Law Provides no Remedy for Seeking Reimbursement of Overpaid Benefits

May 5, 2006 ( - The 6th US Circuit Court of Appeals has agreed with a disability plan participant that the law did not provide the plan administrator with a remedy to obtain reimbursement for overpaid benefits.

In its opinion , the appellate court said that the overpaid benefits could not be traced to particular funds in Charles Buchanan’s possession, so Aetna could not seek equitable relief under the Employee Retirement Income Security Act (ERISA).

Buchanan worked for Progressive Casualty Insurance Co. and was covered by the company’s disability plan, administered by Aetna Life Insurance Co., the opinion said.  The plan required that if a participant receives other benefits in addition to those from the plan, the benefits from Aetna will be reduced. In addition, the plan required the participant reimburse Aetna for benefits overpaid as a result of the receipt of other benefits.

Buchanan began receiving disability benefits under the plan in 1997 and started receiving Social Security Disability benefit payments in January 1998. According to the opinion, Aetna said it did not become aware of the additional benefits Buchanan was receiving until September 1999.  Aetna notified Buchanan that he owed them about $15,000 in overpaid benefits, and they began reducing his monthly benefit for reimbursement.

After 24 months and per plan provisions and Aetna’s review of Buchanan’s medical records, his disability benefits were terminated. The administrator claimed that some $11,000 of overpaid benefits was still due them.

Buchanan filed a lawsuit against the Aetna, claiming that he was entitled to benefits, and Aetna made a counterclaim for reimbursement of the overpaid benefits.

While upholding a lower court’s judgment in favor of Aetna on Buchanan’s claim that he was entitled to further benefits, the appellate court reversed the judgment for  Aetna on its counterclaim and remanded the case back to the lower court. 

According to the opinion, “Although Aetna characterizes its claim as one for unjust enrichment, it actually seeks ‘legal relief – the imposition of personal liability … for a contractual obligation to pay money,'” which the court notes is not authorized by ERISA.