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Insurance Companies Have Limited Options in Forcing You to Pay Back Long-Term Disability Benefits if your Claim is Later Denied

This is the worst. It happens when you are receiving disability benefits and the insurance company pays you in advance – say, they’ll send you a check on March 15 to cover the period March 1-31. Then, sometime in early April, you get a denial letter. The letter says your claim was reviewed, the insurance company “found” jobs you could do (or they think you can go back to your regular job) and your claim has been closed as of, say, March 16. And, oh by the way, you owe them for what they already paid you for March 17-31. This doesn’t happen often, but when it does it can be devastating. Disability payments are only a fraction of your salary to begin with. At the same time you learn you’ll lose even these benefits, you get hit with a sizable “over-payment” bill. Now what??

How We Can Help

Call us. We’ll review your denial letter for free, and we can usually tell just from that whether the insurance company is right or wrong about their claimed overpayment. Often, though, they are technically correct – they can ask for that money back. What happens next depends on your unique situation. If we are handling your appeal, we can write a letter to the insurance company, letting them know we are appealing the denial, and asking them to hold off on collecting the overpayment until the appeal is complete. This is usually effective and can save you from having to make a repayment (or deal with calls from a collections agency) during what is already a stressful time.

Your appeal normally must be submitted within 180 days of receiving your denial letter or your claim is closed permanently, so don’t let the fear of that overpayment paralyze you. It’s free for us to review your denial letter. If we manage your appeal, there are steps we can take immediately to help negotiate with the insurance company.

Fortunately, this situation is uncommon. Most claim terminations are effective as of the date of the letter, so your claim is closed but not overpaid. This small comfort, though, if you are one of the uncommon ones looking at that overpayment letter. The law does not prevent this, but you can consult with an attorney who knows how to use the law to your advantage. Getting started is easy, and we are happy to help.

Each case is different and must be independently analyzed, but there is an important case from the United States Supreme Court that bears on this issue.  In Montanile v. Bd. of Trustees of Nat. Elevator Indus. Health Benefit Plan,  a matter involving an ERISA health benefit plan’s attempt to recover money from the claimant's car accident case settlement. The court said that when an ERISA claimant completely spends a car accident settlement on "non-traceable" items like food or travel,  the insurance company cannot recover its claimed overpayment.

If this situation has happened to you, then the facts of your case would have to be analyzed and cases since 2016, the year Montanile was decided, would have to be reviewed. Our message is: don't just take the insurance company's word for it!

Call us at 703-591-9829 or send your denial letter to [email protected] and we’ll guide you from there.

Ben Glass
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Ben Glass is a nationally recognized ERISA disability & life insurance attorney in Fairfax, VA.