Can Unum Demand Payback?

Wilmington, NCA number of Unum policyholders have asked attorneys experienced with Unum, or Unum Provident disability claims whether the insurance company can demand that they pay back Social Security benefits to Unum. The short answer is to read the terms in your policy. The long answer: it’s complicated.

In 2012, the US Tax Court ruled that a taxpayer was required to include a $73,000 lump-sum payment of Social Security benefits in his gross income, even though he was required to reimburse Unum, his private disability insurer, for that amount.

In 2005, Mr. Brady became disabled and unable to work. He collected long-term disability benefits from Unum, and under the terms of his Unum policy, he was required to apply for Social Security benefits. Initially Social Security denied his application (which is a common occurrence), but in 2008, a judge awarded benefits retroactive to 2005 - Brady received a lump-sum payment of $76,000. Turns out, it wasn’t the windfall Brady hoped for.

According to Brady, he acted on the advice of his accountant and did not include $73,000 of the payment as gross income on his 2008 tax return. The rationale was that he was required to reimburse Unum that amount for the benefits the company had paid under its policy. The court ruled that the Social Security benefits the taxpayer, Brady, received in 2008 could not be offset by the $73,000 reimbursement to Unum (U.S. Tax Court. Brady v. Commissioner, No. 8379-11. Jan. 3, 2013. Lawyers USA No. 993-3716).

“[Section 86(d)(2)(A) of the Internal Revenue Code] provides that Social Security benefits may be offset only by repayments of other Social Security benefits previously received. Section 86(d)(1) defines the term ‘social security benefit’ as ‘any amount received by the taxpayer by reason of entitlement to - (A) a monthly benefit under title II of the Social Security Act, or (B) a tier 1 railroad retirement benefit.’ Benefits received from private insurers do not satisfy this definition, and thus repayments of private insurance benefits cannot be used to offset Social Security benefits pursuant to §86(d)(2)(A),” the court said.

Another Unum policyholder told LawyersandSettlements that he was also required to pay back his Social Security payments to Unum. “I made a mistake and didn’t call an attorney until it was too late - now I have to pay back three years of long-term disability benefits to Unum because I got social security benefits,” said Roger.

Roger’s situation differs somewhat from Mr. Brady. His policy doesn’t mention anything about paying back Social Security benefits.

“Every policy holder has due process based on their documents and you have to be very careful with the appeals process in your policy,” says Greg Jones, an attorney experienced in insurance denial claims, particularly those of Unum.

“Any time limits are binding on the individual - it could be as early as 30 days, or even 120 days, depending upon Unum’s contract.” Jones adds that Unum often advises or asks the policyholder to file for social security benefits, and not necessarily that they have to apply.

Roger read his Unum policy book back to front. “It says nothing in my Unum policy book that I have to pay back my benefits if I collect social security,” says Roger. “I read over it with a fine-tooth comb.” Roger is right - ask an attorney to go over your policy, before you need to collect Unum disability benefits.