Disability Insurance: More Important Than Life Insurance? (Part 3 of 3)

If you read my first two columns about disability insurance, you should now have a basic understanding of both the need to protect one’s ability to earn an income and the essential features of disability insurance policies.  What happens, however, if you actually suffer the misfortune of a disability, file a claim, provide all the necessary documentation to the insurance company and then have your claim denied (or terminated)?

If you are covered under an ERISA long-term disability plan (most long-term disability (LTD) claimants have purchased long-term disability insurance through their employers, pursuant to the federal law “ERISA”), you will have to go through an administrative process consisting of an initial determination and an appeal or “review.” You must generally exhaust these administrative remedies before suing. The denial notice allows at least 60 days for requesting review and the company must respond within 60 days, unless there are extraordinary circumstances (allowing them 120 days to determine the matter), or unless you waive the 60-day deadline imposed upon the company by ERISA (something I do routinely to buy more time to develop claims at the administrative level). It is also common that the final determination will neglect to mention its finality and will invite submission of additional evidence. This is a critical pitfall because, if evidence is submitted after the “review period,” that evidence may be excluded from consideration in the federal lawsuit. You generally have three years to bring suit from the date of the review denial.

It should be noted that you don’t even get to your LTD claim unless you pass the hurdle of short-term disability benefits (STD). Risk management is so aggressive these days that denials of short-term disability benefits are no longer uncommon. The rules of review of STD denials are usually the same or similar to LTD claim denials.

ERISA does not allow for any punitive damages, and, although in certain circumstances a successful plaintiff may receive an award including attorney fees, those too are generally the responsibility of each party.

No jury trials are available under ERISA. ERISA is federal law, so LTD claims end up in federal district court. A key issue is whether the federal court must perform a “de novo” review of the administrative proceedings, or, in contrast, simply make a determination as to whether the insurance company’s decision was “arbitrary and capricious.” A “de novo” review is usually far more preferable, as a federal magistrate or judge then has the opportunity to take a fresh look at the evidence and make a determination based on the “preponderance of the evidence.” Winning a case under the “arbitrary and capricious” standard is much more difficult, although, as with all cases, this will depend greatly on the facts particular to the case.

It must be remembered that, even if your claim is allowed, it cannot be taken for granted that your claim will continue to be paid by the insurance company indefinitely. Not only must you and your physician continue to supply “proof of disability” on a regular basis, other potential obstacles may be thrown in your way by the insurance company. Surveillance is common in disability claims: videotape of you going to the supermarket, attending your child’s soccer game, or doing a hundred other everyday routines may be used in an effort to demonstrate that you are not really “disabled.” In my experience, much of the surveillance typically done proves utterly nothing, but insurers don’t seem to mind paying investigators to go on such “fishing expeditions.” Another tactic employs a “rehabilitation nurse” or other insurance company representative to hassle your doctor, therapist, etc., looking for any “evidence” available to also show that you are no longer disabled. “Independent” medical exams and reviews are also frequently used. Suffice to say that the term “independent” is a gross misnomer.

Since both the definition of disability and the limit on payment of claims involving mental impairments typically comes up after two years, that is the point at which a large number of claimants get terminated and seek legal assistance. In the first instance, this occurs because most LTD policies have a change in the definition of disability after two years from being disabled for your occupation to being disabled for any occupation. With the latter, most LTD policies have a two-year limit on payment of claims involving mental impairments, so that in addition to overcoming the hurdle of now having to prove disability for “any occupation,” you now must also prove that the disability is not “mental.” This is not much of a problem where the “mental” is secondary to say, a stroke, but gets thorny in, for example, cardiac claims where there is little new evidence for ischemia and your claim is that stress produces cardiac symptomatology either on exertion or at rest, or where the basis for your claim is chronic fatigue syndrome (which is largely debunked by insurers and considered nothing more than neurosis with secondary somatic complaints).

In fairness to the insurance industry, assuming that your legitimate disability claim has been presented and documented both timely and thoroughly (see my last column), insurers generally pay and will continue to pay your claim. However, if your claim is unfairly denied or delayed, you should not be intimidated or otherwise deterred from asserting your legal rights.

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