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Sedgwick and AT&T sued as a result of SSDI Overpayment

A recent decision by a Federal Judge in a California ERISA Disability Lawsuit serves as a reminder to all individuals receiving disability benefits: If your disability policy allows for the insurance company to “offset” other income benefits and to collect for overpayments, you must always remember that eventually you may owe that money to the insurance company should they request it soon thereafter or at a later date.

In a case against AT&T Umbrella Benefit Plan No. 1 (a long term disability plan for AT&T employees which was third-party administrated by Sedgwick), a claimant brought suit after the Plan reduced his benefits by $500 per month in an attempt to recover $63,288.11 in past overpayments it believed were owed to AT&T by the claimant.

Claim History

The claimant previously applied for, and received, long term disability benefits from AT&T and Sedgwick. While he was on claim he also applied for, and was eventually approved for, Social Security Disability (SSDI) Benefits. Soon after being approved by the Social Security Administration (SSA), the claimant received a sizeable back benefits check for SSDI benefits for the time period when SSA first found he was disabled to the present. The SSA also began sending him a monthly benefit check due to his disability.

The claimant’s policy with AT&T allowed for AT&T to offset any other income the claimant received while on claim for long term disability benefits. Nearly a year after SSA awarded the claimant disability benefits, AT&T finally got around to requesting the overpayments it believed were owed. AT&T requested that the claimant pay it $63,288.11, the sum of money the SSA eventually paid the claimant for the same time period that AT&T had already paid. Unfortunately, by the time AT&T made this request, the claimant had already spent the money. In an attempt to recoup the money it believed was owed, AT&T began to reduce the claimant’s LTD benefits by $500 per month.

ERISA Disability Lawsuit

Upset at receiving $500 less in benefits per month, a lawsuit was filed. In the lawsuit, the claimant made various arguments in an attempt to justify his belief that he should not have to pay AT&T the money back. Most notably the claimant believed that AT&T’s long delay in requesting the overpayment somehow prevented AT&T from now collecting the money. The claimant argued that this delay effectively waived AT&T’s rights to the money. Unfortunately, the Court did not agree.

The Court first noted that “the terms of the Disability Plan ‘unambiguously’ grant (AT&T) the power to reduce (the claimant’s) LTD benefits to account for a retroactive SSDI award. “The Court also noted that although AT&T waited a year to request the money, AT&T informed the claimant on several occasions that should he be awarded SSDI benefits, he would be required to reimburse AT&T for any overpayment. This was done both verbally and through letters. Additionally, before the claimant began to receive LTD benefits from AT&T, he signed an Agreement that stated he would notify the claims administrator immediately if he was awarded SSDI benefits and that he would repay AT&T in full any money that ended up becoming an overpayment. Finally, the Court noted that the Disability Plan itself states that “failure to apply an offset as soon as it is available shall not constitute a waiver of offset rights or otherwise prevent their later exercise.”

In the end, the Court found that the delay in requesting the overpayment from the claimant did not constitute a waiver of AT&T’s rights to the reimbursement. The Court also stated that the claimant “should have known that the retroactive SSDI award was not his to spend. Thus, Plaintiff’s current state of financial hardship for having spent the retroactive SSDI award does not persuade the Court that equitable relief is warranted.”

While our firm did not handle this case, it can serve as a reminder that before a claimant spends any money they receive from Social Security (or another source), it is best to speak with your Disability Attorney who can guide you through this process. Failure to send in the overpayment can lead to one’s benefits being reduced, totally suspended or even denied. The disability attorneys at Attorneys Dell & Schaefer , Chartered, represent claimants nationwide and are available for a free consultation to discuss your disability claim options.

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There are 10 comments

  • Natasha,

    I would suggest you contact AT&T to discuss repayment of any overpayment. Under the AT&T policy, your monthly benefit would be reduced by the amount received from SSDI.

    Stephen JessupJan 20, 2015  #10

  • Hello, I honeslty thought that once I recieved money from social security that, AT&T had already taken what they needed and since it came to my account that was for me. They are threatening to cut my long term. Can they work something out with me? I never understood why would it be an overpayment when that’s the amount I was receiving from the beginning.

    NatashaJan 19, 2015  #9

  • Pam,

    You will be required to file an administrative appeal prior to the filing of any lawsuit.

    Stephen JessupDec 10, 2014  #8

  • I am an AT&T employee. I have been on short term disability from December 20, 2013 till October 1, 2014. When I was denied, Sedgwick stated what was faxed from my doctor was not enough, which was faxed on November 3, 2014 stating I was totally disabled. Since I was denied short term disability from October 1 to Nov 3, my long term was denied. I did appealed and won. Now At&T says they over paid me and the offset was $5560.00. They knew I was on Social Security Disability and did not take the appropriate funds out from Jun to Nov. They claim the offset was from June to November. I have not recieved any payment from AT&T since September 2014. Do I have a right to sue them or what can I do?

    Pam LyonDec 9, 2014  #7

  • Jenn,

    You make very valid points. Two issues though: (1) you may not receive SSDI benefits and (2) drawing from an employer pension early could result in penalties. Although the policy does allow for the offset of other income benefits, it does provide some level of protection (albeit as indicated time and time again- a small amount) in the event Other Sources of Income are not received.

    Stephen JessupNov 1, 2014  #6

  • In regards to long term disability, if AT&T offsets (subtracts) from the LTD payments, from monies received from SSDI and employer pension, why even bother with LTD? AT&T only pays 50% of the employee’s wages until age 65. If an employee is 61 years old, it seems like it would be better to apply for SSDI along with their pension. Is there an advantage that I’m missing?

    Jenn VoigeOct 31, 2014  #5

  • Terry,

    They may be willing to negotiate with you as to same. My suggestion would be to inquire.

    Stephen JessupFeb 13, 2014  #4

  • Thank you in advance for taking the time to answer my questions. My LTD thru Principal is 2079 a month. My recently awarded SSD is 1560 a month along with back payment of 20 grand. My LTD contract still has 42 months left on a 5 year contract so if I didn’t owe any back pay the difference the LTD carrier would still owe me monthly for the remainder of said contract would be $519 a month. My question is this: if I don’t pay back any of the overpayment and reason with LTD that $519 a month for the remainder of our contract would offset the amount of overpayment that I owe if they just keep that monthly amount as the monthly payment on the sum owed will they go along with that reasoning and allow me to pay them back in that manner? I would rather get $1560 a month SSD, lose the $519 difference a month as repayment to Principal and keep the 20 grand…

    TerryFeb 12, 2014  #3

  • Monica,

    Your question needs to be answered by a bankruptcy attorney and we don’t handle bankruptcy claims.

    Gregory DellFeb 26, 2013  #2

  • What if you filled for bankruptcy and the long term disability overpayment was discarded in court can Sedgwick still recoup said overpayment if they are awarded new disability and retired, when the original overpayment was from a past overpayment of originally filling with SSID?

    MonicaFeb 24, 2013  #1

FAQ

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We represent Sedgwick clients nationwide and we encourage you to contact us for a FREE immediate phone consultation with one of our experienced disability insurance attorneys.

Can you help with a Sedgwick disability insurance policy?

Our disability insurance lawyers help policy holders seeking short or long term disability insurance benefits from Sedgwick. We have helped thousands of disability insurance claimants nationwide with monthly disability benefits. With more than 40 years of disability insurance experience we have helped individuals in almost every occupation and we are familiar with the disability income policies offered by Sedgwick.

How do you help Sedgwick claimants?

Our lawyers help individuals that have either purchased a Sedgwick long term disability insurance policy from an insurance company or obtained short or long term disability insurance coverage as a benefit from their employer.

Our experienced lawyers can assist with Sedgwick:

  • ERISA and Non-ERISA Appeals of Disability Benefit Denials
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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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