Allsup, Inc. v. Advantage2000

As some of you have been following on other blogs and websites the internet community has kicked up quite a fuss at Sony and its recent attempts to prevent music pirating. Click here for the blog of the person who first discovered it. Very technical. Click here for something not so technical and more current.

Sometimes things are not always, as they seem. In the recent case Allsup, Inc. v. Advantage 2000 Consultants, Inc., -- F.3d --, 2005 WL 3054130 (8th Cir. 2005) discovery revealed some things that Allsup may not want its Social Security claimants to know. Both Allsup and Advantage2000 are in the business of assisting disabled persons obtain Social Security benefits. Often the major disability carriers hire one of the two (or one of the others) to help the claimant obtain benefits from the Social Security Administration. The insurance disability carriers are not doing this for altruistic motives. Often the insurance policy allows the insurance company to reduce the amount of benefits the SSA pays to the insured. Thus, it is in the insurance companies’ best interest for you to get Social Security.

Often the SSA makes its claim determination long after the insurance company has paid benefits. The policies usually allow the insurance companies to offset retroactively the Social Security benefits. Paying the LTD benefits before the Social Security benefit is determined results in an overpayment. Since the insurance policy requires the claimants to repay the overpayment the insurance companies want to recover the money. However, the United States Supreme Court in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708 (2002) (See PDF page 391), issued a ruling that made it extremely difficult to sue a claimant who did not repay the overpayment.

Allsup, even before the Court issued Knudson, began to develop a system to help the insurance carriers recover that overpayment. Allsup called its program the “Overpayment Recovery System™” or “Seamless ORS™” This system is what led to the lawsuit in Allsup. As Professor Tushnet explains, the Allsup case involved false advertising among other non-ERISA claims. The dispute involved Allsup’s concerns that Advantage2000 may have taken overpayment recovery business from it. Advantage2000 claims it did not enter the overpayment recovery business.

What this intramural squabble revealed is how much money there is in the overpayment recovery business. Allsup claimed that it spent over a $1, 000,000 developing its overpayment recovery mechanism. Allsup, Inc. page 2. What does Seamless ORS™ do? According to Allsup, it involves the ACH backbone and electronic funds transfer. It is a wire transfer (or automatic debit) from the claimant’s bank account to the bank account of the insurance company (after Allsup) gets its fee. Why does Allsup offer this service to the insurance carrier? It is paid for it and paid well if the development costs are any indication. In addition, as Allsup explains “[s]ometimes they [the claimants] can’t resist using this “found” money to pay off mortgages or their medical bills.” Click here to read the brochure.

Another service that Allsup offers to the insurance companies is its ability to identify those claimants who may be interested in a lump sum settlement. Allsup states, “[b]ecause our representatives develop strong and trusting relationships with claimants, many share information with us that they may not share with their employers or insurers.” Since insurance companies agree to settle if it makes economic sense to them this statement should give you a warm fuzzy feeling. Click here to read the brochure.

As the Knudson court and its progeny have held, it is extremely difficult for the insurance carrier to sue a claimant successfully to recover an overpayment. By authorizing the automatic debit the claimant is giving, a third party the authority to make a payment on a debt that he/she may not be subject to a successful lawsuit. Of course, the contract requires that you repay it. However, you need an experienced ERISA litigator on your side to explain Knudson to you. You can find such a person here.