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Are Insurance Benefits Affected by Damages Recovered in a Lawsuit?

Fri Jun 15th, 2018 on     Disability Insurance,    

Oftentimes, insurance policyholders who are already receiving benefits (or who intend to submit an application for benefits) are concerned about how their qualification for such benefits will be influenced by their success in litigation.  This is a reasonable concern, of course — it seems sensible that one’s disability benefits may be affected by their receipt of hundreds of thousands of dollars, or even millions of dollars in damages from the liable defendant in a personal injury lawsuit.

In reality, however, the effect of a settlement or verdict on one’s receipt of benefits is not necessarily straightforward.  Whether these concerns are valid is fundamentally dependent on the circumstances.

Let’s take a brief look at the situation.

Income-Based Benefits May Be Affected

In Florida, as in other states, private insurance coverage — such as disability insurance, health insurance, and property insurance, among other policies — is generally not affected by the receipt of damages in a settlement or verdict.  It’s a rather simple calculus, in fact.  Private benefits are typically not awarded based on “financial need” or income, and so by securing substantial financial resources through a lawsuit, you do not influence the provision of benefits under your existing coverage.

For example, suppose that you have entered into an agreement for private disability insurance coverage.  You subsequently are involved in a motor vehicle accident where you suffer injuries that give rise to a disabling condition.  In your lawsuit, however, you are awarded $1M in damages.

Unless your policy includes some provision that limits your benefits based on your income (which is highly unlikely), you may still submit an application for benefits — after all, so long as you can show that you are actually disabled, then you will be entitled to receive benefits.

By contrast, certain public benefits — such as Supplemental Security Income (SSI) and Medicaid — are income-based and may be affected by the influx of financial resources due to a favorable verdict or settlement.  You may be made ineligible for SSI benefits due to your receipt of a cash settlement, for example.

Medicaid benefits are granted based on financial need.  Certain individuals may qualify for Medicaid if their household income is sufficiently low to make them eligible for such benefits.  An award of damages may increase the individual’s income enough to make them ineligible for Medicaid benefits, however.

It’s important to note that you must report the award of damages (or settlement) to the appropriate authorities, so that your benefits and eligibility can be re-evaluated given these resources.  Failure to do so could expose you to liability for fraud.

Options for Securing Benefits in the Wake of a Lawsuit

If you would like to preserve benefits, such as SSI or Medicaid, you may be able to do so (despite receiving a large damage award or settlement) by creating an irrevocable trust, such as a Medicaid trust, or by the creation of a Special Needs Trust (where the funds will be redirected).

Consult With an Experienced Miami Insurance Coverage Lawyer

If you are involved in a lawsuit and are successful in obtaining an award of damages (or a favorable settlement compromise), then you may be concerned about the possibility that your existing insurance benefits — such as SSD, SSI, Medicaid, and other such benefits — will be affected by the significant financial resources thus secured.  It’s worth noting, however, that not all of your existing insurance benefits will necessarily be affected.  Further, even if they will be affected, you may have opportunities to avoid the loss of valuable benefits.

Here at Ver Ploeg & Lumpkin, P.A., our team of attorneys boast decades of experience providing comprehensive legal representation to those involved in insurance disputes.  We understand that — in the wake of a substantial verdict or settlement — you may have lingering concerns about the loss of insurance benefits, and we work closely with our clients to ensure that these issues are properly evaluated and addressed as soon as possible.

Call (305) 577-3996 or submit an online claim form to setup an appointment with an experienced Miami insurance coverage lawyer at Ver Ploeg & Lumpkin, P.A.

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