Offsets of workers' compensation benefits
A new case from California opens the door to challenging disability insurers’ efforts to offset permanent total workers’ compensation awards. In Alloway v. Reliastar Life Ins.Co., 2008 U.S.Dist.LEXIS 34853 (C.D.Cal. April 28, 2008), the court refused to dismiss a challenge to Reliastar’s practice of offsetting permanent total awards. The court found that under California law, the permanent total award is not made for loss of income, which would be a permissible offset, but “are provided for permanent bodily impairment, to indemnify for impaired future earning capacity or decreased ability to compete in an open labor market.” Illinois law is the same. The Illinois Supreme Court has also ruled “a primary purpose of the benefits paid under section 8(e)(18) [820 ILCS 305/8(e)(18)-permanent total disability] is to compensate the employee for the pain and inconvenience represented by the loss of both feet, both legs, both arms or both eyes, while the benefits payable for temporary total disability are calculated to replace his lost current earnings.” Freeman United Coal Mining Co. v. Industrial Com., 99 Ill. 2d 487, 496, 459 N.E.2d 1368 (1984). Thus, we will be challenging long term disability insurers’ offsets of permanent total workers’ compensation benefits.