Wisconsin Federal Court Finds in Favor of ERISA Long-Term Disability Claimant, But Grants Insurer Right to Recover SSDI Overpayment

In Lehnen v. Unum Life Insurance Co., No. 23-CV-192-WMC, 2026 WL 444692 (W.D. Wis. Feb. 17, 2026), the Western District of Wisconsin held that a long-term disability claimant was entitled to ongoing benefits based on physical impairments that prevented him from performing the material and substantial duties of his regular occupation. Applying de novo review, the court independently evaluated the administrative record and concluded that the claimant met his burden of proving disability beyond the policy’s 24-month mental health limitation. At the same time, the court held that Unum was entitled to recover an SSDI-related overpayment through equitable setoff under ERISA § 502(a)(3).

Standard of Review and Burden of Proof

Because the policy did not grant discretionary authority to Unum, the court applied de novo review. Under that standard, the court made an independent determination of both factual and legal issues without deference to the administrator’s prior denial. The claimant bore the burden of proving, by a preponderance of the evidence, that he satisfied the Plan’s definition of disability—namely, that he was unable to perform the material and substantial duties of his regular occupation.

The court began by carefully defining the claimant’s occupation in the national economy. Although Unum characterized the role as sedentary work requiring only occasional keyboarding, the court found that the claimant’s executive-level position required constant computer use, extensive keyboarding, sustained written communication, independent judgment, and high-level cognitive functioning under stress. That determination framed the remainder of the analysis.

Physical Impairments and Functional Limitations

The medical record reflected multiple significant physical conditions, including advanced cervical degenerative disc disease, bilateral hand dysfunction consistent with carpal tunnel syndrome, persistent postural perceptual dizziness (PPPD) triggered by screen use, and chronic sleep disorders.

Imaging confirmed multilevel cervical degeneration. Treating providers imposed restrictions limiting prolonged cervical flexion and extension and requiring breaks from sitting and computer use. Although injections had previously provided relief, the claimant could not continue them after losing insurance coverage. The court found that these restrictions were incompatible with an occupation requiring sustained screen time and prolonged seated work.

The claimant’s hand impairments were supported by occupational therapy testing documenting reduced typing speed, diminished dexterity, swelling after limited keyboard use, and below-average performance on dexterity measures. The therapist recommended limiting typing to short intervals with significant breaks. The court treated this functional assessment as objective and persuasive evidence that the claimant could not meet the keyboarding demands of his job.

The court also credited evidence that PPPD caused dizziness and nausea triggered by scrolling and visual stimuli. Because continuous computer use was central to the occupation, this screen intolerance weighed heavily in favor of disability.

Cognitive Consequences of Physical Conditions

Although neuropsychological testing did not conclusively establish a neurodegenerative disorder, the court emphasized that disability analysis must account for how physical impairments affect cognitive performance. Treating providers documented executive functioning concerns and cognitive inefficiency associated with chronic pain and sleep fragmentation.

Given the claimant’s high-level crisis management role, the court concluded that the combined effects of sleep disturbance, pain, and PPPD meaningfully interfered with his ability to sustain executive functioning under stress. The court rejected Unum’s attempt to isolate physical symptoms from their cognitive consequences.

Evaluation of Medical Opinions and SSA Findings

Unum relied on non-examining file reviewers who concluded the claimant retained sedentary capacity. The court discounted those opinions, noting that the reviewers had not examined the claimant and had failed to address the combined impact of the documented impairments. Under de novo review, the court found the treating-provider evidence and functional testing more persuasive.

The Social Security Administration had also determined that the claimant was disabled, primarily due to skeletal spine disorders. While acknowledging that SSA determinations are not binding in ERISA cases, the court found the agency’s decision persuasive—particularly because additional functional evidence supporting disability had not been before the SSA.

Holding on Disability and Remedy

Considering the record as a whole, the court held that the claimant proved by a preponderance of the evidence that he was unable to perform the material and substantial duties of his regular occupation. The court ordered retroactive LTD benefits beginning July 19, 2022, reinstatement of benefits going forward subject to continued eligibility, and prejudgment interest calculated at the average prime rate. The issue of attorneys’ fees was reserved for further briefing.

SSDI Overpayment and Equitable Setoff

The court then addressed Unum’s counterclaim seeking recovery of an SSDI-related overpayment. The claimant had signed a reimbursement agreement authorizing Unum to recover overpayments and to offset future benefits.

Although the claimant argued that the SSDI funds had been dissipated and therefore could not be subject to an equitable lien under Montanile, the court concluded that the reimbursement agreement created an enforceable equitable lien by agreement and that the Plan expressly permitted recoupment through suspension or setoff of future benefits. Because benefits were reinstated, Unum was authorized to offset or withhold future LTD payments to recover the remaining overpayment and to obtain an accounting of SSDI benefits received.

Takeaway

Lehnen demonstrates the practical impact of de novo review in ERISA litigation. Detailed functional capacity evidence, consistent treating-provider restrictions, and careful analysis of occupational demands carried the day. At the same time, the decision confirms that insurers may enforce SSDI reimbursement provisions through equitable setoff—even where the claimant ultimately prevails on the merits of disability.