By: Guy O. Kornblum, Certified Civil Trial Advocate, National Board of Trial Advocacy and Member, Million Dollar Advocates Forum
Many, if not most, of you who read this paper are likely to have a disability policy or disability coverage in some form. For many, that coverage may be provided by your employer as part of your employee benefit program. The self-employed, however, may have individual coverage as part of a personal insurance program to protect from the loss of income from a mid to high income job. Individual policies are more likely held by professionals such as doctors,dentists, CPA's, insurance and real estate professionals, and - yes - lawyers.
In either case, long-term disability policies usually provide a monthly benefit based on a percentage of your average earnings over a period of time immediately before the disability begins, or a fixed sum (in the individual cases) based on financial information indicating that the benefit is something less than what you earned. In the case of many individual long-term disability policies which are sold to income earners, the benefits continue as long as you are "totally disabled" from your occupation up to Age 65 and sometimes for life. (There is usually a "waiting period" of 30-180 days after disability begins before benefits begin.) The purpose is to protect you from the significant loss of income resulting from your inability to continue working in your occupation.
While you may feel secure knowing that you have this "promise of protection" against income loss in the event you are disabled from working, disability insurers may have a different view of what protection they intend to provide. Unfortunately, the disability insurance "business" has fallen on hard times. Individual disability policies were a "hot product" in the 70's, 80's and early 90's. The marketplace was full of insurance companies willing to take on high end employees and professionals and insure them for several thousand dollars a month if they became disabled. Prices were very competitive, i.e. favorable to the applicant. The underwriting was "loose" to generate premium dollars.In the late 80's and 90's, these carriers were hit with thousands of claims, and the premium income was not sufficient to pay claims. The carriers had to dip into their pockets to keep up. As a result, many of the insurance companies have sold off their "book of business" to one of the few large companies still interested in managing the policies and handling the claims.
Usually this results in the new carrier simply "buying" existing policies, or it can be an"administrative agreement" by which the new carrier agrees to manage the business and administer the claims. The new carrier is paid on the basis of how much it saves in claims payments. Thus, it is interested in terminating longer term claims as soon as it can.
There are various techniques used by the carriers still administering these claims - UNUM/Provident, Metropolitan Life, and others - to challenge a claimant's eligibility for longterm disability benefits. As one former high level executive of one of the better known disability insurers said in a deposition: "[T]he company was looking for ways to disprove the credibility of claimants" and deny benefits. One company estimated a savings of $30-60 Million as a result of "claim improvement initiatives."
First of all, the definition of "total disability" in the policies protecting from the inability to work in your own occupation usually requires that you be: a) unable to perform the substantial and material duties of that occupation; and b) under the care of a physician. You are required to regularly supply a form, usually monthly, but sometimes, if the cause of the disability is stable,quarterly or semi-annually, which will be carefully scrutinized for any information which can be used to challenge a claim. Often these forms are misleading or incomplete and the claimant is left to his or her own devices in completing them. But the carriers insist on their prompt return; otherwise benefits will "not continue." So, the unknowing claimant does what is requested without a real understanding of how the claim form will be used. The insurer may also send you to an "independent medical examiner," who sees you one time and often is regularly engaged by insurance companies to examine their insureds. Or, the company may conduct an in-house review by its own captives - employees or consultants who base their opinions on the information provided by the claims handlers or simply what medical records or reports they obtained. Often claims tactics will be used under the "guise" of a "good faith" dispute over whether the claimant is truly totally disabled or because there is "suspected fraud."
Sometimes, the carriers will use more direct approaches: personal interviews which are conducted by professionals who know how to "set up" claimants for termination; direct contact with treating physicians - again with a view towards developing information designed to serve as a basis for termination; or surveillance, which is often conducted by "private investigators" who video activities of a claimant. Unfortunately, this information is, more often than not, used to terminate a claim rather than with a view towards understanding the claim and why the claimant is unable to return to a former occupation. The "visit" by the "field representative" is
often unannounced or scheduled on short notice; the purpose is to find out more about you, what you are doing, size up your lifestyle and neighborhood, and possibly establish the basis for a later surveillance with video. You are not required to meet with these representatives in your home.
Other challenges to claims might be:
- The claimant had a "dual occupation" at the time of disability. For example, a neurosurgeon might also be a department head. Maybe he cannot do neurosurgery any more because of extensive cervical disc disease, but he or she can "administer" a department, even though unable to practice what he studies hard to do.
- Misrepresentations in the application for insurance. Often, if the claim is filed within two years of issuance, the insurance company will engage in "post-claim underwriting" by completely investigating the statements made by the insured on the application in an effort to find some mistake on which it can void the policy. However, the insurance company only has two years from the date of issuance to do this. After that it must accept the insured no matter what.
What is most troublesome, however, is that persons handling these claims are often not trained or qualified to do so. They make vocational evaluations without being trained in such; they decide medical issues without being medically trained. And, if in house consultants are used, they are often not real "experts" in the fields of medicine on which they are called to give opinions, and they certainly do not have the intimate knowledge of the treating physician. Usually, the treating doctors' views are given short shrift.The California Supreme Court has consistently provided that "[t]he insured in a[disability] contract...does not seek to obtain a commercial advantage by purchasing a policy - rather, he seeks protection against calamity... The purchase of such insurance provides peace of mind and security in the event the insured is unable to work." (Egan v. Mutual of Omaha Ins. Co., 1979.) The unique factors present in disability policies make it incumbent upon an insurer to respect the insured's right to receive the benefits of the contract. California law requires that insurance companies handle all claims in "good faith." This means there are a rigorous set of duties for insurers to follow in administering long-term disability claims. An insurer is required to "properly investigate its insured's claim." (Egan.)
This obligation is two-fold:
(a) "it is essential that the insurer fully inquire into possible bases that might support the insured's claim"; and
(b) "an insurer cannot reasonably and in good faith deny payments to an insured without thoroughly investigating the foundation for its denial." (Egan.) An essential element of the duty to investigate is that an insurer must give primary weight to the findings and conclusions of an insured's treating physician. So, if you have or are making a claim to "your" disability insurer, I suggest the following:
1. File as soon as you know you are disabled. Don't wait. If you do, the insurer will wonder why? Filing early is also important if you have a "residual disability" clause which pays if you are not totally disabled but contemplate a gradual return to work. It pays while you are not working or earning only a part of what you earned when working full time.
2. Be polite but discreet with claims handlers who call to "discuss" your claim. You are required to supply information, but I suggest you request the opportunity to record the conversation to document what is said. They will be cordial and polite most of the time. But be wary, they are in a disguised "adversarial" posture.
3. The claims handler who calls may ask to record the conversation. If so, ask for a copy.
4. Be prepared for the "visit" of the claims representative. Make them schedule in advance. If they show up, advise the representative that you will speak with them at a convenient time if they will schedule. Talk with your attorney about how to handle the interview. You may want to record it (which I strongly suggest).
5. Don't supply tax returns if requested. Unless the policy requires it, you are not required to do so. You can supply earnings information through your CPA or bookkeeper, or through forms from your employer or business. Tax returns are "private" and do not have to be provided. Simply politely decline and find out what information they want.
6. Keep your physician informed of what is going on. He or she needs to know that they may be questioning your claim. Your treating doctor will be supporting you in your quest for the policy benefits. As such, it is important to keep him or her "in the loop," so if there is direct contact, your physician will be prepared for it.
Your insurance company has collected your premiums which you paid for the "Promise of Protection." The solicitation materials which you received when you were considering purchasing a long-term disability policy made statements on which you relied and which enticed you to buy this coverage. Those promises of this protection from total disability and income loss were important to you. Your expectations were that you would be paid your monthly benefit if totally disabled. Take steps to make sure your insurance company lives up to its promises and does not unfairly refuse to pay your claim, forcing you to sue to get what is rightly yours.