There is a plethora of disability insurance policies on the market and numerous coverage options, coverage limitations, terms, and definitions to consider and understand when applying for disability benefits, filing an appeal, renewing or changing coverage options, or responding to inquiries and requests for information from you insurance company. Failure to recognize and appreciate the terms and limitations within your policy can result in reduced coverage, a shortened benefit period or a denial of benefits. Generally, these are the basic types of disability insurance policies available:
- Individual Disability Policies - These policies are procured by the insured (or his/her agent), paid for by the insured directly and are not an employee benefit or business expense. Thus, in most cases the disability benefits are not taxable and may pay beyond age 65 or for life. Should the claim be denied, the insured can either file an appeal of the denial or proceed straight to litigation.
- Group Disability Policies (Long Term and Short Term) - These policies are provided through an employer and often fall under the jurisdiction of the Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA the insured presents the disability claim to the disability plan's administrator along with evidence of disability. If the plan administrator denies the claim, the insured must first appeal the denial; he or she may not proceed directly to litigation. If the claim is denied, then the importance of filing a complete appeal with all proof of loss and evidence of disability cannot be overstated.
- Business Overhead Expense Policies (BOE) - These policies provide reimbursement for the expenses of operating a business if the Insured is disabled and cannot work and may cover at least part of the salary of a professional temporary replacement - such as a doctor retained to fill in during the Insured doctor's period of total disability. These policies are often written with ambiguous and confusing policy language. Insurance companies often challenge certain expenses as not covered under the policy and refuse to provide the full monthly benefit.
When filing for benefits it is imperative that you understand whether you are entitled to full (total) disability benefits, residual (partial) disability benefits, lifetime benefits, benefits for only a limited time period and the impact of choosing to accept retirement or disability benefits from another source can have on your disability claim.
Policies which incorporate a residual or partial disability definition, or in which a residual disability rider was purchased, may apply where an individual continues to work and perform some or all of the duties of his or her occupation, but due to a disability is unable to perform those duties for as much time or as often as he or she did in the past. Typically, you must also suffer an income loss of at least 20 percent. Under many policies you may qualify under both the total and partial disability provisions, though you can only collect benefits under one. Often, insurance companies will attempt to assert that since you fall under the partial disability provision, you are not totally disabled. In most cases, your total and partial disability provisions are separate and distinct, for which you likely paid additional premiums. As such, it is inappropriate to deny coverage under the total disability provisions, because you also qualify for partial disability. Your insurance company has a duty to act in your best interest. Unfortunately, this is not always the case.
Under most disability policies there is a distinction between disabilities caused by a sickness or illness and one caused by an accident or injury. This distinction can be quite important. Some policies will provide lifetime benefits IF the disabling condition is the result of an injury. Thus, many insurance companies will try and attribute a back injury to degenerative disk disease, rather than to the specific accident which may have been the cause. Additionally, many policies only provide 24 months of benefits for mental/nervous illnesses, such as depression, panic disorder or post traumatic stress disorder. However, some illnesses are not truly mental/nervous, but the result of an organic injury to the brain. Quite common is the case where the insurer will deem a secondary illness (such as the depression that may result from a serious injury or illness) as the primary disabling condition and try to limit benefits to only 24 months.
Another way insurance carriers attempt to deny or limit benefits is to assert that the insured was engaging in two or more separate and distinct occupations, as that will require the insured to show that she is totally disabled from all occupations in order to be entitled to total disability. Raising the dual occupation defense may allow the company to deny liability all together. Insurance companies frequently attempt to show that secondary duties, (such as a doctor or dentist taking over the administrative functions of their practice) were previously a part of the material and substantial duties of his/her "own occupation" and deny benefits.
As indicated above, if your insurance company denies your disability claim it is crucial to know whether or not your claim is governed by ERISA. Under ERISA, claimants are required to appeal a denial of disability insurance benefits directly to the insurance carrier within 180 days. In most ERISA claims, if you fail to provide any information to your insurance carrier within your appeal, you are forever barred from presenting it during your lawsuit. Essentially, you must prepare your lawsuit before filing suit. In a private or non-ERISA disability insurance claim, if your insurance carrier wrongfully denies your claim, you can file a lawsuit and begin to gather all of the evidence you need to prove your case at trial. This includes obtaining all of your medical documentation, eliciting testimony from your family members, friends, and co-workers that have knowledge of your condition, and obtaining independent medical and vocational expert opinions. Most claimants would not choose to prepare for or go to trial without the aid of an attorney however, many claimants simply do not understand that by submitting an ERISA appeal without consulting an attorney with experience in ERISA disability claims, they are basically doing just that.
Before filing a claim for disability benefits, responding to questions from your carrier about your job or medical condition, renewing or changing coverage or filing an appeal, understanding your policy's terms and conditions is vital and can be the difference between a smooth claims process and the approval of your claim and the delay or denial of benefits. For information about your policy or claim, please contact one of DI Law Group's attorneys for a free consultation.