Appeals court rules for insurer in long-term disability policy dispute

The Indiana Court of Appeals ruled for an insurer Wednesday in a dispute over long-term disability benefits, finding its policy excluded Social Security benefits and affirming an order that the recipient refund monthly payments, with interest, that the insurance company overpaid.

The appellate court granted no relief to Beverly M. Kennedy, a former employee of the University of Louisville who was unable to work after December 2010. At that time, she applied for long term disability insurance the university had offered through Lincoln National Life Insurance Co. After initially denying her claim for benefits, Kennedy sued in Kentucky and Lincoln National settled, paying her a monthly benefit of $2,322 effective in June 2011. The payments continued for more than three years.

Kennedy also applied for Social Security disability benefits, which were ultimately awarded with a date of disability determined as Sept. 21, 2010. Lincoln National brought the instant suit in Washington County, Indiana, where Kennedy resides, and in October 2019, the Washington Circuit Court granted partial summary judgment to each party.

The trial court found Lincoln National was entitled to offset Kennedy’s Social Security disability benefits because both were awarded for the same disability as prohibited by the policy. The court ruled for Kennedy that “the Policy was ambiguous regarding the amount of the offset and strictly construed that ambiguity against Lincoln National to hold that it was only entitled to offset the amount of Kennedy’s SSDBs after her Medicare Part B insurance premiums had been deducted,” Judge Patricia Riley wrote for the panel.

“The trial court further ordered that any reimbursement to Kennedy from Lincoln National would be subject to accrued interest at 12%, compounded annually. On November 18, 2019, Lincoln National filed a motion to correct error, and Kennedy filed a motion to reconsider. On March 9, 2020, the trial court entered an amended order on summary judgment which was materially the same as its October 18, 2019, order apart from directing that any reimbursement to Lincoln National from Kennedy would also be subject to 12% annual interest. On April 22, 2020, the trial court stayed proceedings, including Kennedy’s request for class certification, until the resolution of this appeal,” Riley wrote.

“Based on the foregoing, we conclude that Lincoln National was entitled to full summary judgment as a matter of law based on the Policy’s provisions, and therefore, we reverse the trial court’s grant of partial summary judgment to Kennedy and enter summary judgment in favor of Lincoln National,” the panel concluded. “In addition, we conclude that the trial court did not abuse its discretion when it ordered that Lincoln National was entitled to reimbursement of overpaid benefits, subject to interest.”

The case is The Lincoln National Life Insurance Company v. Beverly M. Kennedy, 20A-PL-837.