This case shows how a long-term disability insurance company can claim an overpayment once a claimant is approved for social security disability income benefits.
The following is a real life example of a claimant with a Unum disability policy who decided he did not want to pay back his SSDI overpayment.
Daniel N., while employed by ICI Americas Inc., participated in his company’s long-term disability (“LTD”) plan governed by ERISA. Unum Life insurance Company of America is the claims administrator and named fiduciary of this plan.
Like most group long-term disability policies, Daniel’s policy with Unum contained a provision allowing Unum to recover any overpayments due to… [Claimant’s] receipt of deductible sourcesof income.” The policy further defines deductible sources of income to include any Social Security disability income (“SSDI”) benefits and provides that Unum will subtract any SSDI benefits from the “gross disability payment.”
Daniel signs Reimbursement Agreement to repay Unum any overpayments
Daniel’s claim for LTD benefits was approved on May 16, 2005, effective May 1. Upon approval, Daniel received a letter from Unum informing him that any SSDI benefits would be subtracted from his monthly LTD benefits. On July 15, 2005, Daniel signed the Reimbursement Agreement stating his intention to accept the full amount of LTD benefits and later repay any overpayments. By selecting that option, Daniel agreed to “reimburse [Unum] any such overpayment within thirty (30) days of his receipt of such funds.”
In March 2009, Unum received notice that Daniel was approved for SSDI benefits, retroactive to October 2005. Unum then determined that Daniel’s receipt of SSDI benefits resulted in an overpayment of LTD in the amount of $77,900 and after advising Daniel of this overpayment and pursuant to the Reimbursement Agreement, Unum began holding a portion of his monthly LTD benefit to recoup the overpayment.
Unum sues to recover overpayment
When Daniel reached the maximum benefits period under the policy, Unum could no longer deduct monthly benefits to recover the overpayment, the balance of which was then $65, 848.40, and Unum sued Daniel in the Georgia Federal Court to recover the amount in addition to attorney fees and the costs of litigation. The court entered a judgment in favor of Unum requiring Daniel to pay the nearly $66,000 plus the costs of the litigation.