Can my insurance company sue me for overpayment money?

2 answers | Last updated: Oct 22, 2016
A fellow caregiver asked...

I have been receiving long-term disability from a former employer's insurance provider for about two years and was recently approved for Social Security Disability Income. I received a lump sum of retro pay from Social Security and now the insurance company wants their "overpayment" back. Problem is the money has been used to save my home, pay medical bills (COBRA has run out) and put food on the table. The insurance company is unwilling to work with me on repayment, but have subsequently stopped any future payments to me. They are threatening to turn me over to a collection agency. Can they do that or even worse, sue me, place a lien on my property, etc? Please advise. The stress of all of this certainly doesn't help with my illness.

Expert Answers

Whether you owe anything to the insurance company depends on the terms of your former employer's disability insurance policy with the company. Because employer-sponsored disability insurance is a private contract between your employer and the insurance company (not government-run like state or Social Security disability programs), that contract sets the rules. In many cases, employer-sponsored disability insurance does not pay benefits if the person also qualifies for Social Security disability insurance (SSDI) benefits. If that's the case with your former employer's disability insurance policy, then the insurance company was not obligated to pay you for any period when you received SSDI payments. If you received SSDI payments that covered a period during which you already received benefits under the employer-sponsored disability insurance policy, then that insurance company has a right to repayment.

If you owe money to the private insurance company because of such a "duplicate" payment situation, the insurance company is like any other private company to whom you owe money. In other words, the company can negotiate with you for terms of repayment, or it can send your debt to a collection agency (which, despite their reputation, are often easier to work with on a repayment schedule).

It's possible that your state has its own rules that regulate how the private disability insurance company can seek repayment of the overpayment. You may want to contact your state's department of insurance consumer protection division to find out if they can help.

Community Answers

Roaring mouse answered...

It's a shame that there's no time stamp on this article to find out how current a situation this is.

But having been through Anonymous's situation personally, ...yes you have to pay it back even if it's something no one ever identified to you. Yes, it's not fair. And yes it's not fair even when it's in tiny print and you are expected to be able to interpret legaleeze. However, before you pay get a financial advocate to make sure that their math is correct. Ours tried to overcharge us by $13,000...but we caught their errors and instead of getting no least now we are getting partial funds. The other item is that if you explain to them that they would place you in dangerous financial hardship as it sounds like might occur...they might be willing to prorate the payments expected back.

For anyone reading this after our experience I since learned that if there is the word "inclusive" in the policy then any funds brought by "anyone" into the home can be declared as income of the person with the LTD policy.

Roaring Mouse - a caregiver