Can Your Disability Insurance Take Back Payments It Makes to You?

When you are facing a short-term or long-term disability that impacts your ability to work or increases medical bills and other expenses, disability insurance payments can be a critical part of managing day-to-day finances. When an insurance company stops making those payments, it might cause serious duress and money problems. That is even more true if an insurance company decides to take back disability payments it has already made by asserting an overpayment.

While there are some scenarios where a group or individual disability insurer may be able to seek the recovery of payments it has made, it is important to be aware of the potential for bad-faith insurance actions. An experienced disability insurance lawyer can help you understand if your insurance company is seeking funds it does not have a right to and how you can challenge that recovery.

When Disability Insurance Companies May Be Able to Recover Payments

While this list is not exhaustive, it covers six of the most common scenarios that might allow private disability insurance providers to recover payments made to policyholders.

1. Misrepresentation by the Policyholder

If an insurance company can show that the policyholder misrepresented facts on an insurance application or when requesting a payout under the policy, it may be able to require the funds to be paid back.

Policyholder misrepresentation can include, but is not limited to, not including pertinent medical history on an insurance application, being dishonest about the type of work you do when applying (if relevant to the application), or overinflating health issues to better support a disability claim.

2. Benefits Duplication Given Multiple Payment Sources

In some cases, you might receive disability payments from more than one source. You could have multiple group or individual disability insurance policies or receive payments from federal or state disability insurance benefits programs. Many disability insurance policies have language that allows the insurance company to offset required payments by amounts you receive from other benefits programs. For example, most group or individual disability insurance policies allow the insurance company to deduct the amount you receive from Social Security Disability Insurance.

However, the wheels can move slowly when it comes to insurance payment processing. You might begin to receive benefits from another program while still receiving the total benefits from your group or individual policy. If you do not report your new benefits in a timely manner or the group or individual insurance company does not process the change in a timely manner, you may be overpaid for a few months. In such cases, the insurance company might offset future payments to recoup what it should not have paid in the first place once updated payment information is calculated.

3. Administrative Errors on the Part of the Insurance Company

Sometimes, overpayments occur because the insurance company made an error. A typo, the wrong selection in a benefits drop-down menu, and untimely processing of paperwork are just a few errors that might lead to you receiving disability payments you were not supposed to receive under your policy. If this occurs, the insurance company may have some right to request you pay back those funds. They might also be able to offset future payments to recover payments they should not have made.

4. New Changes in Law or Policy That Are Retroactive

In rarer cases, changes in laws or policies might enable insurance companies to seek repayment of funds. However, this usually is only the case when the changes are retroactive, which means they impact payments that were already made.

5. Change in Disability Status

If the insurance company can demonstrate that you had a change in disability status that makes you ineligible for payments, they may be able to seek recovery of those payments back to the point in time that the status change is believed to have occurred. To do this, the insurance company will need to present compelling evidence that your status has changed.

6. A Qualifying Return to Work

If you have returned to full-time work or part-time work as defined by your disability insurance policy, your benefits might end. If you return to work and do not notify your insurance company in a timely manner, you may receive funds you will need to pay back because they are not supported under your policy.

Talk to a Disability Lawyer About Your Situation

If your group or individual disability insurance company is seeking to recover payments it has made to you and you believe this is in error or your insurance company is acting in bad faith, talk to a lawyer about your case. Your attorney can help you understand the details of your policy and how they apply to your case. They can also help you challenge the insurance company if possible.

For example, if an insurance company is claiming that you had a change in disability status that means you are no longer eligible for payments, a lawyer may be able to help demonstrate this is not the case. Your attorney will gather evidence such as medical records, work history, and witness testimony to help show that you still qualify for the benefits and force the insurance company to comply with its own policies.

For help with disability insurance cases, contact the McKennon Law Group, PC, by calling 949-504-5381.