District Court Permits Filing of Counterclaim for Overpayment of ERISA Benefits Based on Purported “Equitable Lien”

In Radle v. Unum Life Insurance Company of America, No. 4:21CV1039 HEA, 2023 WL 2662876 (E.D. Mo. Mar. 28, 2023), Michael Radle filed an action against Unum, alleging that it had wrongfully terminated his long term disability benefits. During his claim, Plaintiff had received almost $150,000 in disability benefits. After Defendant had answered, Plaintiff was approved for Social Security Disability Benefits and received a retroactive award of over $91,000. The Award also entitled Plaintiff to continuing Social Security Disability Benefits of over $2,500 per month.

During the litigation, the parties unsuccessfully mediated the case. Prior to the mediation, Plaintiff provided Unum with a copy of his Social Security Award. After the unsuccessful mediation, Unum filed a motion for leave to file a counterclaim for recovery of the overpayment caused by Social Security Award. Unum alleged that its policy language provided an equitable lien on overpaid benefits, entitling it to seek equitable relief against the Plaintiff.

Plaintiff resisted the Motion on grounds that the counterclaim was untimely and that the remedy was improper. The Court permitted the counterclaim, relying on FRCP 13, which permits one to file a supplemental pleading asserting a claim that is acquired or matures after the filing of an earlier pleading. Although the Social Security decision was provided in connection with a mediation, the Court held it was not subject to the mediation privilege because the Award was provided to Unum prior to the mediation.

The Court expressed no opinion as to whether the remedy sought by Unum was permissible. Prior authority has limited an ERISA fiduciary’s right to recover overpayments only to actions traditionally available under equity. See Montanile v Bd. Of Trs. of Nat. Elevator Indus. Health Benefit Plan, 577 U.S. 136, 142, 136 S. Ct. 651 (2016). Moreover, it is uncertain whether an ERISA fiduciary may assert an equitable lien over Social Security benefits. Recent cases have focused on whether the promise to re-pay is in the original plan documents and whether the plan identifies a particular fund which would be the subject to the lien. See Messing v Provident Life & Accident, 48 F.4th 670 (6th Cir. 2022).

The Jette Court did not resolve this issue. It permitted the filing of the counterclaim, stating that resolution of the propriety of the counterclaim was not currently under consideration.  It is a case to watch in the future.