Can My Insurer Claim Overpayment of Benefits After Years of Paying?
A Case Study

If an insurance company decides that they have overpaid a claim, policy language often allows them to recoup this benefit amount from an insured. In some instances, the insurer may assert that an overpayment has gone on for multiple years, and the amount in question can be quite significant. This can present a financial hardship for the insured and it may require costly litigation to determine if the overpayment claim is legitimate.

One such case is that of Raymond v. Unum[1]. In this matter, pharmacist Dr. Raymond became disabled after being diagnosed with multiple sclerosis and she filed a claim with Unum. Initially, Unum approved her claim for Total Disability, and later for Residual Disability when she returned to work as a pharmacist in a limited capacity.

Dr. Raymond’s policy also contained a Social Insurance Supplemental Income (SIS) benefit that provided an additional $500 per month upon receipt of “satisfactory” proof that the insured applied for social security benefits.  Unum initially paid the SIS benefit, but after asking repeatedly for written proof that Dr. Raymond had applied for SSDI without receiving a response, Unum stopped paying the extra $500 per month. However, Unum did not notify Dr. Raymond of this determination in writing.

For her part, Dr. Raymond did not realize that her benefit was cut off for 10 years, as she received her benefit via direct deposit and had not noticed the lowered benefit amount.

When a dispute over the benefit amount gave rise to a lawsuit, Unum learned that Dr. Raymond had also misstated both the time she spent working, her job duties, and her income on her proof of loss claim forms. After evaluating this new information, Unum issued a re-determination that Dr. Raymond had not been eligible for any benefits (residual or total) under her Policy for 2014-2019, and determined that they had overpaid her $225,578.91.

In its opinion, the Court repeatedly noted that it found Unum’s behavior odd in that it continued paying benefits for such a long time, despite Dr. Raymond’s failure to submit requested documentation. Nevertheless, they determined that Dr. Raymond had also engaged in misconduct, found her arguments that the overpayment was arbitrary and capricious unpersuasive, and ultimately found in Unum’s favor.

This case illustrates the importance of not only being mindful of your policy’s offset provisions, but also being mindful to clearly disclose all income and employment status to your insurer. Otherwise, you may be on the hook for substantial amounts, even if your insurance company did not preemptively warn you of this.

Every claim is unique and the discussion above is only a limited summary of the court’s ruling in this case. If you are concerned that your insurer is not evaluating your claim under the proper standard, an experienced disability insurance attorney can help you assess the situation and determine what options, if any, are available.

[1] Raymond v. Unum Grp., No. CV 20-00352-BAJ-EWD, 2023 WL 2543944, at *7 (M.D. La. Mar. 16, 2023).


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