Do I always have to repay Social Security disability benefits to my disability insurance company? Maybe not!

Does a disability insurance claimant have to repay an insurance company back for the money received from Social Security? Unfortunately, this answer is overwhelmingly answered by a simple affirmative “yes.” The vast majority of ERISA governed group long term disability policies contain provisions allowing the insurance company to offset your monthly disability benefit by the amount you and/or your dependents receive from Social Security benefits as a result of your disability. This also includes a right to recover any award of back benefits made by the Social Security Administration, which is usually in the form of a lump sum check. As indicated, this is the most common answer to the question posed. However, a recent Federal Court ruling from Ohio sheds an additional light on the subject. As a disclaimer, the Court’s ruling is highly fact specific and does not necessarily reflect the vast majority of overpayment repayment issues.

The Issue of Overpayment and the Maybe Not

In the case of Kapp v. Sedgwick CMS, Mr. Kapp had been on long term disability for some 8 years through his employer, AT&T’s, long term disability policy, which is administered by Sedgwick. During that time frame Mr. Kapp was paid the wrong monthly benefit amount despite the fact that he repeatedly notified Sedgwick that there was an error in the computation of his monthly benefit. All totaled, he was overpaid $162,308.21. The overpayment stemmed from his receipt of SSDI benefits. The Court notes that Mr. Kapp advised Sedgwick the day he received notice from Social Security that his claim had been approved and benefits were being awarded. When Sedgwick did nothing in response, he continued to notify Sedgwick of the error in his monthly benefit. Despite his attempts to honor his duties and obligations under the policy, Sedgwick and AT&T never claimed an overpayment and actually responded to his notifications and inquiry that the amount he was receiving under the AT&T plan was correct.

From 2002 to 2010 Mr. Kapp received his full monthly disability benefit in addition to his monthly SSDI benefit. Finally, in 2010, Sedgwick and AT&T notified Mr. Kapp of the overpayment and demanded that the benefits be paid. Mr. Kapp appealed Sedgwick and AT&T’s decision to enforce the overpayment. To no one’s surprise, Sedgwick and AT&T deemed the overpayment repayment appropriate.

The Court Steps In

Mr. Kapp filed a lawsuit in Ohio Federal Court, challenging the claimed overpayment on equitable grounds, or in layman’s terms, it isn’t fair. The Court noted that Mr. Kapp had made numerous financial decisions based on the amount of his monthly benefit; had made charitable contributions based on the benefit amount; and helped to pay for the care of his parents, amongst other things, all on the assertions made by Sedgwick as to the amount of his monthly benefit.

In rendering its decision the Court noted that applicable case law stated that even when a benefits plan unambiguously provides the plan a legal right to recoup an overpayment, “equitable principles” may limit a Plan’s right to do so. In making a determination as to whether such equitable principles bar recovery of a mistake resulting in overpayment under an ERISA plan, the Court considered six factors:

1) The amount of time which has passed since the overpayment was made;
2) The effect that recoupment would have on that income
3) The nature of the mistake by the administrator
4) The amount of the overpayment
5) The beneficiary’s total income; and
6) The beneficiary’s use of the money at issue.

After reviewing all of the information before it, the Court did note that under the Plan, an overpayment had occurred, but given the facts and circumstances surrounding the case that Sedgwick and AT&T were barred from recovering the overpayment on equitable grounds.

What It All Means

The ruling in Kapp was a culmination of circumstances that came together in a “perfect storm” of facts. The Court’s opinion should not be read to mean that an insured does not have to repay an insurance company money received from Social Security or other deductible sources of income, but it does establish that on a case by case, deeper analysis should be performed as to the company’s right to enforce repayment. Dell Disability Lawyers had no involvement in representing Mr. Kapp or in his case.


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Sent on July 5th 2024 by Attorney Gregory Dell

David:

It’s horrible that Hartford did that to you.

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We are disability insurance attorneys that know how to get your short or long term disability benefits paid. As a nationwide law firm we have helped thousands of disability insurance claimants throughout the United States to collect hundreds of millions of dollars of disability insurance benefits from every major disability insurance company.

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Our clients include all types of employees ranging from retail associates, sales representatives, government employees, police officers, teachers, janitors, nurses, pilots, truck drivers, financial advisors, doctors, dentists, veterinarians, lawyers, consultants, IT professionals, engineers, professional athletes, business owners, and high level executives.

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What are your fees?

Since we represent disability insurance claimants at different stages of a disability insurance claim we offer a variety of different fee options. We understand that claimants living on disability insurance benefits have a limited source of income; therefore we always try to work with the claimant to make our attorney fees as affordable as possible.

The three available fee options are a contingency fee agreement (no attorney fee or cost unless we make a recovery), hourly fee or fixed flat rate.

In every case we provide each client with a written fee agreement detailing the terms and conditions. We always offer a free initial phone consultation and we appreciate the opportunity to work with you in obtaining payment of your disability insurance benefits.

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No. For purposes of efficiency and to reduce expenses for our clients we have found that 99% of our clients prefer to communicate via phone, email, fax, or video conferencing sessions. If you prefer an initial in-person meeting please let us know. A disability company will never require you to come to their office and similarly we are set up so that we handle your entire claim without the need for you to come to our office.

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When you call us during normal business hours you will immediately speak with a disability insurance attorney. We can be reached at 800-698-9159 or by email. Lawyers and staff must return all client calls same day. Client emails are usually replied to within the same business day and seem to be the preferred and most efficient method of communication for most clients.

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