How Disability Benefits Are Affected By Other Forms of Recovery
Accidents that give rise to disabilities — whether in the workplace or elsewhere — may seem complicated by the presence of multiple sources of compensation. If you have been injured in a motor vehicle accident, for example, then you may receive a substantial award of damages from the defendant, and you might also be eligible to receive disability benefits in accordance with your private disability insurance policy. In the state of Illinois (and elsewhere), however, these varied sources of compensation do not necessarily interfere with one another, except in limited circumstances.
Private Disability Benefits Are Not Affected
Private disability insurance policies can vary quite significantly from plan-to-plan, but as a general rule, benefits are not paid out on the basis of one’s financial resources — disability benefits are instead paid out if the policyholder can prove that they are “disabled” pursuant to the provisions of their insurance agreement.
Given that the financial resources available to the disability insurance policyholder are irrelevant to their receipt of benefits, other forms of recovery — such as a large settlement in an accident lawsuit, or damages awarded following a favorable case verdict — will have no effect on benefits.
Suppose, for example, that you have been injured in a motor vehicle accident. You are also a private disability insurance policyholder (short-term and long-term). The defendant agrees that they are at-fault for the accident, and they quickly negotiate a settlement for a payment of $500,000, which covers various losses, including those that relate to the disability you suffered as a result of the accident.
You might think that this damage recovery — given how substantial it is — would interfere with your receipt of private disability benefits, but that would be incorrect. In Illinois, and throughout the country, you could submit a claim for disability benefits and receive all benefits owed under the policy.
Importantly, other benefits (Supplemental Security Income, or SSI) that are based on your income will be affected by the influx of funds awarded in litigation, or through various other sources, such as workers’ compensation. If you are concerned about preserving your SSI eligibility, speak with a qualified attorney about the possibility of forming an irrevocable trust.
- Related Article: 5 FAQs About Private Disability Insurance Claims
Collateral Source Rule Protects Your Recovery in a Lawsuit
Interestingly, your receipt of disability benefits will also have no effect on your ability to recover damages in a lawsuit. This is known as the “collateral source rule,” and the state of Illinois continues to apply this rule to protect injured policyholders.
How does it work?
The collateral source rule essentially disallows a jury from hearing evidence of the plaintiff’s receipt of benefits (or other reimbursement), and the rule also prohibits any reduction in damages due to third-party reimbursement. For example, if you claim damages for the defendant having caused you to suffer a disabling injury, then the defendant is not entitled to introduce evidence of your disability insurance coverage to minimize their own liability.
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We have decades of experience representing policyholders in a range of insurance disputes, and we believe that our success is fundamentally owed to our comprehensive, client-oriented legal representation — we prepare thoroughly for litigation, working with staff-consulting physicians and other experts to evaluate medical records, insurance contracts, and various other documents that will serve to anchor our arguments later.
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