Great Disability Insurance Cases of the 19th Century: What is “Total Disability?”

We have blogged previously about how important it is to know your policy’s definition of “total disability.” Total disability may be defined as being unable to perform every duty of your occupation, or more commonly, as being unable to perform the substantial and material duties of your occupation. Though insurers today often dispute whether particular occupational duties are substantial and material, in the 1800s the dispute centered around the broader issue of what constituted “total disability.” Early policies, which failed to define “total disability,” left the issue up to the courts. Over time, the substantial and material duty standard developed.

In the 1877 case of Lyon v. The Railway Passenger Assurance Co., 46 Iowa 631 (1877), the insured was a carpenter who purchased a disability insurance policy that provided, in relevant part, for payment of lost wages while “totally disabled and prevented from the transaction of all kinds of business.” Following a train accident, the insured was forced to litigate for his rights. The trial judge instructed the jury that “total disability” meant the inability to perform any occupation in the usual way, but did not require a finding that the insured was incapable of performing any of his occupational duties. The Supreme Court of Iowa disagreed and ruled that the policy required the insured to be “totally disabled and prevented from the transaction of all kinds of business.” (emphasis in original).

This definition of total disability remained the law in Iowa until 1938, when Lyon was overruled by Hoover v. Mutual Trust Life Insurance Co., 282 N.W. 781 (1938). In Hoover, a farmer became disabled with arthritis but was able to still manage his farm by hiring workers and giving them directions. The insurer argued that although the insured was clearly disabled and no longer able to work on his farm, he was still capable of performing managerial duties and thus was not totally disabled as a farmer.

Following the then well-established trend, the court ruled that total disability meant an inability to perform the “substantial and material acts” of an occupation. Because the insured was clearly unable to perform the substantial physical labor of farming, the court held that he was considered totally disabled under the policy.

Disability insurance policies now define terms such as “total disability.” These words are typically bolded or underlined in the policy and are given particular definitions. Insureds should read their policy and know these definitions. However, ambiguous language still exists in even the best policies, and courts often must interpret policy language. Therefore, to understand the full extent of your rights under your policy, it is important to consult with an experienced disability insurance attorney who is familiar with the law of your state.


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