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Is Your Disability Insurer Watching You?

When you file a disability claim with your insurance company requesting that it pay you monthly disability benefits, it will take all necessary steps to try to disprove your claim. If, for example, you assert that you cannot work due to sickness or injury that causes your inability to work in your occupation or any other occupation, the insurance company may try to show that this is not the case because of the activities you engage in regularly. To do that, the insurance company may engage in surveillance tactics without your knowledge to watch your daily activities.

Insurers who conduct surveillance do not automatically engage in bad-faith conduct. They have a right to protect their bottom line and shareholders by conducting reasonable investigation of claims. Nonetheless, it is important to understand what tactics the insurance company might use and how to protect your rights and your claim.

Physical Surveillance by an Investigator

Disability insurers normally hire undercover private investigators who film you during the day and night. These individuals must adhere to privacy laws, which means they cannot take videos or pictures of you at certain times and in certain locations, such as inside your home, without your permission. However, they can generally capture video and photographs of you outside or in public, and they can record their own observations about what you do and when you do it. Video surveillance is conducted mostly at and around your home and will include your travel to locations near your home when you travel away from it.

Surveillance and Invited Investigations at Your Home

Insurers often conduct surveillance of your home and sometimes they set up a visit to your home to ask you questions. If you invite this person into your home, they have access to your private areas that can be seen from the area in which you invited them. Anything they note while inside the home can be documented for use in an insurance case.

This may not seem like it is very important, but something the representative sees in or around your home while he or she is there might call into question your entire disability claim. For instance, if you are the only person who lives in the home and you have claimed that you cannot work due to physical disabilities and limited mobility, the insurance company might question why its representative saw a mountain bike that seemed recently used in your home.

Video Evidence Can Be Damning to Your Claim or It Can Assist in Proving It

Insurance companies can and often do use video evidence from surveillance as evidence against your case or claim, especially if the matter goes to court. The insurance company might try to gather video footage from traffic cameras or other sources that show you doing things that seem to indicate you would have no trouble working or that your disability or injury is not as serious as you claim. In some cases, insurance companies might try to subpoena video evidence from other cameras, including personal cell phones.

Social Media Investigations

If you use or own social media accounts, these can and will be investigated by your disability insurer to determine if anything you post (whether written or photographic) is inconsistent with your disability claim and the representations you make about your claim. Your own Facebook, Instagram, X, or TikTok account could give your insurance company evidence they might use against you. Some insurance companies engage in social media investigations, which means they hire trained professionals to monitor your accounts.

This is an important consideration, as you must be careful what you share online. You cannot just ensure you keep your photographs and other information to “friends only,” either, as nothing on the internet is completely private.

Consider a hypothetical case where a disability claimant is dealing with extreme back pain and cannot work. However, through the use of medication, days of rest before and after, and help from others, she is able to attend an important family event, where she is seen walking, bending and sitting without any noticeable pain. A disability insurer might try to use pictures and videos to deny your claim, though the pictures do not tell the entire story of what those few hours might have cost the individual after the event is over.

If you use social media platforms, you may also want to select settings that keep people from tagging you in pictures and posts. This helps reduce the chance that others might add information or images to your profile that are damaging to your case. McKennon Law Group PC believes that these types of investigations are so important that it provides all of its disability clients with a Social Media Questionnaire and Warnings document they are required to complete.

Background Checks and General Research

Insurance companies also conduct background checks and research into your life before and after any injury or disability. Investigators may look for information about your previous jobs, where you have lived in the past, who you have lived with, and what your interests and hobbies are. All of this information can inform the rest of their research or the strategy they take in surveilling you in the future.

For example, if background research shows that someone was an avid hunter or hiker, investigators may be on the lookout for evidence that the individual is engaging in these activities despite their claimed disability.

How a Disability Lawyer Can Help

Knowing that an insurance company or investigator might be watching you—literally and figuratively—can be stressful. That is a stress you certainly do not need to pile on in an already stressful time, but it is important to understand what actions might weaken your case and how to protect your rights, privacy, and case.

An experienced disability attorney can help with all of that. At McKennon Law Group, PC, we work hard to protect our clients from bad-faith insurance actions. We also provide guidance throughout your claim and case process so you can live more confidently knowing you are working in the best interests of your case.

Most employee benefits are governed by a federal law called the Employee Retirement Income Security Act of 1974 (“ERISA”), including life insurance, disability insurance, accidental death insurance, health insurance, pensions, and other benefits offered by employers to their employees through their employee benefit plans. Sometimes the plan’s sponsor (which is usually the employer), plan’s administrator, and/or an insurance company (if the plan’s benefits are funded by an insurance policy), mistakenly charge, deduct from the employee’s paycheck, and accept his premiums for insurance of which he or his family is ineligible under the plan’s terms. This can lead to dire financial results if the employee relies to his detriment on the fiduciary’s mistake.

For example, a prevalent practice exists in the group life insurance industry where the employers charge, and the insurers accept, premiums from their plan participants without verifying their eligibility for the coverage (until after the participant dies and his or her beneficiary makes a claim). Then, the insurer investigates the claim and sometimes determines that the employee had been paying premiums, often for years, for coverage for which he or his family members were ineligible. The insurer thus denies the claim based on ineligibility, and it returns the employee’s mistakenly collected insurance premiums without paying the valuable life insurance claim. The glaring problem in this all-too-common scenario is that, by then, it is too late for the employee to secure alternate life insurance coverage. His loved one is already dead. The Department of Labor recently condemned “This egregious practice” because it “left grieving families without the life insurance for which their loved ones had paid.” It vowed to “take appropriate action against any insurance company that collects regular premium payments from plan participants, and later plays a game of ‘gotcha’ to wrongfully deny benefits based on technicalities like ‘insurability’ after the participant passes away.” See DOL News Release, 4/19/23, found at https://www.dol.gov/newsroom/releases/ebsa/ebsa20230419.

The Department of Labor’s policy statement begs the question: Is an ERISA plan sponsor (employer) or administrator liable when they mistakenly collect premiums from an ineligible plan participant? That is a complicated question under ERISA fiduciary duty law. Until the very recent decision from the Ninth Circuit Court of Appeals in Keith McIver v. Metropolitan Life Insurance Company, et al., No. 23-55306, 2024 WL 4144075 (9th Cir. Sept. 11, 2024), the answer was unclear. The courts had usually found that when an ERISA plan entity made a mistake in calculating and collecting premiums due, without more, it engaged in a “ministerial” function, not a fiduciary one, because no discretion or judgment was required. So held the Ninth Circuit of Appeals in Bafford v. Northrup Grumman Corp., 994 F.3d 1020 (9th Cir. 2021), but in a slightly different context (pension benefit calculation errors). Going forward, however, the answer is a resounding yes in certain circumstances. That is, thanks to the McIver decision, employers, plan sponsors, and plan administrators who mistakenly collect premiums from an employee perform a fiduciary function and breach fiduciary duties if: (1) The plan documents ascribe to them the duty to make eligibility decisions (or those duties are delegated to them and they perform them in practice); (2) They fail to investigate the plan participant’s eligibility within a reasonable time of accepting his premiums; and (3) When a dependent participant that was once eligible becomes ineligible based on her divorce (or other dependent status change), the employee must provide sufficient notice of their divorce in accord with the plan documents to trigger the employer’s, sponsor’s, and administrator’s fiduciary duties.

In McIver, the McKennon Law Group PC obtained a favorable decision for one of its ERISA plan life insurance clients. The Ninth Circuit clarified and drastically expanded the scope of ERISA plan sponsor’s/employer’s and administrator’s fiduciary duty liability in these ways, i.e., when they mistakenly collect dependent life insurance premiums for an ineligible plan participant. It did so without any representation by the plan sponsor, administrator, or insurer to the employee or his family that their dependent life insurance coverage was in place (besides their continued premium deductions after notice of divorce). That is a fair result because ERISA plan sponsors/employers, administrators, and insurers are often fiduciaries of plan participants and their beneficiaries. As fiduciaries, they have a duty to act solely in the interest of the plan’s participants and beneficiaries for the exclusive purpose of providing them their benefits, and with care, skill, prudence, and diligence. See 29 U.S.C. § 1104(a)(1). That duty includes a duty to investigate suspicions that one has concerning the plan. See McIver, 2024 WL 4144075, at * 2, citing Barker v. Am. Mobile Power Corp., 64 F.3d 1397, 1403 (9th Cir. 1995). With these very high duties of loyalty and prudence and to investigate suspicions, why would a court allow a plan sponsor or administrator to mistakenly collect premiums for an ineligible plan participant (like a former dependent of the employee in McIver’s case), without investigating her eligibility within a reasonable time of accepting the premiums, and after receiving notice of the employee’s divorce from his former spouse, to the employee’s financial detriment with no consequence (especially because an employee’s divorce for most ERISA plans makes his former spouse ineligible for ongoing dependent life insurance coverage because she is no longer a dependent).

McIver is significant because it changed the landscape of ERISA fiduciary duty law on these types of issues in a favorable way for ERISA plan participants. Our client, Keith McIver (“Keith”), worked for The Boeing Company for 31 years. Early on, he enrolled in Boeing’s group ERISA life insurance plan. As a Boeing employee, he was eligible to obtain life insurance for himself and his dependents, including his legal spouse, Bonnie McIver (“Bonnie”). He enrolled and paid Boeing insurance premiums for decades to cover him and his then wife. Boeing deducted dependent premiums from his paycheck biweekly for many years before he divorced, and for several months after he divorced. Unknown to him, Bonnie’s insurance terminated when they divorced because, under the life insurance plan’s terms, only his “legal spouse” qualified for Boeing’s dependent life insurance coverage, not an ex-wife. However, because Boeing continued to deduct the premiums from his paycheck for 11 months after he notified Boeing and its plan administrator, Employee Benefits Plan Committee (“EBPC”), of his divorce, he mistakenly thought Bonnie was still covered. He thought Boeing would stop accepting his premiums if his ex-wife was not entitled to the coverage.

Boeing, and the insurance company that funded the plan’s benefits, Metropolitan Life Insurance Company (“MetLife”), did not investigate Bonnie’s ongoing eligibility for the insurance until several months after Keith had notified Boeing and EBPC of their divorce. They waited for several months to investigate her continued eligibility, until after she died, and after he had made a claim for dependent life insurance benefits. In the interim, Boeing continued to charge and deduct his premiums for the dependent coverage (incorrectly). Then, when it was too late for Keith to obtain alternative life insurance on Bonnie, after she had died, MetLife told Keith that Bonnie’s coverage had ended when they divorced and, therefore, MetLife would not pay his dependent life insurance claim as her beneficiary.

McKennon Law Group PC filed a lawsuit against Boeing and EBPC for breach of fiduciary duty on Keith’s behalf. We alleged in the lawsuit that they owed our client fiduciary duties of prudence and loyalty and to investigate his ex-wife’s continued, post-divorce eligibility (within a reasonably proximate time after Boeing took his premiums for the dependent coverage and he notified them of his divorce). That Boeing and EBPC breached these fiduciary duties when Boeing, after our client notified both of them of his divorce, continued to charge and collect premiums from him for several months for his ex-wife’s dependent life insurance coverage, that had terminated on divorce, without timely investigating her eligibility. That because EBPC had broad duties assigned to it under the group life insurance plan documents to make eligibility decisions (which EBPC assigned to Boeing), including after a marital status change, they had a duty to prudently and timely investigate her continued eligibility, reasonably proximate to the time that they received notice of his divorce and took his post-divorce notice premiums. But Boeing and EBPC did not timely investigate or decide Bonnie’s ongoing eligibility (despite these plan duties), after Keith notified them of his divorce in accord with the plan documents. Instead, Boeing mistakenly charged him dependent premiums for several months without investigating whether Bonnie was still eligible (when she was not eligible), in breach of the Boeing defendants’ fiduciary duties of prudence, loyalty, and to investigate her continued eligibility.

Boeing and EBPC filed a motion to dismiss the lawsuit. They argued that they did not owe or breach any fiduciary duties to Keith (by mistakenly collecting his dependent life insurance premiums). Specifically, that Boeing performed a ministerial not fiduciary function that involved no judgment or discretion when its payroll department mistakenly collected his premiums for coverage for which he had enrolled. We opposed Boeing’s and EBPC’s motion to dismiss, but the federal district court granted it and dismissed the case with prejudice. The court (and the Boeing defendants) incorrectly relied on the Ninth Circuit Court of Appeals’ decision in Bafford, 994 F.3d 1020. Bafford held that an ERISA plan benefit calculation mistake that involves no discretion is not a fiduciary function. The court analogized the Boeing payroll department’s conduct to Bafford. It held that the Boeing defendants did not use any discretion when Boeing mistakenly charged Keith premiums for Bonnie’s dependent coverage and, therefore, did not owe or breach any fiduciary duties to him. That collecting his post-divorce notice premiums was just a ministerial mistake, not a fiduciary function.

We appealed the adverse trial court’s decision to the Ninth Circuit on Keith’s behalf, and we won the appeal. The employer Boeing and its plan administrator EBPC again argued that Bafford controlled the outcome of the case because their error in collecting premiums was a ministerial mistake. The Ninth Circuit rejected this argument, emphasizing that because Boeing and EBPC had assigned or delegated duties under the plan to determine eligibility, and because Keith sent them his Qualified Domestic Relations Order (“QDRO”) that stated he was divorced, they performed fiduciary functions and breached fiduciary duties when they mistakenly collected Keith’s premiums for his dependent Bonnie’s coverage (without first investigating and deciding her continued eligibility within a reasonable time after they received his post-divorce notice premiums). The court clarified that Bafford did not apply to Keith’s case, and it held that the operative Complaint plausibly alleged that the employer and plan administrator performed fiduciary functions and breached fiduciary duties under these circumstances.

In short, the Ninth Circuit agreed with Keith’s position that it just is not fair for an ERISA plan entity, who has duties assigned to it in the plan documents to decide eligibility, to mistakenly collect insurance premiums from an ineligible plan participant without timely deciding whether or not she is eligible. That an employer, sponsor, or administrator of a group life insurance plan with plan eligibility decision duties cannot continue to charge premiums for dependent life insurance coverage (that had terminated on divorce), for months after they received notice of the divorce, without making an eligibility decision. The appellate court agreed that such plan fiduciaries act inequitably and breach fiduciary duties of prudence, loyalty, and to timely investigate when they wait to decide eligibility until after the insured dies and the beneficiary makes a claim for her life insurance benefits. And only then say, when it is too late to secure alternate life insurance, “sorry,” you don’t have the coverage that you have been paying premiums to us for months. But here are your ill-gotten premiums back.

The appellate court reversed the district court’s Federal Rules of Civil Procedure 12(b)(6) dismissal of the case and remanded it back to that court to decide at trial whether Keith can prove the allegations he made in his operative Complaint. Specifically, the Ninth Circuit Court of Appeals found:

If the facts alleged in the Second Amended Complaint are true, Boeing and EBPC performed fiduciary functions when they continued to charge, deduct, and collect dependent life insurance premiums from Keith after they received notice via his QDRO stating that he was divorced.

If the facts alleged in the Second Amended Complaint are true, Boeing and EBPC breached fiduciary duties owed to Keith by failing to investigate Bonnie’s ongoing eligibility for dependent life insurance coverage after he submitted, and they received, notice via the QDRO stating that they were divorced.

Therefore, Keith’s Second Amended Complaint allegations are sufficient to defeat Boeing’s and EBPC’s motion to dismiss Keith’s breach of fiduciary duty claim against them. And, therefore, the appellate court reversed the district court’s decision to dismiss them from the lawsuit.

Key Take Away

The Ninth Circuit McIver Court clarified and expanded ERISA plan participant’s rights, as well as employer’s, plan sponsor’s, and plan administrator’s fiduciary duties (which will also apply to group life insurers under the correct circumstances), particularly in the context of premium collection errors for dependent life insurance after notice of a divorce. ERISA fiduciary duty law is quite complex. Whether an employer, plan sponsor, plan administrator, or insurer performed a fiduciary function in a specific case requires careful analysis by an expert.

Many cases address the critical issues surrounding the denial of long-term disability (LTD) benefits under the Employee Retirement Income Security Act of 1974 (ERISA), and many explore the procedural and substantive requirements that insurers must follow when adjudicating disability claims, including the necessity for thorough and transparent explanations for claim denials. One such case is Halleron v. Reliance Standard Life Ins. Co., 2024 WL 3585139 (W.D. Ky. July 30, 2024). This case also examines the administrative remedies claimants must exhaust before seeking judicial review, and the circumstances under which a court may find that such remedies have been effectively exhausted even without an appeal. The broader implications of this case highlight the importance of understanding one’s rights and the legal standards governing disability benefits.

Dr. Halleron, a physician, performed physical exams, met and interacted with patients, providers, and pharmacies, and was involved in establishing and following procedures and protocols for her practice. Unfortunately, she was diagnosed with POTS — postural orthostatic tachycardia syndrome. The symptoms of POTS – dizziness, fatigue, joint pain, and syncope — rendered Dr. Halleron unable to perform her job, so she stopped working and submitted a claim for disability benefits to her disability insurer, Reliance Standard Life Insurance Company. Dr. Halleron’s short-term disability (“STD”) claim was denied based on POTS being a pre-existing condition; however, Dr. Halleron also made a claim for LTD benefits, which was not barred by a pre-existing condition exclusion.

Matrix reviewed Dr. Halleron’s LTD claim and denied it because she did not meet the policy definition of “Totally Disabled.” Matrix’s denial was brief and lacked detail about how Dr. Halleron failed to meet the policy standard for disability. Dr. Halleron sued Matrix. Matrix argued that the suit should be dismissed because Dr. Halleron failed to exhaust administrative remedies, as she did not appeal Matrix’s initial LTD claim denial.

The District Court in Kentucky considered whether Dr. Halleron exhausted her administrative remedies without appealing Matrix’s denial of her LTD claim. The court determined that Dr. Halleron exhausted her administrative remedies without submitting an appeal. The court found that Matrix’s determination notice did not strictly comply with ERISA claims regulations; specifically, the determination did not discuss the decision and explain any disagreement with or choice not to follow the view of the claimant’s treating physician.

The court reasoned that Matrix’s denial letter did not address the assessment of Dr. Halleron’s condition by her treating physician or that physician’s conclusion that Dr. Halleron would require disability benefits and work modifications for the rest of her life. Matrix’s denial was substantively merely one paragraph and did not provide a sufficient analysis of Dr. Halleron’s medical records as required by ERISA. The court explained that:

The claims regulations, inter alia, require adverse benefit determination notices to discuss the decision and explain any disagreement with or choice not to follow the views of the claimant’s treating physician. 29 C.F .R. § 2560. 503-1(g)(1)(vii)(A) (i). Matrix’s determination that Dr. Halleron is not disabled did not address Dr. Perrotta’s assessment of Dr. Halleron’s condition or her conclusion that Dr. Halleron required disability benefits and work modifications for the rest of her life. (LTD Admin. R. 93-94). Accordingly, ERISA regulations deem Dr. Halleron’s administrative remedies exhausted and allow Dr. Halleron immediate access to judicial review. (Emphasis added).

The court also concluded that both the STD and LTD denials were arbitrary and capricious because they were not the product of a deliberate, principled reasoning process. The court cited the Sixth Circuit’s opinion in Elliott v. Metropolitan Life Insurance Co., 473 F.3d 613, 617 (6th Cir. 2006), which held that a reasoned judgment about a claimant’s capability must rely on medical evidence that assesses the claimant’s physical ability to perform job-related tasks and because Matrix merely concluded that POTS was a pre-existing condition without explanation.

Based on these findings, the court remanded Dr. Halleron’s claim back to Matrix to perform a full and fair review of bother her STD and LTD claims as required by ERISA.

The court’s determination in this case highlights the importance of understanding the claims process and your rights as a claimant. Whereas Matrix attempted to brush off Dr. Halleron’s claims without providing sufficient analysis or explanation, Dr. Halleron did not accept Matix’s improper denials, but found legal counsel and asserted her rights under ERISA. Specifically, while a claims administrator or insurer may try to convince a claimant that she is not entitled to disability benefits, the claimant should not take such determinations at face value. ERISA requires claimants to exhaust administrative remedies, but in a case like this where the insurer or administrator does not provide enough information for the claimant to understand what is required for a successful appeal, the claimant may have a successful argument that the case is ripe for litigation even without going through the administrative motions of submitting such an uninformed appeal.

Dealing with a hostile work environment is a daunting experience that can impact a person’s mental and physical health. When the stress and strain of such an environment cause a disability, it is crucial to understand how the hostile work environment can affect a claim for disability benefits.

What is a Hostile Work Environment?

Unwelcome conduct from colleagues, supervisors, or even clients that is severe or pervasive enough to create an intimidating, hostile, or abusive working atmosphere characterizes a hostile work environment. This can include harassment, discrimination, bullying, and other forms of mistreatment. To be legally actionable, the behavior must be discriminatory, meaning that it is based on race, gender, religion, age, disability, or other protected characteristics.

Impact of a Hostile Work Environment on Mental Health

A hostile work environment can profoundly affect a person’s mental health. Prolonged exposure to such negative conditions can lead to anxiety, depression, post-traumatic stress disorder (PTSD), and other mental health issues. These conditions can severely impair a person’s ability to perform his job, which may make it necessary to take medical leave from work or to make a claim for disability benefits.

Disability Claims Involving a Hostile Work Environment

One may assume that if a hostile work environment renders a person unable to perform their job, they should file a claim for disability benefits. However, it is important to understand that many policies will not pay disability benefits where the disability is because of workplace issues, including a hostile work environment. These policies will use language that defines an occupation based on the “national economy. The analysis determines if a person can perform that occupation, as it is performed in a national economy, without a hostile work environment, to define their disability according to the policy.

For example, if you manage a shipping/receiving warehouse and you can no longer work there because you are harassed by other employees in the warehouse, if your group disability policy defines “occupation” as one performed in the national economy, your claim will likely be denied because while you may be unable to work in that particular warehouse, you are not disabled from working in another shipping/receiving warehouse with different personnel and a different environment. The theory is that while you may not be able to work in one warehouse, you can find a new job at a different warehouse where there is no hostile work environment; if you are truly “disabled” under the policy, you would not be able to perform at any warehouse because your disability is caused by your medical condition, rather than to your work environment.

Where a policy does not contain “national economy” language, the analysis done to determine whether benefits are payable is likely a more straightforward question of whether the claimant is able to perform his occupation as defined locally. Thus, in the above example, if you cannot continue working in your specific occupation as a shipping/receiving manager for your particular employer, your disability claim should not be denied for that reason (note that your claim may still be denied for many other reasons).

Medical Evidence and Documentation

If you believe that you have a covered disability claim, medical evidence is the cornerstone of any disability benefits claim. To substantiate your disability claim, you will need to provide medical records evidencing the condition on which your claim is based. Therefore, it is crucial to understand that if you have discussed issues at work with any of your doctors, the insurance company might deny your claim based on those workplace issues. Just as insurance companies will “cherry-pick” medical evidence and focus only on evidence that do not support a claim, despite the evidence taken as a whole in fact supporting the claim, they will also focus on any mention of issues with a workplace or co-workers, even if the evidence taken as a whole demonstrates that a disabling condition is not caused by workplace issues.

It is thus vital to know the contents of your medical records. The insurance company could spin even something as seemingly innocuous as “I have a difficult co-worker” to mean that your difficulties with a particular co-worker are causing your inability to perform your occupation.

Taking Legal Action Beyond a Disability Claim

Many people who experience a hostile work environment and have become unable to work initially take the position that they should make a claim for disability benefits under an insurance policy and should also file a lawsuit against the employer for harassment or similar claims. However, this approach may be a recipe for failure of your disability claim.

For example, assume your insurance company denied your disability claim and appeal, so you file a lawsuit to recover disability benefits due you under the policy. By claiming in a lawsuit to be entitled to disability benefits, you are inherently claiming that if not for your disabling condition, you would otherwise be able to continue working. Assume further that you had consulted with an employment attorney and file a lawsuit for damages based on a hostile work environment. By making such a claim, you are inherently taking the position that if not for the hostile work environment, you would be able to continue working at your job.

This can create a conflict that causes both of your lawsuits to fail: the insurance company will point to your employment-based lawsuit and take the position that because you are claiming that without the hostile work environment, you would be able to work – and you must therefore not be disabled from working due to your medical condition. Meanwhile, your employer will point to your disability claim in order to downplay the hostile work environment claim, and take the position that based on your disability claim, you must have stopped working because of your disability and not because of a hostile work environment.

This could result in both of your lawsuits getting dismissed, leaving you with no way to recover your disability benefits or damages.

Conclusion

A hostile work environment can negatively affect your ability to perform your job. Being unable to perform your job can have devastating effects on every aspect of your life and could lead to a need for your to make a claim for disability benefits. In such a situation, it is crucial to understand completely how your potential claims may impact one another. If you or someone you know has become disabled and needs to submit a claim for disability benefits or navigate these issues, reach out to McKennon Law Group PC now for a free consultation.

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.

Insurance companies regularly review the ongoing medical care of their recipients of long-term disability benefits to find evidence of improved health and functional capacity that allows the recipients to return to gainful employment. The insurers look for any signs of discontinued medical care, lack of consistent medication regime, and the slightest improvement in overall health to claim that return to work is warranted. Sometimes, the insurers will even change the method they evaluate a claim and reverse their prior determination of eligibility of benefits based on the same information contained in the recipients’ administrative record.

In the recent case of Iravani v. Unum Life Insurance Company of America, 692 F. Supp. 3d 904 (N.D. Cal. 2023), the Plaintiff suffered from degenerative spinal disease, ongoing migraines, neck pain, and back pain that rendered her incapable to perform the daily tasks of her job. After payments for over a decade, Unum discontinued Plaintiff’s long-term disability benefits. Plaintiff sued Unum for denying her long-term disability claim.

The parties agreed that the “de novo” standard of review applied, under which “the court does not give deference to the claim administrator’s decision, but rather determined in the first instance if the claimant has adequately established that he or she is disabled under the terms of the plan.” Muniz v. Amec Const. Mgmt., Inc., 623 F. 3d 1290, 1295-96 (9th Cir. 2010)

The Plaintiff worked as a cosmetic beauty specialist at Saks Fifth Avenue until June 2010 when she stopped working and submitted a claim for disability benefits under a group insurance long-term disability policy issued by Unum. Plaintiff indicated that she was unable to continue working because of neck pain and migraine headaches. Unum approved her claim and started paying her long-term benefits while requesting updated information from Plaintiff and her doctors annually.

Suddenly, on January 7, 2021, Unum terminated Plaintiff’s benefits with the explanation that Plaintiff could “perform the duties of alternate gainful occupations,” so she was no longer considered disabled. Specifically, Unum contended, “based on the totality of the medical evidence in the file, including the infrequency and the lack of intensity in treatment, that Plaintiff could perform “full-time sedentary or light physical demands”, including occupations such as “Information Sales Representative,” “Hotel Sales Representative,” and “Personnel Scheduler.”

Unum retained two physicians to conduct reviews of the medical file and a new vocational expert, who evaluated Plaintiff’s prior work experience. Unum’s experts provided “paper review” opinions that Plaintiff was no longer eligible for long-term disability benefits and could return to work in job occupations requiring far greater skills than Plaintiff possessed based on her work experience. To justify benefits termination, Unum pointed out that Plaintiff had not had any recent imaging studies, received decreased medical treatment over time for her low back and neck pain, and that she controlled her pain with only over-the-counter medications.

Unum did not perform an independent medical examination of Plaintiff to determine the reasons behind her decreased medical care and changes in the medication regime. Contrary to Unum’s conclusions, Plaintiff’s medical condition never improved. However, Plaintiff had a gap in health insurance coverage that explained her lack of doctors’ visits. She also received marginal benefits over the years from strong pain relief medications and steroid injections which lead her to treat her ongoing disability with conservative measures pursuant to her doctors’ recommendations.

The administrative record showed that Plaintiff received extensive medical care during the years of her disability. Since 2010, Plaintiff received ongoing medical treatments and underwent multiple medical tests. Plaintiff’s 2010 MRI of her cervical spine showed “disc degenerative changes and straightening of the cervical spine” that resulted in the diagnosis of cervicalgia, bilateral upper extremity C6 radiculopathy, cervical spondylosis at C5-C6 and C6-C7, and cervical spinal stenosis at C5-C6, and C6-C7. Plaintiff’s medical treatment plan involved steroid injections, physical therapy sessions, at-home exercise plan, chiropractic sessions, general rest, and the medications of Maxalt and Ibuprofen.

As soon as 2011, Plaintiff’s chiropractor identified restrictions in Plaintiff’s ability to sit, stand, and walk, and diagnosed her with cervical disc syndrome, radicular neuralgia, cervical sprain, thoracic sprain/strain, lumbar sprain/strain, and segmental dysfunction along her spine. The chiropractor concluded that “Plaintiff could only return to work with significant accommodations: no more that 4-6 hours of work per day; no lifting, pushing, or pulling over 5-8 pounds; no bending, stooping, or climbing more that 8-10 times per hour; no squatting or kneeling; and no firm grasping or repeated use of hands.”

Based on the Plaintiff’s diagnoses and work restrictions in 2011, Unum granted Plaintiff’s request for disability benefits. During the next 10 years, Unum performed regular reviews of Plaintiff’s medical records and ongoing medical treatment of her disability. Plaintiff continued to visit her regular physicians and continued taking medications. She received chiropractic care that only provided her with temporary benefits according to her medical files. Unum’s own claim analyst, who performed a review in 2017, concluded that Plaintiff’s “diagnosis and symptoms have not gotten any better in the past year and remained consistent with no improvement in functional capacity.”

Bolstering Plaintiff’s arguments for long-term disability benefits, Plaintiff applied for social security and her case was evaluated by an administrative law judge. In 2018, after a hearing, an administrative law judge found Plaintiff’s medical complaints credible and well supported by the medical evidence. The judge determined that Plaintiff was entitled to social security disability benefits.

Despite the presence of overwhelming medical evidence of Plaintiff’s continued disability and work restrictions, Unum terminated her benefits based on flawed “paper reviews” by Unum’s in-house physicians. In 2020, Dr. Stewart Russell, M.D., without examining Plaintiff, opined that “he did not believe any functional restrictions were warranted based on Plaintiff’s medical records”, and “Plaintiff was only taking Tylenol, which he believed was insufficient to support a finding that her migraines caused any impairments.” A second Unum’s medical officer, James Lewis. M.D, who reviewed Plaintiff’s medical file without examining her, agreed with Dr. Russell’s opinion. Neither of Unum’s in-house physicians addressed Plaintiff’s ongoing medical treatment in the past 10 years, her specific diagnosis, and limitations that administrative Judge Flanagan found based on the medical records, and Plaintiff’s own physicians’ diagnosis and recommendations for treatment. Unum did not interview Plaintiff or any of her medical providers.

Additionally, in 2020, Unum hired a new vocational expert to review Plaintiff’s employment history of a cosmetic beauty specialist selling beauty products, and to provide an opinion of whether Plaintiff had the skills for alternative sedentary occupations that would provide a gainful wage. In contrast to two prior vocational experts’ opinions, Unum’s new expert applied a completely different standard of evaluation to Plaintiff’s file and concluded that Plaintiff had a “supervisory and managerial experience.” Unum argued that it reconsidered its interpretation of Plaintiff’s vocational history and overlooked her significant managerial and supervisory experience.

Despite Unum’s extraordinary efforts to rewrite history by claiming that Plaintiff was miraculously cured from a serious degenerative disease based on conservative medical treatment, and that Plaintiff had managerial experience, Judge Haywood S. Gilliam of the Northern District of California rendered judgment for the Plaintiff and ordered Unum to continue paying long-term disability benefits.

On September 15, 2023, Judge Gilliam concluded that Plaintiff provided sufficient evidence to establish disability and that she was entitled to continued benefits. In his decision, Judge Gilliam provided the following reasons for his ruling: 1) There is no evidence that any of Plaintiff’s treating physicians ever concluded that Plaintiff’s back or neck pain improved, and have consistently found that Plaintiff’s pain stems from degenerative spinal problems; 2) Since 2010, seven different physicians have diagnosed Plaintiff with cervical and lumbar radiculopathies and spinal stenosis; 3) Throughout the time Unum paid Plaintiff’s benefits-and agreed that she was disabled- Plaintiff’s treatment was conservative, and Plaintiff’s doctors expressly recommended conservative treatment as appropriate for her condition; 4) Unum’s conclusion that Plaintiff had the kind of high-level management skills that would be transferable to a job outside of the retail sale of cosmetics is not supported by the record.

Based on the Court’s ruling in this case, the California district courts will support future disability recipients’ arguments that the lack of more intense treatment of a medical condition does not necessarily mean that the condition has meaningfully improved. If insurers attempt to claim that decreased medical treatment and decreased medications regime translate somehow in curing the medical condition giving rise to the disability, their arguments better be supported by experts’ opinions, preferably who have personally examined the claimant, and based on credible medical evidence in the administrative record. Otherwise, the Courts will give deference to the diagnosis and treatments by the claimant’s personal treating physicians, who are in a far better position to evaluate the claimant’s health and improvement. Moreover, the insurers must avoid the pitfall performing vocational evaluations that attribute skills to a claimant that do not exist based on a claimant’s job experience. We have found that disability insurers regularly mischaracterize job skills in order to reach a conclusion that other occupations exist which a claimant can perform when they evaluate whether a claimant can perform “any occupation” under a disability policy. Hiring the right disability insurance attorney to find disability insurer’s errors can make all of the difference between winning or losing your case.

What Surveillance/Investigation Tactics to Expect From Disability Insurers