What you DON’T Want To See In Your Your Long Term Disability Policy
Unfair Language # 1: “We Have Discretion to determine Benefits”
Most disability insurance companies hide behind a clause hidden in their policies known as a “reservation of discretion”. But don’t bother to look in the ERISA statute for anything about a “reservation of discretion” clause. The federal courts have given the insurance companies the right to hide the so-called “reservation of discretion” clause, leaving all employees at risk!
Florida is part of the Federal 11th Circuit Court of Appeals which has chosen to create its own rules on how it will review an insurance company’s long-term disability claim denial.
First, the federal judge will try to determine whether or not the disability insurance company’s policy or factual interpretations were “wrong”, based on the courts’ review of facts, and the presence of any biased language in your long-term disability plan. If the judge finds that the insurance company’s policy interpretation was right… you lose.
Second, if the federal judge finds the disability insurance company’s denial was “wrong”, the federal judge must then decide if you have presented a more reasonable interpretation of the policy or facts. If you have not presented a more reasonable interpretation… you still lose.
Third, if you have succeeded in presenting a more reasonable interpretation of the facts, the federal judge will then determine if the disability insurance company’s incorrect interpretation could still somehow be considered somewhat reasonable. If it is, in any way, found to be somewhat reasonable (even though it has already been deemed wrong) the insurance company will be awarded “discretion”. Once discretion is awarded… you will again lose your claim.
In almost any other legal proceeding, you can win as long as you have more than 50% of the evidence in your favor. Under ERISA, however, you can command 99% of the evidence, while the insurance company controls only the remaining 1%, and still lose. This is because, if the federal judge believes the disability insurance carrier’s interpretation is, in any way, reasonable, it does not matter how much evidence you have; you will still lose your rightful claim to disability benefits.
Another common problem arises when disability carriers are not only responsible for deciding whether you get paid, but also for paying your benefits out of their own pocket. This doubling of responsibilities can lead to a serious conflict of interest. If this happens, the claim must be sent to a special handler, known as a “long-term disability claims administrator” who must prove that the disability insurance company’s decision was not affected by their own self-interest in saving their money by not paying you. So long as the disability claims administrator can prove that, while his policy or factual interpretation was wrong, a reasonable interpretation was actually made, the disability insurance company will not have to pay you a dime.
During the lawsuit, you will only be allowed to take the deposition of the insurance company, and its representatives, when determining whether or not there was a conflict of interest during the decision to deny your disability benefits. You will not be allowed to ask any questions about how they arrived at their decision.
You are also not allowed to meet, or take the depositions of, any of the doctors who were involved in deciding that you are able to work and not disabled (even though they never actually examined you, and only did a quick review of your medical records).
When it comes time for “trial”, you will not be allowed to have a jury hear your case to fairly decide the matter. Instead, a federal judge will be appointed to rule on your case by simply reviewing the material in the insurance company’s file at the time they denied your claim.
The judge will not see any evidence or hear testimony from any witness. He/She will only review the insurance company’s file. You will also not be allowed to add any new material that may have taken place since the denial of your benefits. The judge will only listen to the lawyers’ arguments, before making a decision.
The judge is only allowed to overturn your insurance company’s decision if he finds the insurance company was wrong and unreasonable.
If the judge decides that the disability carrier has a conflict of interest in the decision-making process, a wrong but reasonable interpretation will not be upheld, unless the claims administrator can show that, while there was a conflict of interest, it did not effect the insurance company’s decision; in which case, again…you lose.
You should also remember that, even if the judge does decide that you are the “winner” of your case, he cannot award you any money for all the inconvenience, hassle, and emotional upset that the insurance company’s decision caused you. Lost your house? Too bad. Lost your life insurance and health benefits because of their decision? Tough luck… The only thing the judge can do if you win your case is to award you the money the insurance company should have paid you in the first place and, maybe (in very few cases) your attorney’s fees.
Unfortunately, these are the court’s “rules” for those times when long-term disability insurance companies deny your claim for benefits.
These rules are not mandated by any law or statute. The laws originated because disability insurance companies write the long-term disability policies for employers and are allowed to insert almost anything they want, into their policies…including:
The Six most dangerous words you will ever see in an insurance policy:
“We have discretion to determine benefits.”
This is known as the “discretionary” clause. The Supreme Court decided years ago that any insurance company offering disability insurance plans should be allowed to “reserve discretion” to determine benefits. The Supreme Court decided it would be a “good idea” to keep courts out of the decision making process, and leave it to the “people that know about these claims the best.”
Unfortunately, this means that in 100% of the cases, the insurance companies who must ultimately pay the benefits also have the power to legally decide the amount of your benefits they want to pay, if any at all.
This also means that you are not on a level playing field. When you go to federal court disputing your disability insurance company’s belief that you are not disabled, you have an uphill battle, unless you have properly organized overwhelming evidence from the very beginning, and made no mistakes.
The great injustice is that this discretionary clause is not, in any way, required by any law. Most employers simply do not understand how this clause gives the insurance company such an overwhelming advantage in court. As a result, employers never give the clause a second thought when the disability insurance company asks that it be added to their policy.
Employers should always insist there be no discretionary clause included in their disability policies or that any is removed from their policies.
Unfair Language #2: A Definition of Disability That Pays Benefits Only if You Can’t Perform “Each and Every” Material Duty of Your Occupation
This language shows up in many disability insurance policies, and for good reason. Courts have decided that this language means you will be paid benefits only if you cannot perform “every” duty of your regular occupation. For instance, if you are a journalist and you are not able to travel, be with people, or even type at a computer, but you can still read, you would not be considered disabled from your occupation because you would still be able to perform at least one of the duties of your occupation.
In one case, the physical requirements of an assistant manager of a computer information systems position included using a personal computer, talking on the telephone, and attending meetings. This employee was frequently required to sit, stand, and walk, however, due to an injury, he was unable to stand for long periods of time. Unfortunately, the job could not be performed by alternating between sitting and standing. The employer agreed that he was limited to a small amount of work in one day. Doctors agreed that he was only able to work for up to three hours in an eight hour day.
Before his injury, the assistant manager worked 40 hours per week at a fairly physical, non-taxing job. His injury, however, limited him to three hours per day. Unfortunately, he was insured under a disability policy which only paid him benefits if he could not perform “each and every” substantial duty of his occupation.
The insurance company argued that since he could perform even one material duty (working for as little as three hours per day) he was not disabled and therefore not entitled to disability benefits. The scary part of this story is that the court accepted this argument!
The court stated that, even though “such a definition of total disability is extremely restrictive, and not a disability policy that a prudent consumer will be expected to purchase, the plain language of the disability plan commands this result.”
Under ERISA, there is no oversight over limitations on coverage a long-term disability insurance company can place into a disability insurance policy. Since there is no requirement that benefits be provided in the first place, there are no rules against providing scanty or almost unattainable benefits.
At a hearing, the judge suggested this was like a “coma policy.” That is, it was a policy that would only pay benefits if you were in a coma. The judge said that while it might seem unfair that this policy paid nothing, he pointed out that the employer had paid all the premiums, and that the employee was free “to purchase on his own, a less restrictive disability policy, but he did not do so.” If the employer wanted to protect its employees against anything but the most serious and terrible disabilities, then it could have purchased a better policy and paid higher premiums. Since, this employer did not, the employee was stuck with the terms of the policy.
Some long-term disability policies also state that you are only entitled to benefits if you are unable to perform the “material and substantial duties of your own occupation” as defined by a book called the “Dictionary of Occupational Titles,” or in the national economy. It does not matter how you actually performed your job for your employer, only what the definition of your job requires. Unfortunately, in many cases the “material and substantial duties” of your job are not at all how your job is actually performed.
Example: Carrigan v. Reliance Insurance Company
The case of Carrigan v. Reliance Insurance Company illustrates, first-hand, the need for your treating physician to understand the definition of “disability” found in your disability insurance policy before writing any reports in support of your claim. Dr. Anthony, the treating physician, described the claimant as “disabled from even sedentary work” without further describing Mr. Carrigan’s physical limitations as related to the disability policy’s definition of disability, and without actually identifying the periods of time Mr. Carrigan was disabled
To make matters worse, Dr. Darden, Mr. Carrigan’s treating orthopedic surgeon, did not have an opinion one way or the other on these issues. Dr. Darden concluded that Mr. Carrigan had some physical limitations and could work six hours in a work day, so long as appropriate positional changes were allowed.
Dr. Aiken, another of Mr. Carrigan’s treating physicians, confirmed that he had suffered from chronic back pain and that his back problems could, at any time in the future, disable him from gainful employment. Dr. Aiken did not conclude Mr. Carrigan was disabled, or even provide evidence that his back pain had gotten worse after the date of alleged total disability.
Mr. Carrigan had a vocational expert provide an opinion that he was totally disabled under the definition of his policy, but he did not specify what period of time he felt Mr. Carrigan was totally disabled, and he relied only on the reports of Mr. Carrigan’s treating physicians, all of whom felt he could work in some capacity. Therefore, Mr. Carrigan’s expert vocational opinion was contradicted by the opinions of his own treating physicians.
The judge accepted the opinion of the disability insurance company’s vocational expert who, upon reviewing the same medical evidence, concluded that Mr. Carrigan could perform the various duties of his job, at least on a part-time basis. Ultimately, when the case was appealed to a higher court, the denial of disability benefits was approved.
Mr. Carrigan made many mistakes in the handling of his claim. His physicians did not express the standard of disability that was applicable to him per his disability insurance policy, ultimately did not give opinions that supported his claim for disability, did not specify what they believed was his period of disability, and failed to address the date Mr. Carrigan became disabled. Mr. Carrigan’s vocational expert rendered an opinion about his disability that was contradicted by his own physicians. It is no wonder the court supported the denial.
Unfair Language #3: “Own Occupation” Less Than Two Years
Most disability insurance companies will pay benefits for two years, if you are unable to work at your own occupation. After two years, you are entitled to continuing disability benefits, only if you are unable to work at ANY occupation.
The theory behind this is two years is enough time to be retrained to produce income in some other business or mode of employment.
Most, if not all, disability policies that I have seen specify the time frame during which you (depending on your occupation) may receive disability benefits without concern of benefit payment interruption. Basically, what this means is that if your sickness or illness prevents you from working, then you are eligible to receive a portion of your benefits, but after six months, if there is any job in the labor market that you can perform, then your benefits will be immediately cut off. Buyer beware: some policies provide less than two years of such protection from abrupt benefit suspension. In some cases, the protection is only six months.
Believe me, disability insurance companies work tirelessly “finding” jobs that, at least theoretically, you can perform.
Unfair Language #4: Income Protection under 60% of Your Prior Earnings
Most long-term disability insurance policies promise to pay 60% to 66% of what you would have earned had you not gotten hurt. They forget to tell you that if your employer pays the premiums, income taxes will be taken out of your disability benefits, significantly reducing what you receive.
Through the years, I have seen policies that provide varying degrees of protection. I have even seen plans that offer less than 60% of your prior earnings. I am critical of employers who pay premiums for policies with such little coverage because, after taxes are taken out, such policies essentially offer no disability benefits at all. It is very important that you realize disability policies providing less than 60% of your wages before you were disabled are not standard, and that there are much better policies available at nearly the same rate.
Unfair Language #5: Your Benefits Will be Terminated If You are Able to Work Part-time.
While insurance agents selling disability insurance policies often focus on the benefits that will be paid if a person meets the definition of “disability”, they rarely explain the “termination of benefits” clause in the policy. Why should they? They are trying to sell you something!