How Far Will Insurers Go To Offset Your Benefits?

We have previously discussed benefit offsets, which are provisions in policies that permit the insurer to reduce the amount of your monthly benefits if you are receiving income from certain sources (listed in the policy). While you may be aware that these provisions exist, you may be shocked by how far some insurers are willing to go to reduce benefits.

In the case of Rustad-Link v. Unum[1], Dawn Rustad-Link suffered a below-the-knee amputation after receiving negligent medical care. In addition, she had been diagnosed with multiple sclerosis (MS) several years earlier. Accordingly, she filed for disability benefits under her Unum policy.

At the outset of Rustad-Link’s claim, Unum determined that her MS was the primary disabling condition, and asserted that she had to wait 12 months to receive benefits, because the MS was a pre-existing condition.

Later on in the claim, Rustad-Link received a medical malpractice settlement (in connection with the below-the-knee amputation). When Unum learned about the settlement, it changed it’s prior assessment, determined that the amputation (not the MS) was the primary disabling condition, and asserted that, because of this, they were entitled to offset any income she received as a result of the amputation (i.e. the medical malpractice settlement). Significantly, when asked to assess the situation, Unum’s own in-house attorneys concluded that the settlement proceeds did not qualify as an offset; however, Unum’s “Financial Recovery Unit” ignored this, and continued its efforts to apply and enforce the offset. Unum then claimed that it had overpaid roughly $47,000 in benefits, and informed Rustad-Link that, moving forward, it would be reducing her benefits each month by roughly $2,000 until this amount was repaid to Unum (resulting in a remaining monthly benefit of only $115). Rustad-Link then filed suit to contest Unum’s determination.

Fortunately, the Court saw through Unum’s efforts to improperly apply the offset and concluded that Unum’s interpretation of the policy was “impermissibly self-serving.” In reviewing the record, the Court noted that Unum did not change its assessment until after it learned of the medical malpractice settlement, and concluded that the only purpose behind this change was “to take advantage of the settlement by treating the entirety of her misfortune as income.”

Although, in the end, Rustad-Link was able to avoid an offset, this case highlights the fact that insurance companies are financially motivated to deny and/or reduce your disability benefits, and illustrates how far insurance companies are willing to go to apply an offset. This case also shows that, while many juries have awarded damages and regulators have imposed fines in an effort to deter to bad faith conduct, Unum (and other insurance companies) continue to take aggressive and unreasonable positions in order to benefit their bottom-lines.

[1] Rustad-Link v. Providence Health & Serv., No. CV 16-136-M-DWM, 2018 WL 651833 (D. Mont. Jan. 31, 2018).

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