Lawsuit Claims Unum Wrongfully Demanded Reimbursement of SSA Disability Benefits Paid to Insured

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An Illinois man claims in a proposed class action that Unum Life Insurance Company of America wrongfully demanded reimbursement of the disability benefits he was paid after he received retroactive payments from the Social Security Administration.

According to the lawsuit, Unum’s demand for reimbursement of the plaintiff’s disability payments renders its contract with the man unenforceable given the benefits were provided without any risk to the company.

“Defendant Unum provided disability insurance without any risk, knowing full well that its risk was essentially zero as its definition largely mimicked the disability definition of the SSA,” the suit says.

The plaintiff, who worked for OBF Health Care in Illinois before becoming disabled, says he opted to pay for long-term disability coverage offered by Unum through his employer. Later, the plaintiff was diagnosed with prostate cancer and submitted a claim for disability that was accepted by the defendant, the case states.

Per the complaint, Unum’s definition of disability “largely mimicked” the definition adopted by the Social Security Administration (SSA), with some additional restrictions. 

According to the lawsuit, Unum hired a third-party vendor to apply for and obtain disability status for the plaintiff from the SSA, after which the man was deemed disabled and obtained retroactive benefits pursuant to his disability status. When the plaintiff received a check from the SSA, Unum allegedly demanded a “substantial rebate” of the benefits it previously paid to the plaintiff, an ask the case argues is wrongful given the benefits would then have been paid risk-free.

In other words, Unum was assured upon entering the contract with the plaintiff that if he were to become disabled, he would be eligible to receive retroactive SSA benefits from which the insurer would receive compensation, the suit relays.

“Only Unum had no risk;” the complaint reads. “Defendant would pay the disability payments up front, virtually insured to be compensated later, knowing full well that any employee meeting the definition of ‘disabled’ under Unum would also meet the definition under the SSA. As such, there was no consideration for the contract.”

The lawsuit argues that in order to have a valid contract, there must be an offer, acceptance, consideration and “meeting of the minds.” By adopting a definition tied to a vested right for disability payments from the government, Unum was “providing nothing” to the plaintiff in exchange for his premium payments, rendering the contract unenforceable, the case contests.

“Because there exists no consideration under the contract, the agreement remains unenforceable and Unum is not entitled to any reimbursement under the contract with Plaintiff,” the suit charges, alleging there are likely hundreds or thousands of individuals in Illinois who “remain in the same position as Plaintiff” with regard to Unum’s policies and practices.

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