No Offset of ERISA Disability Payments from Net Lump Sum Personal Injury Settlement Under New York Law
A Konica account executive received ERISA-governed disability benefits following a work-related fall. After being awarded a lump sum settlement in his personal injury case, the insurer reduced the award by 50% of the net proceeds under the ERISA plan. The employee sued for wrongful denial of long-term disability insurance benefits. The Second Circuit held a New York statute limiting reimbursement and subrogation claims in personal injury and wrongful death actions was implicated by the decision to offset 50% of the net settlement against the employee’s disability benefits. Since the statute was not preempted by ERISA and the plan choice of law provision did not govern this issue, New York law applies and it precludes such an offset against his disability benefits.