereby the amount of benefits otherwise payable thereunder is reduced by various forms of defined "other income", including Social Security disability benefits payable (1) directly to the certificate holder and (2) payable to the certificate holder's spouse, child or children as a result of the certificate holder's disability.

The representative’s client became disabled and entitled to benefits under the Policy. The insurer has reduced the gross monthly benefit that would otherwise be payable by the amount of Social Security disability benefits that the insured and the insured's spouse, child or children are eligible for as a result of the insured's disability.

Analysis:

The specific language of the Policy at Page 12 states that the monthly disability benefit payable thereunder will be reduced by the amount of other income benefits. "Other income benefits" are defined at Page 14 to include disability benefits payable under the United States Social Security Act, as follows:

5. The amount of disability or retirement benefits under the United States Social Security Act, The Canada Pension Plan, or the Quebec Pension Plan, or any similar plan or act, as follows:

a. disability benefits for which:

i. you are eligible; and

ii. your spouse, child or children are eligible because of your disability: or

b. retirement benefits received by:

i. you; and

ii. your spouse, child or children because of your receipt of the retirement benefits.

These other income benefits, except retirement benefits, must be payable as a result of the same disability for which we pay a benefit.

The Policy provides Group Long Term Disability Income benefits for a specified maximum benefit period when a certificate holder is disabled due to sickness or injury and requires the regular attendance of a physician. See 11 N.Y. Comp. Codes R. & Regs. § 52.8 (1999) (Insurance Department Regulation 62). The coverage is a type of "Accident and health insurance" authorized under the New York State Insurance Law. N.Y. Ins. Law § 1113(a)(3) (McKinney 2000 and Supp. 2002).

N.Y. Ins. Law § 3221 (McKinney 2000 and Supp. 2002) establishes requirements regarding standard provisions of group or blanket accident and health insurance policies issued in New York State. The statute requires that any policy provision reducing benefits shall be printed in the policy with the same prominence as the benefits to which the provision applies. N.Y. Ins. Law § 3221(c) (McKinney 2000 and Supp. 2002). This requirement would appear to be satisfied by the provisions of the Policy, which clearly state that calculation of benefits payable shall include a deduction for "other income benefits" as defined above.

11 N.Y. Comp. Codes R. & Regs. § 52 (1999) (Insurance Department Regulation 62) implements the requirements of N.Y. Ins. Law § 3221. Paragraph 52.18(b)(13), with respect to the content of forms for group insurance, provides as follows:

(13) Where disability income benefits are integrated with social security benefits, the policy shall provide that the amount of any disability benefits actually being paid to a disabled person shall not subsequently be reduced by changes in the level of social security benefits resulting from cost of living adjustment or changes in the Social Security Law which became effective after the first day for which disability benefits became payable.

The above quoted regulatory provision has been in effect without modification since January 1, 1983, when the old Regulation 62 was repealed and repromulgated. The Policy provision regarding cost of living increases to Social Security disability benefits would be consistent with the Insurance Law and regulatory language quoted above.

For further information you may contact Associate Attorney Sam Wachtel at the New York City Office.