A federal appeals court has sided with Reliance Standard Life Insurance Company in a long-running dispute over disability insurance payments, reaffirming the insurer’s handling of Social Security offsets and denying a request for attorney’s fees tied to an administrative appeal.
The decision, handed down July 8 by the Tenth Circuit Court of Appeals, capped a challenge brought by Nancy Stark, the legal guardian of Jill Finley, a former mortgage underwriter who was left permanently disabled after a cardiac arrest in 2007. Finley had received long-term disability benefits through her employer’s group policy with Reliance Standard. The benefits were initially approved and paid, but years later, Reliance reduced the monthly payments after Finley was awarded Social Security Disability Insurance (SSDI), citing a clause in the policy allowing “Other Income Benefits” to be deducted.
Stark filed suit after the insurer temporarily terminated Finley’s benefits in 2022. Although Reliance reinstated the benefits following an internal appeal, Stark argued the company should reimburse Finley for all SSDI-related deductions and cover the legal costs she incurred while challenging the termination.
The case raised important questions under ERISA, the federal law that governs private employee benefit plans. At issue was how courts interpret a plan administrator’s fiduciary duties and the scope of equitable relief available under the statute.
Reliance's long-term disability policy includes provisions that reduce benefits by other income sources, including SSDI. The insurer's internal manual suggests claimants are not required to apply for SSDI, though it may be in their best interest. In Finley’s case, after she was awarded SSDI benefits in 2009, Reliance retroactively reduced her monthly disability checks and sought repayment for prior overpayments.
Stark didn’t challenge the SSDI offset at the time but later raised the issue in federal court. She argued that the deductions were improper and that Reliance breached its fiduciary duty by failing to provide plan documents and by pressuring Finley to apply for SSDI.
In rejecting these claims, the Tenth Circuit affirmed that ERISA does not authorize recovery of attorney’s fees for work done during administrative appeals. The court also held that Stark’s attempt to contest the SSDI deductions came too late – more than a decade after they were first applied. Moreover, she had not completed the insurer’s internal appeal process regarding that issue.
“In any action under this subchapter... the court in its discretion may allow a reasonable attorney’s fee,” the judges wrote, emphasizing that the statute refers specifically to litigation costs, not pre-litigation appeals. The court added that allowing fees as “equitable relief” would undermine the law’s explicit limitations.
For insurance carriers offering group disability coverage, the ruling reinforces the importance of clearly drafted policy language and consistent administrative practices. It also sends a message to plan participants and their advocates: disputes over benefits or deductions must be raised promptly and through the appropriate channels.
The court noted that Finley is once again receiving her monthly disability benefits and that no future payments are in dispute. What remained was essentially a claim for retroactive compensation and fees, which the court found unsupported under ERISA.
While the decision does not break new legal ground, it reinforces established principles around ERISA claims. These include the narrow availability of attorney’s fees and the necessity of exhausting administrative remedies before turning to the courts. For insurers, it’s a reminder that carefully following plan procedures and terms can stand up to legal scrutiny – even years later.
