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

Attorney Alex PalamaraAuthor: Attorney Alex Palamara

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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