Many claimants are unaware that disability carriers continue to monitor claimants’ applications for Social Security disability benefits even after the carrier has ceased to pay benefits.
A recent case out of the Middle District of Florida, which did not involve the law firm of Dell & Schaefer, serves as a reminder that your disability carrier often continues to monitor the status of your application for Social Security disability benefits even after your disability benefits have been terminated by the carrier.
This case involved an employee welfare benefits plan, which provides short-term disability (“STD”) and long-term disability (“LTD”) benefits and is governed by ERISA. Sedgwick Claims Management Services, Inc. (“Sedgwick”) is the claims administrator.
Plan requires claimant to apply for SSDI benefits
Under the plan, a claimant is required to apply for Social Security disability benefits when notified to do so by the claims administrator. The plan requires that STD and LTD benefit amounts be reduced by the claimant’s disability benefits provided under the Federal Social Security Act. More importantly the plan further requires that “if an Employee is awarded Social Security Disability for any period for which the Plan has fully paid disability benefits, there will be an overpayment from the Plan equal to the amount of such Social Security Disability benefits so paid,” and the Plan has the right to recover the overpayment.
Hines was employed by Delta Air Lines, Inc. as a customer services agent until she injured her wrist in August 2009. As a result of her injury, Hines received STD benefits under the Plan and then applied for and received LTD benefits under the Plan.
Hines Signs Reimbursement Agreement
While Hines was receiving disability benefits she signed a Reimbursement Agreement Concerning Long Term Disability Benefits (“Reimbursement Agreement”), agreeing to repay any overpayment of when awarded retroactive SSDI benefits.
Hines applied for SSDI benefits as the Plan required her to do so.
Sometime after applying for SSDI benefits Hines was notified by letter that Sedgwick had made the decision to terminate her disability benefits with an effective termination date of November 23, 2010. Hines appealed the termination of her benefits twice to no avail as Sedgwick upheld the decision on both appeals.
By letter dated May 10, 2011 the Social Security Administration sent Hines a Notice of Award, awarding her monthly SSDI benefits beginning February 2010. Although Hines apparently did not notify Sedgwick of her SSDI award Sedgwick learned of it anyway. Sedgwick sent Hines a total of five letters requesting reimbursement of overpayment in the amount of $9,361.10. Hines neither repaid nor responded.
ERISA Disability Lawsuit
In August 2012, Hines filed a lawsuit alleging she is entitled to LTD benefits under the plan from the date her benefits were effectively terminated to the present. In response the defendants countersued seeking reimbursement of overpayment due to Hines’ retroactive SSDI award.
When Hines failed to respond to the Defendants’ motion and failed to appear at a December 3, 2013 hearing the court found that the Defendants are entitled to recover the overpayment.
After her disability benefits were terminated Hines probably thought her relationship with Sedgwick was over. Although Hines had not been approved for SSDI benefits when Sedgwick made the decision to terminate Hines’ benefits, Sedgwick continued to monitor the status of Hines’ application for SSDI benefits.
Upon learning of Hines’ approval for SSDI benefits Sedgwick immediately sought to recover the overpayment under the reimbursement agreement signed by Hines. It appears that Hines was not represented by an ERISA attorney at any stage of her claim.
It is important to remember that if you are receiving or were receiving disability benefits under your group disability policy you should not immediately spend your SSDI benefits once received. It is always a good idea to consult with an experience ERISA disability attorney to determine your rights as early as possible.
Read more about Sedgwick cases here.