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Recoupment and Overpayment

Massachusetts Workers’ Compensation – Recoupment and Overpayments

The Massachusetts Workers’ Compensation Act has undergone considerable change over the past 15 years. Insurers have been provided with more means than ever before to defend cases and reduce costs. Perhaps none is more harmful than insurance companies’ rights to recoupment.

The term recoupment means just that. An insurance company, which has made overpayments, has been granted a statutory right to recoup, that is, recover, overpayment of benefits. These overpayments most often occur through no fault of the injured workers who are struggling to make ends meet in a very trying time.

Overpayments occur in several ways. An employer may erroneously overstate the wages earned by an employer before an injury. As these payments form the basis upon which weekly compensation checks are calculated, the reporting of a higher amount can result in an overpayment which the insurer can recoup by reducing weekly checks as much as 30% until the overpayment is recovered. This has a dramatic effect on the weekly payment as the insurer reduces weekly payments to reflect the accurate wages, and then further reduces the payment by 30% to make its recovery. Employees who face this dilemma must carefully monitor the insurance company to be sure that it returns to the proper rate of payment after recoupment.

The second most common incidence of overpayments results when workers’ compensation paid under an order of an Administrative Judge is overturned in a subsequent proceeding. Insurers have a right to seek to recover the funds paid under that order. This right is not absolute, however, as the judge who issued the order has discretion to limit recovery, or deny it in its entirety.

The Reviewing Board of the Department of Industrial Accidents, in a decision which helps level the playing field, has ruled that an award of attorneys’ fees to the employee’s lawyer may be made when an injured worker successfully defends a claim of recoupment by an insurer. This ruling may temper attempts by insurers to recover funds from a vulnerable employee who did not contribute to the overpayment.

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