LTD Settlement in California

There is a important interplay between long term disability (LTD) benefits under insurance policies and employer pension plans and Social Security disability benefits because LTD plans almost always offset their benefits by Social Security disabisity benefits. In December 2005 the California Insurance Commissioner issued an order that would have dramatically altered LTD benefits in the nation's largest state. The order would have forbidden LTD plans from reducing their benefits by the amount of Social Security disability benefits, among other things. The LTD industry sued. The Insurance Journal reports that there is now a partial settlement in the case. Apparently, the California Insurance Commissioner has dropped the ban on offsetting Social Security disability benefits, while the insurers have agreed that they cannot include a "discretionary" clause which gave them an almost unlimited ability to deny LTD claims at their discretion. The insurers also agreed to a standard definition of disability and pre-existing conditions.