Over the last few decades of working with people who have disability insurance claims, we have seen some heavy-handed tactics used both with private policies as well as group policies. Usually, the tactics involve some significant unfairness, and the person who is filing the disability claim has no idea of the potential for abuse which can occur and often does occur.
Insurance companies are very motivated to root out fraud and prevent fraudulent claims from being filed. There are always going to be bad people out there who file fraudulent disability claims, but let's also not forget there are also bad people out there who work for insurance companies and are often pushed by supervisors to deny claims that should be paid. To deny these claims, they use, what we call, unfair, heavy-handed tactics.
The second heavy-handed tactic concerns overpayments.
What is an Overpayment?
An overpayment is when you receive more money for a month than the amount you should have been paid. The amount of your overpayment is the difference between the amount you received and the amount due.
What Are the Provisions of Overpayments?
1. An overpayment occurs if a claimant receives other benefits that offset their disability benefits.
For example, an overpayment occurs if you are receiving a disability benefit of $5,000/month, and then, you begin receiving Social Security Disability benefits in the amount of $2,500/month. In this case, an offset occurs. SSD pays you retroactively to an earlier point in time, which causes an overpayment of your disability benefit in the past. If there is a dollar for dollar offset, then you would ultimately end up owing some money back to the insurance company. This is a fair, contractual provision in the policy. You agreed upon that at the outset. Not heavy-handed.
2. An overpayment occurs if a claimant fails to report information or if there is a misstatement or a fraud on the part of the claimant.
For example, if a claimant fraudulently created documents that said they made X amount of dollars, and in fact, they did not. Those things can be easily detected at the outset by obtaining wage information from the employer directly. That's another fair provision of overpayments. Not heavy-handed.
However, there is one unfair provision of overpayments, and that is concerning when an overpayment occurs due to an error or mistake by the insurance company. They then have the right to correct that error whenever.
If the insurance company discovers they made a mistake or an error, they could contend that there is no time limit on that provision, allowing them to go back years and require you to pay back the overpaid benefit. This is heavy-handed because there are time limits on the claim decision, and insurance companies have an obligation under the policy to make decisions under those time limits. To say those time limits no longer matter if they make a mistake allows them to go back years and correct a matter.
If they do find a mistake that was their fault, that change should be made going forward, not retroactively. The policy has to be interpreted by all those provisions, including those time limits. Otherwise, it's a heavy-handed tactic.
What is an Overpayment Unit?
Insurance companies will sometimes form “overpayment units,” where a person's job at the insurance company is to review other files of insurance adjusters to try to find a mistake and assert a claim against the claimant to get the money back. Thus, making the insurance company more profitable at the expense of the claimant.
What is That in the Direct Deposit Form?
Direct deposit forms will often have a provision that allows the insurance company to access your bank account to retrieve any overpayments without your authorization or assistance from you.
That form should read that if they make a mistake putting money into your account, they will contact you to let you know that there has been a mistake and will work with you to fix that mistake. The form should also include a provision that you agree to work with them fairly and reasonably to fix that mistake.
If you have experienced this heavy-handed tactic, you need to seek the help of an experienced ERISA disability attorney.
Whether you or your client needs advice before applying or appealing for ERISA benefits such as long term disability, short term disability, life insurance, pension, or retirement, contact an experienced ERISA disability attorney at The Martin Law Group at 800-284-9309.
The information presented in this video should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. Therefore, no information of any kind that you provide us before such a relationship is created is confidential or privileged.