Most short term disability (STD) or long term disability (LTD) policies contain language that reduce their benefits by amounts received in worker’s comp benefits for the same disability. Also, if the STD or LTD benefits are received by the injured worker because worker’s compensation has been denied, and then the worker wins his workers’ compensation hearing, the judge will likely order reimbursement to the private disability insurer out of any workers comp indemnity for the same period of disability. See Wis. Stats. Sec. 102.30(7). The STD or LTD insurance carrier does not have standing to appear as an interested party in the worker’s compensation hearing process. However, since the employer is a party to the process and the private disability policy is paid for by the employer, the employer’s attorney often advances the interest of the STD/LTD insurance company but filing a certified copy of the policy with the reimbursement language. See unpublished Wisconsin Court of Appeals decision Walton v LIRC, 316 Wis 2d 773 (Ct App 2009).
Since most worker’s compensation claims settle at or shortly before hearing, the STD or LTD issue must be addressed in the settlement or compromise documents. This is especially true if the injured worker had to sign an indemnification or reimbursement agreement in order to receive the STD or LTD benefits. Basically, this is a document that gives the STD /LTD company a stronger right of getting paid back, over and above what they already had in their contract language. Some unions that provide STD or LTD benefits are very well versed in the use such documents. In such cases, the injured worker’s attorney tries to force the respondent worker’s compensation insurance company to pay back the STD / LTD insurance company outright, in addition to the benefits paid to the employee in the settlement. Another method or protection of the worker is for the employer or its worker’s compensation insurance carrier to promise to protect or hold the employee harmless should the STD /LTD insurer attempt to come after the injured worker for reimbursement.
At McCormick Law Office in Milwaukee, Wisconsin many of our seriously injured workers who have neck surgery or low back surgery, have received STD or LTD benefits while we fight for workers comp benefits. It is very important that our attorneys receive trustworthy and honest information about the receipt of STD or LTD benefits so that we can appropriate deal with the issue in any settlement negotiations or at hearing. Many highly qualified insurance policies may not have the indemnification or reimbursement language, so it is very important if the injured worker can provide us with a policy copy.