Long-Term Disability Overpayments: Can Your Long-Term Disability Insurer Recover An Overpayment In Court?

As a Greater New Orleans disability attorney, I have had quite a few people approach me with the following scenario:

I applied for and was granted long-term disability benefits under my employee benefit plan.  I also applied for Social Security Disability.  While I was waiting for a Social Security Disability decision, the LTD insurance paid me my full benefit amount.  After a year or so of waiting, I was finally awarded SSDI.   At some point, when the LTD insurer discovered I was receiving SSDI, I received a letter stating – “We overpaid you by $____________ as a result of your receipt of Social Security Disability Benefits.  Please send us a check in this amount.”  What do I do?

Usually, the amount that the LTD insurance company is seeking to recover is substantial – $10,000 or more.  This is a difficult prospect for a disability claimant who is already struggling to survive on 60% or so of their earnings and dealing with medical expenses.

To make matters worse, disability claimants often get this letter in conjunction with a reduction in their disability benefit payment to the minimum due under their policy OR after the disability insurer has determined they no longer qualify for benefits.

So what are your options?

If you remain eligible for the long-term disability insurance benefits, you can ask that the insurer apply your currently due amounts to the overpayment.  While it is not ideal because you are losing out on much needed funds, you may often have ancillary benefits dependent upon you remaining on long-term disability insurance – such as medical, pension, or waiver of premium insurance.

If the long-term disability insurance company is demanding repayment either because you are no longer on benefit or because they claim you need to repay to stay on benefit, you may be able to say “Leave Me Alone” and mean it.

In the case of Cooperative Benefit Administrators, Inc. v. Ogden, 367 F.3d 323 (5th Cir. 2004), the United States Court of Appeal for the Fifth Circuit held that long-term disability insurers were not legally able to sue a claimant for recovery of an overpayment.  The court looked at the text of ERISA, the federal law that governs employee benefit plans, and found that the law did not provide insurers with a right to sue claimants for money.  The court also found that there was no federal common law right of recovery in such a case.  This case effectively shields claimants from suits by long-term disability insurance companies to recover overpayments, which are often tied to Social Security Disability awards.

It is important to make clear that this case only applies to decisions in the 5th Circuit – Texas, Louisiana and Mississippi.  The legal rules in your area may differ and allow such recovery.

This holding does not prevent the long-term disability insurance company for asking you for the money and taking it if you give it to them.  If you receive a letter demanding that you repay a substantial portion of money to the long-term disability insurance company because of an overpayment, you should seek legal counsel before sending off your check.

This post was created by Greater New Orleans SSDI attorney and long-term disability lawyer Loyd J. Bourgeois on Louisiana Disability Law and is for educational purposes only. The social security disability or long-term disability information provided here is no substitute for speaking with or seeking assistance from a Louisiana lawyer familiar with social security disability claims or long-term disability claims.
2 Responses to Long-Term Disability Overpayments: Can Your Long-Term Disability Insurer Recover An Overpayment In Court?
  1. Stacey
    May 2, 2011 | 8:22 AM

    Can LTD demand me to repay them after SSI is awarded for overpayment,what if I would have never applied they required me to apply how do they know exactly how much you receive and can they terminate my policy if I don’t pay them.need advice in Houston,Tx thanks.

  2. Gary Creason
    July 14, 2013 | 1:56 AM

    In Aug 2012, I applied for Med Part A and to begin my SS payments. I received a letter saying “allbenefits are approved” but we received only Med Part A went to local SS office and they could not find application part for the ss payments So by now end of Oct and get fists apt in Nov and benefits beging in Nov2012. In meantime, became ill, and start SS disability in 09-11-2012, continue till 03-18-2013. At this point I begin LT Disability. They send me a letter saying they can offset “any deductible income that you receive or a dependents receive as a result of your disability, or retirement,(including , but not limited to Sick leave salary continuation SS Workers Compensation or retirement benefits.” I collected my SS prior to the disability, but due to Ss mistake did not start till 11 2012. I collected ONLY because I had turned 65 in 05 2012 not as retirement or disability.In addition my employer does not require me to submit letter of retirement till 0-2013. I was never asked for any offsets during St disability. NOW they say because I got my SS in Nov , it was After disability, and it does not matter WHY I got the benefits, even though the letter specifically states “as result of your disability or retirement due to disability” Changning rules now. I do not believe they can collect. I can receive long term benefits for 24 months and then longer if I can perform no work at all. SS made the mistake or I could have had benefits in 08-2012, I have asked the local office to supply these proof of mistakes where they had me fillout the 4 pAGE LETTER OF COMPLAINT PLEASE ADVISE AS TO HOW THEY CAN ASK FOR THIS AGE RELATED BENEFIT , NOT RELATAED TO DISABILITY OR RETIREMENT

Leave a Reply

You must be logged in to post a comment. Click here to log in.

Trackback URL http://www.louisianadisabilitylaw.com/2011/04/longterm-disability-overpayments-can-your-longterm-disability-insurer-recover-for-social-security-overpayment/trackback/