Nowadays, it is standard practice for disability insurance companies to require claimants with long term disability (LTD) benefits to apply for Social Security disability benefits as well. Upon being approved for social disability benefits, the disability insurance companies will then deduct the amount of the monthly social security payment from the monthly benefit amount that was previously paid by the disability company.
In most cases there are no disputes by the recipients as to this procedure by the disability insurance companies. However, problems arise when the disability insurance companies also try to claim those social security benefits like social security child benefits as offsets which are not meant for the claimants of LTD benefits. The case of William E. Sorrell V UNUM Life Insurance Company of America is an example of the above mentioned situation.
The Facts of the Case- Ohio disability Lawyer Sues Unum to Prevent Setoff for Child Social Security Benefits
The case William E. Sorrell V UNUM Life Insurance Company of America was filed at the Court Of Common Pleas of Ross County, Ohio by a disability attorney. The plaintiff William E. Sorrell was a divorcee with a child named Alena K. Sorrell, whom the ex wife has sole legal custody of. While employed at PACCAR, lnc, the plaintiff had purchased a long-term disability policy from UNUM Life Insurance Company of America (UNUM).
On June 15th 2001, the plaintiff was determined as being disabled. He filed a claim for LTD benefits on July 16th 2001 with UNUM and was approved for payment of disability benefits. Around the same time, the plaintiff was also in the process of applying for social security benefits. From October 2001 to January 2005, UNUM paid the plaintiff $2340.00 in benefits per month.
On January 25th 2005, the Social Security Administration (SSA) approved the plaintiff claim for social security disability benefits from August 3rd 2003 onwards. The SSA also determined that the plaintiff was entitled to a monthly social security disability payment in the amount of $1787.00 from January 2005 onwards. As per the Unum disability insurance policy, the plaintiff was required to reimburse UNUM the overpayment of disability benefits from the months of August 2003 through December 2004 in the amount of $29,483.00 which the plaintiff promptly paid upon the receiving the payment from the SSA.
On January 2005, UNUM reduced the plaintiff’s payment of disability benefits by approximately $553.00 per month on the grounds that the plaintiff was also required to reimburse UNUM the social security benefits that were paid to his ex wife as child benefits for his daughter. The claimant never received the $553.00 as it went directly to his ex-wife.
Breach of Contract
In the lawsuit, the plaintiff argued that UNUM’s action constituted a breach of contract as UNUM was legally obliged to pay the plaintiff disability benefits of $553 per month for the months of January 2005 through January 2010. The refusal and failure of UNUM to pay the plaintiff the said amount resulted in the plaintiff suffering a total loss of $33,180.00 (60 months of $553 monthly benefits).
Plaintiff alleges UNUM Acted in Bad Faith
The plaintiff further alleged that UNUM had acted in bad faith as it had no reasonable justification to request the plaintiff to reimburse UNUM for benefits in the amount of $11,532.80 that he had never received. The plaintiff argued that UNUM also had no justification to reduce his monthly benefits by $553.00 from January 2005 to January 2010 to offset the $11,532.80 that UNUM requested. The plaintiff argued that had UNUM conducted a reasonable investigation, it would had found out that the plaintiff’s ex wife had sole legal custody of the Plaintiff”s daughter, Alena K. Sorrell and as such any benefits paid to plaintiff’s ex-wife as sole custodian of Alena would be not recoverable by the plaintiff himself and also in which the plaintiff himself never benefited.
The plaintiff alleged that UNUM as a disability insurance company which had regular dealings with the SSA would certainly know that the plaintiff would not only be unable to reach or recover any benefits that may have been paid to his daughter through plaintiff’s ex-wife. The plaintiff further alleged that UNUM certainly knew the plaintiff would be unable to obtain any conclusive information regarding benefits his daughter received under the Social Security because any such information about a person’s Social Security Benefits is confidential by law. Hence, the plaintiff argued that UNUM failed to act in good faith in processing the plaintiff’s claim, in requesting the reimbursement of an unknown amount, and in withholding benefits from January 2005 through January 2010 in the amount of $553.00 per month.
Unconscionable LTD Contract
In the lawsuit, the plaintiff also pointed out that the LTD Contract between the plaintiff and UNUM was one of adhesion. This means UNUM presented the terms in the contract on a “take it or leave it” basis leaving no room for any negotiations or revision of the language contained in the contract. The plaintiff argued that in the situation where the contract is one of adhesion, the Courts have long been disinclined to effectuate clauses of limitation which are unconscionable. According to the lawsuit:
A contract provision is unconscionable if it is such as no person in his/her senses and under delusion would make on the one hand, and as no honest and fair person would accept on the other. No person would have accepted a contractual provision, as stated in the Unum Provident policy, in which the benefits paid to a person’s ex-wife through social security - and in which the person would receive no benefit – would be off-set as attributable to that person’s disability and disability award given by the insurer
Therefore, the plaintiff argued that the provision in the policy offsetting benefits should be deemed void as unconscionable.
Ambiguity in the Language of the Policy
The plaintiff alleged that the language in the policy is ambiguous as two different reasonable interpretations can be derived from the policy’s language. The plaintiff argued that because of the ambiguity, the contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer. Hence, since the provision that provided for the offsets of the plaintiffs long term disability benefits is ambiguous, the ambiguity is construed in favor of the plaintiff that any benefits that may have been paid to plaintiff’s ex-wife for Alena should not offset other benefits provided by UNUM to the plaintiff.
Contrary to Public Policy
The plaintiff also argued in the lawsuit that the language in plaintiff’s policy containing a provision seeking reimbursement and offsetting Social Security benefits paid to Plaintiff’s ex-wife is unenforceable on the grounds that it violates public policy.
Relief Sought By the Plaintiff
As a result of UNUM’s alleged actions, the plaintiff is seeking from the Court the following relief:
- An award of $33,180.00 in compensatory damages for breach of Contract.
- An award of Prejudgment interest, at the maximum rate allowed by law, accruing from the month of January, 2005 to January 2010 the date in which UNUM resumed full payment to the plaintiff.
- Punitive damages in the amount of $99,540.00 (3 times compensatory
damages) for UNUM’s bad faith in handling the plaintiffs claim
- Interests on the above amount at the maximum rate allowed by law plus the costs and attorney’s fees of this suit.
- Any other relief this Court deems fair and equitable
This is a very challenging issue that affects thousands of claimants nationwide. Unfortunately, most long term disability policies have specific language that allow the carrier to reduce the monthly benefit by the amount of child social security benefits. It is unfair as the parent does nto receive the funds. It is further unfair as the claimant is now faced with additional taxable income that may not have been taxable when the disability company was paying the same monthly benefits.