ERISA allows for recovery of overpayments - but only when the ERISA plan says that such recovery may be recovered.
That was the conclusion of the United States District Court for the District of Nevada, in Kaufman v. Unum Life Ins. Co. of America, No. 2:06-CV-00621-ECR-LRL (D. Nev. Jul. 18, 2011).
In Kaufman, Dr. Joseph A. Kaufman in 1998 suffered injuries that prevented him from continuing to work as a cardiologist. He continued in an administrative position. He was insured under a long-term disability benefits plan issued by Unum Life Insurance Company of America. The plan was an employee welfare benefit plan governed by ERISA. Dr. Kaufman submitted a claim to Unum for long-term disability benefits, and Unum determined that Dr. Kaufman was eligible for benefits. Unum terminated all benefit payments when Dr. Kaufman's income reached 80% of his pre-disability income. Unum also concluded that there had been an overpayment of benefits due to errors in Dr. Kaufman's reported income. Kaufman disputed whether there had been an overpayment, and claimed that his benefits should never have been reduced under the terms of the plan.
The court concluded that Unum correctly determined that Dr. Kaufman's benefits should be reduced by his post-disability earnings. The court also concluded that Unum did not abuse its discretion in deciding that Dr. Kaufman's benefits should be reduced by all of his monthly earnings.
But on the issue of the overpayment, the court ruled for Dr. Kaufman, saying that Unum's claim was not for the kind of overpayment reimbursement provided for under the plan or within the scope of ERISA:
Unum's counterclaim alleges that Unum overpaid Kaufman, and that Unum is entitled to reimbursement of the overpayment. Kaufman asserts that Unum has no right to repayment. Under 29 U.S.C. § 1132(a)(3), ERISA authorizes civil actions “to obtain other appropriate equitable relief” to enforce ERISA or to redress any violation of ERISA.
In Sereboff v. Mid Atlantic Medical Services,the Supreme Court held that the plan has a right to reimbursement under 29 U.S.C. § 1132(a)(3) when the plan contains a provision requiring repayment. 547 U.S. 356, 360 (2006). In our case, however, the Plan only refers to repayment of overpayment caused by awards received under the United States Social Security Act, the Canada Pension Plan, or the Quebec Pension Plan, or similar plans or acts. . . . The Plan has no express provision providing for repayment in the case that Unum miscalculates the benefits due to an insured. Other courts have refused to extend Sereboff to cases in which there is no express agreement to repay; rather, the courts hold that the strict tracing rules found in Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 215 (2002), prohibit plans from recovering overpayment unless the overpayment could be traced to particular funds or property in the defendant's possession. See, e.g., Sivalingam v. Unum Life Ins. Co. of America, 2011 WL 1584055 *11 (E.D. Pa. April 26, 2011); Fier v. Unum Life Ins. Co. of America,2009 WL 3644187 *14 (D.Nev. November 3, 2009). Because Unum cannot impose an equitable lien under a theory of restitution without providing evidence of “particular funds or property” in Kaufman's possession, we hold that Unum is not entitled to repayment of any overpayment that Kaufman may have received under Unum's calculation of damages.
Unum further argues that it may recover its overpayment under state law, if ERISA does not provide a remedy. In Cooperative Ben Administrators Inc. v. Ogden,the Court of Appeals for the Fifth Circuit held that “ERISA plan fiduciaries do not have a federal common law right to sue a beneficiary for legal (as distinct from equitable) relief on a theory of unjust enrichment or restitution” because Congress “specifically contemplated the possibility of extending to plan fiduciaries a right to sue a participant for money damages and chose instead to limit fiduciaries' remedies to those typically available in equity.” 367 F.3d 323, 332, 336 (5th Cir.2004).
Kaufman v. Unum Life Ins. Co. of America, No. 2:06-CV-00621-ECR-LRL.
The full opinion is available here.