Commissioner of Social Security's Structured Settlement "Daisy Cutter" Is Reversed

by John Darer CLU ChFC MSSC CeFT RSP CLTC

An Administrative Law Judge ("ALJ") previously found that a Plaintiff’s structured settlement annuity was not an excluded resource for purposes of SSI

"Driving Miss Daisy"

The ALJ found that Plaintiff’s lawsuit was “largely based on the premise that he had been injured by [the] loss of his service dog, Daisy, beyond her replacement value,” and even if service animals were considered resources, the exclusion would only apply to the cost to replace the animal.  [see Dennis H., Plaintiff v Commissioner, Social Security Administration United States District Court, D. Oregon 6:17-cv-01563-MC]

The ALJ found that:

1. Plaintiff’s lawsuit included issues beyond Daisy’s replacement, and the “precise sources of the claimant’s damages, and what amount of his total settlement are attributable to what injuries, are not established.” 
2. Plaintiff’s $27,000 award far exceeded the cost to replace Daisy.
3.  the settlement terms did not limit or dictate Plaintiff’s use of the benefits, and Plaintiff has not used any of the funds to replace Daisy.  The ALJ said that a service animal would be considered a resource at the hearing but did not find that Daisy was a resource in his opinion. See tr. 347, 351, 34. The Court assumes, arguendo, that Daisy was a resource.

On Appeal to the United States District Court, District of Oregon, Plaintiff Dennis H. argued that the Administrative Law Judge (“ALJ”) erred by:

1. finding that none of Plaintiff’s settlement award was attributable to the loss of his service animal;
2. finding that the settlement award far exceeded the cost to obtain a new service animal; and
3. failing to make a “special determination.” Pl.’s Br. 1–3, ECF No. 18.

Plaintiff also argues that he received ineffective assistance of counsel because the ALJ erred in finding that none of Plaintiff’s settlement award was an excludable resource.

In a February 19, 2020 decision, the Commissioner of Social Security's decision was REVERSED and this matter was REMANDED for recalculation of benefits.

Eligibility for SSI

Aged, blind, and disabled individuals whom the Social Security Administration determines to be eligible based on their income and resources are eligible for SSI benefits. 42 U.S.C. § 1381a. “Income is anything you receive in cash or in kind that you can use to meet your needs for food and shelter.” 20 C.F.R. § 416.1102. “Income” encompasses earned and unearned income. 42 U.S.C. § 1382a(a). Unearned income includes “[a]nnuities, pensions, and other periodic payments” and “awards,” such as those one receives “as the result of a decision by a court, board of arbitration, or the like.” 20 C.F.R. § 416.1121(a) and (f); see also 42 U.S.C. § 1382a(a)(2)(B) and (C). Certain income is excluded, including “[r]eceipts from the sale, exchange, or replacement of a resource” and “any cash or in-kind item that is provided to replace or repair a resource [ ] that has been lost, damaged, or stolen.” 20 C.F.R. § 416.1103(c).

What is a "Resource" for Purpose of SSI?

“Resource” is defined as “cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his or her support and maintenance.” 20 C.F.R. § 416.1201(a). An individual’s asset or property is a resource if “the individual has the right, authority, or power to liquidate” it.” 20 C.F.R. § 416.1201(a)(1). Cash that a claimant uses “to repair or replace the excluded resource” within nine months of the date it is received is considered an excluded resource. See 20 C.F.R. § 416.1232(a). Any cash that a claimant does not use “to repair or replace the excluded resource” within nine months will be counted as a resource starting the month after the nine-month period expires.

The ALJ found that Plaintiff’s structured settlement annuity was not an excluded resource. Tr. 34. The ALJ found that Plaintiff’s lawsuit was “largely based on the premise that he had been injured by [the] loss of Daisy beyond her replacement value,” and even if service animals were considered resources, the exclusion would only apply to the cost to replace the animal. Id. The ALJ found that Plaintiff’s lawsuit included issues beyond Daisy’s replacement, and the “precise sources of the claimant’s damages, and what amount of his total settlement are attributable to what injuries, are not established.” Id. The ALJ found that Plaintiff’s $27,000 award far exceeded the cost to replace Daisy. Id. Finally, the ALJ found that the settlement terms did not limit or dictate Plaintiff’s use of the benefits, and Plaintiff has not used any of the funds to replace Daisy. Tr. 34–35. The ALJ said that a service animal would be considered a resource at the hearing but did not find that Daisy was a resource in his opinion. See tr. 347, 351, 34. The Oregon District County assumes, arguendo, that Daisy was a resource.