Can a disabled person be forced to repay miscalculated benefits?

Just weeks ago the U.S. Court of Appeals handed down a decision regarding an alleged miscalculation of disability benefits. The lawsuit was filed under the Employee Retirement Income Security Act (ERISA) and the decision addresses how short-term (STD) and long-term disability (LTD) benefits are calculated.

The story

A man suffered a disabling injury at his workplace a few years ago and received STD benefits for 12 weeks. These benefits were calculated based on his "average gross weekly earnings" - his actual income based on the year prior to his injury - which included such items of compensation as:

  • Annual earnings
  • Overtime pay
  • Commissions
  • His contributions to his retirement plan

After the 12 weeks were up, he began receiving LTD benefits that were calculated based only on his annual earnings, a figure much less than his gross earnings. The man filed an ERISA action claiming that his LTD benefits were miscalculated. The disability insurance company for his employer argued that, not only had they calculated his LTD benefits correctly, they had wrongfully included his retirement contributions, commissions and overtime pay when calculating his STD and concluded that he must reimburse the company for the overpayments made to him.

The court's decision

After years of court appearances and appeals, the U.S. Court rendered a decision that both helped and hurt the man. The court agreed that the STD calculations were correct and the man was not required to return any of the money he received during the first 12 weeks after his workplace injury. Unfortunately, the court further decided that his LTD benefits were also calculated correctly and he was not entitled to benefits based on his actual gross income but on his stated earnings, the far lower figure.

Help for the injured

Not all disability insurance policies are the same, nor do all disability insurance carriers deal fairly with injured employees. Sometimes disability claims are decided in favor of the claimant but often carriers wrongfully deny claims.

It is important to know how your disability insurance coverage calculates STD and LTD benefits in the event you are injured. For example, if your income is primarily comprised of commissions but your disability benefits are calculated based on your salary, you may need to make some changes.

If you have questions regarding disability benefits or a claim you have has been denied, consult an experienced disability insurance lawyer. An attorney knowledgeable about denied claims can help you obtain benefits to which you are entitled.