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ERISA Law

Do I Have to Pay Back My Long-Term Disability?

August 24, 2020

Developing a disability can be a stressful time for you and your family.  Fortunately, if you have long-term disability (LTD) insurance through your employer, or even a policy that you purchased yourself, you have access to a percentage of your monthly earnings in the event that you cannot return to work.  While these benefits will be paid to you on a month-to-month basis if your claim is approved, there are certain situations in which you may have to pay back the insurance company for long-term disability benefits you have received.  This is typically referred to as an overpayment.  We will discuss some of the most common overpayments below.

Social Security Disability Benefits

The most common reason that claimants owe long-term disability benefits back to the insurance company is that they begin receiving Social Security Disability Income (SSDI) benefits.  More often found in group policies, or a policy that you get through your employer, the long-term disability insurer is entitled to offset your monthly long-term disability benefits based on the disability compensation you receive from Social Security.  Typically, the application process for SSDI benefits takes longer than the process of applying for long-term disability.

Additionally, if your SSDI claim is denied, requesting a hearing and appealing the denial can further delay your receipt of SSDI benefits.  Accordingly, you more than likely will collect your full long-term disability benefit, without the reduction for SSDI benefits, for a period of time.  If your SSDI claim is then approved, those are benefits the long-term disability insurer should have been offsetting, but wasn’t, and as a result, your long-term disability claim has been overpaid.  Once you are approved for SSDI and receive your retroactive benefits, it is important to notify your long-term disability insurer so they can calculate any overpayment on your claim.  Usually, the overpayment to the insurance company is most, if not all, of the retroactive benefit you receive from Social Security.  Consequently, it is important to hold onto the retroactive award you receive from Social Security so that you can pay back the long-term disability insurer in a timely manner.

Personal Injury Settlements

Another reason that you could owe money back to your long-term disability insurer is if your disability is a result of a motor vehicle accident, slip-and-fall, or another personal injury claim, and you ultimately receive a third-party settlement.  Comparable to SSDI benefits, this type of offset is commonly found in group policies, however, the terms surrounding the offset can vary.  For example, based on the terms of the plan, the insurer may be entitled to offset most, if not all, of your personal injury settlement.  However, in other plans, the language may state that the insurer is only entitled to offset compensation that you received as a result of lost wages.  Again, when you receive a third-party settlement, it is important to inform your insurance company as soon as possible so they can efficiently calculate any overpayment you may have to pay back.  If you are able, you should hold onto the money you received from your settlement until you know the amount you will pay back to the insurer, so that you can pay them back in a timely manner.

Do I Have to Pay Back Work Earnings?

Lastly, it is sometimes possible to work and continue to receive long-term disability benefits.  If you return to work on a full-time or part-time basis and continue to meet your policy’s definition of disability or partial disability, your work earnings will also likely be an offset to your long-term disability benefits.  In most cases, you are obligated to inform the insurance company right away if you return to work.  However, if there has been a delay in notifying the insurer, or the insurer continued to pay you your full benefit without accounting for your work earnings, you will likely owe money back to the insurance company for the earnings you received during that time.

The amount of the overpayment will likely depend on the policy language and what, if any, formulas are used when calculating the offset for work earnings.  For example, your policy may have a dollar for dollar offset for work earnings.  This means that you will owe the insurance company the exact amount you received as your work earnings.  However, in some policies, your insurer may only be entitled to offset a percentage of your work earnings or use a formula to calculate how much can be offset from your benefit.  It is important to review your policy to ensure that your insurer is calculating the offset correctly as it pertains to your work earnings.  Additionally, it is important to notify your insurance company right away if you return to work, as you risk owing a larger overpayment to pay back if you delay.

Contact Chisholm Chisholm & Kilpatrick LTD

The attorneys and professionals at Chisholm Chisholm & Kilpatrick have experience dealing with different types of overpayments asserted by insurance companies.  We can help you navigate this process and ensure that the insurance company is treating you fairly and only asserting overpayments to which it is entitled under the policy.  We can also help to ensure that the insurance company’s calculations are correct and that you meet any deadlines associated with paying these benefits back.  Contact us today for a FREE consultation to see if we can assist you.