The type of disability insurance policy that you have may affect your rights and obligations under the contract and law. Typically, disability insurance policies will fall into one of three categories, based on how the policy was obtained: private, group, or association. It is important to understand what type of policy you have before pursuing a claim or attempting to fight a delay or denial of your benefits.
A “Private” policy (also referred to as an “Individual” policy) is usually purchased by an individual, through a private insurance agent or directly from the insurance company. It is not offered to the individual due to his/her involvement in a particular group or as a result of his/her employment. Typically, insurance companies and agents will target business owners and high income professionals to purchase these policies or they may be offered as a supplement to other disability insurance policies or when purchasing other insurance products. Of the three categories, the premiums for private policies are usually the most expensive, as the risk of insuring these policies are not shared among a larger group. Moreover, these policies usually contain more beneficial language to claimants, as there is more flexibility in the type and amount of coverage that an individual may purchase.
If your insurance company delays or denies your claim under the policy, you have a right to bring a lawsuit in a civil court. You may seek all past and current benefits due under the policy, as well as costs, interest, and attorneys’ fees incurred as a result of the delay in payment or denial of your claim. Moreover, if your insurance company engaged in bad faith claims handling practices, you may also be able to obtain punitive damages if available under your state laws. The ability to hold an insurance company accountable for their unfair and deceptive practices can be a powerful tool. At the same time, because private policies can result in significant liability for an insurance company, these claims are often highly scrutinized. Understanding your rights and obligations is essential in applying for benefits and fighting a delay or denial of a claim.
A “Group” policy is often provided to an individual as part their employee benefit package and as such typically falls under the Employee Retirement Income Security Act of 1974 (“ERISA”), a federal law, which governs how disputes can be resolved. There are a few exceptions, which render certain employer provided policies exempt from ERISA and thus, subject to state law (see the Private policy section above). Your employer may pay all or part of your premiums or you may pay 100% of your premiums as a deduction from your paycheck.
An ERISA governed policy limits the options that you have if your claim is delayed or denied. This is an extremely complicated area of the law and provides very strict guidelines and deadlines for claimants to meet when filing his or her appeal. Missing these deadlines and not abiding by the guidelines can be extremely detrimental to your claim and your future rights at trial. Unlike private disability insurance claims, if you fail to submit all of your information to your insurance carrier prior to or during your appeal, you will likely be forever barred from bring forth any new information at trial if your insurance company denies your appeal. Thus, you must essentially prepare your claim for trial during your ERISA appeal. This means that you must gather all of the evidence that you would want to submit at trial such as medical evidence, expert medical and vocational opinions, and testimony from your friends, family, and co-works that understand how your condition limits your abilities and put it forth in your ERISA administrative appeal. An experienced attorney may make all the difference in apply for benefits or appealing a denial of your claim. If the denial is upheld after you submit all required administrative appeals, you may then file a lawsuit. However, state insurance laws are preempted by ERISA and thus, even if your state has a punitive damages statute, you will not be able to seek such damages, even if you are successfully in overturning the denial in court and there is clear evidence of the insurance companies unfair and deceptive claims practices. Thus, insurance companies often aggressively fight these claims, as there is little accountability for bad faith claims handling practices.
The third category are policies purchased through an “Association.” Often, insurance companies will sell a professional association disability insurance policies, which they can in turn, sell to their members. The premiums for Association policies typically increase with the age of the member or his/her years of practice in the profession. Obtaining a disability insurance policy through an association may provide a discount for members, but there are usually strict limits on the discounts and the insurance company may eliminate the discount at its discretion. Likewise, there is much less flexibility in the amount of coverage or the wording of the policy provisions that members are able to purchase. Thus, the policy language is typically less beneficial to claimants under Association policies and there are often strict limitations on what types of claims are covered and on the duration of benefits for certain conditions.
The type of disability insurance policy that you have may affect your rights and obligations under the contract and law. Consulting an experienced attorney prior to filing a claim or after a delay or denial of benefits can mean the difference between obtaining your benefits and unknowingly destroying your claim.