Tag Archives: disability insurance claim

I used to practice __________ but now I’m _____________?

 

You spent years in school and invested countless hours to establish and maintain your practice.  You even protected this investment by purchasing a disability policy.  Yet, if you do become disabled and make a claim, your insurer might still make the argument that you are only trying to retire and get paid for it.  Unfortunately, disability insurance claims by doctors and other healthcare professionals are especially targeted for denial or termination.

When you are disabled and are no longer able to practice in your profession, it may seem logical to simply refer to yourself as “retired,” especially if you are not working in another capacity.  While it’s certainly understandable that you may not want to explain to everyone who asks why you’ve hung up your lab coat, you need to keep in mind that innocently referring to yourself as retired will likely prompt your insurer to subject your claim to higher scrutiny.  Insurance companies often attempt to take statements out of context in order to deny or terminate benefits by alleging that a legitimately disabled claimant is:

  • Malingering
  • Making a lifestyle choice.
  • Unmotivated by or unsatisfied with work.
  • Embracing the sick role.

Remember, in the insurance company’s mind, there is a big difference between “disabled” and “retired.” Below are some common situations where you should avoid referring to yourself as retired:

  • When asked for your profession on claim forms.
  • When talking to your doctors or filling out medical paperwork.
  • On your taxes, other financial forms, and applications.
  • Around the office.
  • At social functions or gatherings.
  • On social media.

Insurers can—and often do—employ private investigators to follow claimants on social media; interview staff, family, or acquaintances; and track down “paper trail” documents (such as professional license renewal forms, loan applications, etc.) to see if you have made any statements that could be construed as inconsistent with your disability claim.  Insurers also routinely request medical records and may even contact your doctor(s) directly regarding your disability.  So, for example, saying something off-hand or even jokingly, such as “I’m retired—I can stay out as late as I want now!” to your doctor, or at a social event like a block party, could lead to your insurer trying to deny your claim if they later spoke to your doctor or your neighbor.

While the focus of your claim should be on your condition and how it prevents you from working, insurance companies can latch on to innocent statements like this in an effort to deny legitimate claims. Eschewing the word “retirement” is a good and easy first step to help avoid unwanted and unwarranted scrutiny from insurers.

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Understanding Your Policy: Examination Provisions

Disability insurance companies are constantly searching for new ways to expand the power and control they have over their policyholders through the use of restrictive policy provisions.  In previous posts we’ve discussed how disability insurers are expanding their control over their policyholders’ medical treatment by implementing more stringent care provisions.  However, care provisions are not the only avenue for disability insurers to exert a greater degree of influence in the claims process.  Over the years, insurers have also expanded the scope of their authority under examination provisions.

The most basic examination provisions simply notify the policyholder that he or she may be examined by the insurer’s doctor or interviewed by a representative of the insurer, like this policy from Northwestern Mutual:

  • Medical Examination. The Company may have the Insured examined by a health care practitioner.
  • Personal Interview. The Company may conduct a personal interview of the Insured.
  • Financial Examination. The Company may have the financial records of the Insured or the Owner examined.

Taken alone, this does not seem to onerous.  However, you need to watch out for additional requirements buried at the end of the provision:

Any examination or interview will be performed:

  • At the Company’s expense;
  • By a health care practitioner, interviewer or financial examiner of the Company’s choice; and
  • As often as is reasonably necessary in connection with a claim.

The final sentence of this provision leaves the open the possibility of multiple interviews throughout the claim, and may be overlooked by a claimant who does not carefully review his or her policy.

Other provisions, like this medical examination provision from a Standard Insurance Company individual disability insurance policy, expressly condition the payment of benefits on your cooperation with the exam:

MEDICAL EXAM – We can have Physicians or vocational specialists examine You, at Our expense, as often as reasonably necessary while You claim to be Disabled.  Any such examination will be conducted by one or more Physicians or vocational specialists We choose.  We may defer or suspend payment of benefits if you fail to attend an examination or fail to cooperate with the person conducting the examination.  Benefits may be resumed, provided that the required examination occurs within a reasonable time and benefits are otherwise payable.

In newer policies the language used by the disability insurance companies has become ever more burdensome.  For instance, some modern provisions for examinations and interviews create far more specific duties for the policyholder and condition the payment of benefits on the claimant’s satisfaction of these duties.  Take this Guardian policy, for example, which outlines the policyholder’s duties and obligations to comply with examinations and interviews in very specific language:

We have the right to have You examined at Our expense and as often as We may reasonably require to determine Your eligibility for benefits under the Policy as part of Proof of Loss. We reserve the right to select the examiner. The examiner will be a specialist appropriate to the assessment of Your claim.

The examinations may include but are not limited to medical examinations, functional capacity examinations, psychiatric examinations, vocational evaluations, rehabilitation evaluations, and occupational analyses. Such examinations may include any related tests that are reasonably necessary to the performance of the examination. We will pay for the examination. We may deny or suspend benefits under the Policy if You fail to attend an examination or fail to cooperate with the examiner.

You must meet with Our representative for a personal interview or review of records at such time and place, and as frequently as We reasonably require. Upon Our request, You must provide appropriate documentation.

Examination provisions containing language this specific and this restrictive significantly limit your rights.  The most significant change in the evolution of the examination provision is the number of obligations upon which your benefits are conditioned.  This policy language allows disability insurers to use your benefits as leverage to compel your compliance with medical exams, interviews, and a litany of other examinations.

Review your disability insurance policy, and particularly your examination provisions in the “Claims” section, to determine what your rights, duties, and obligations are under your policy.  Unfortunately, if your policy requires to participate in examinations, a refusal will likely lead to a denial of benefits.  However, you do not have to attend alone.  No matter how restrictive the language in your disability insurance policy, you always have the right to have an attorney present for any examination or interview.  If you have any questions about your duties or obligations under your policy, contact an experienced disability insurance attorney.

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Ninth Circuit Determines That Persons Who Can’t Sit for More than Four Hours Can’t Perform Sedentary Work

 

In a previous post, we summarized the five exertion levels (sedentary work, light work, medium work, heavy work, and very heavy work), as defined by the Dictionary of Occupational Titles (DOT), and discussed why they matter in the context of disability claims.  Essentially, these exertion levels function as broad classifications that are used to categorize particular jobs and occupations.  The physical requirements under each exertion level increase as you move up from level to level, with sedentary work requiring the least physical exertion and very heavy work requiring the most physical exertion.

If you have an “own occupation” policy, these exertion levels will likely not come into play, because the terms of your policy will require your insurer to consider the particular duties of your specific occupation, as opposed to the broader requirements of the various exertion levels.  However, if you have an “any occupation” policy, which requires you to establish that your disability prevents you from working in any capacity, your insurer will likely seek to determine your restrictions and limitations at the outset of your claim, using claim forms or possibly a functional capacity evaluation (FCE).  Once they have done so, they will then likely seek to fit you into one of the five exertion levels listed above and have their in-house vocational consultant provide them with a list of jobs that you can perform given your limitations.

Not surprisingly, your insurer will generally try to fit you into the highest category possible, and then argue that you can perform all of the jobs at that exertion level, and all jobs classified at a lower exertion level.  Typically, someone suffering from a disabling condition can easily establish that they cannot perform medium, heavy, or very heavy work, so, in most cases, the insurer will be trying to establish that you can perform light work, or sedentary work, at the very least.

As you might expect, one of the key differences between sedentary and light work is that sedentary work mostly involves sitting, without much need for physical exertion, whereas light work involves a significant amount of walking and standing, in addition to other physical requirements, such as the ability to push or pull objects and the ability to operate controls.  Given the low physical demands of sedentary work, it can often be difficult to establish that you cannot perform sedentary work.  This can be problematic, because there are many jobs that qualify as sedentary work.  However, if you have a disability that prevents you from sitting for extended periods of time, the very thing that makes sedentary work less physically demanding—i.e. the fact that you can sit during the job—actually ends up being the very reason why you cannot perform sedentary work.

While this is a common sense argument, many insurance companies refuse to accept it and nevertheless determine that claimants who cannot sit for extended periods of time can perform sedentary work.  However, the Ninth Circuit Court of Appeals recently held in Armani v. Northwestern Mutual Life Insurance Company that insurers must consider how long a claimant can sit at a time when assessing whether they can perform sedentary work.

Avery Armani was a full-time controller for the Renaissance Insurance Agency who injured his back on the job in January 2011.  He eventually stopped working as a result of the pain from a disc herniation, muscle spasms, and sciatica.  Multiple doctors confirmed that Avery was unable to perform the duties of his job, which required him to sit for approximately seven hours per day. In July 2011, Northwestern Mutual classified Avery’s occupation as “sedentary” and approved his claim under the “own occupation” provision of his employer-sponsored plan.

Despite regular statements to Northwestern Mutual from his doctor that he could only sit between two and four hours a day and must alternate between standing and sitting every thirty minutes, Avery’s disability benefits were terminated in July 2013.  Northwestern Mutual’s claims handler identified three similar positions in addition to Avery’s own position that he could perform at a “sedentary” level, and determined that his condition no longer qualified as a disability under his policy.

When his benefits were terminated, Avery sued Northwestern Mutual.  After several years, his case ultimately reached the Ninth Circuit Court of Appeals.  In resolving the case, the Ninth Circuit held that an individual who cannot sit more than four hours in an eight-hour workday cannot perform “sedentary” work that requires “sitting most of the time.”  In reaching its conclusion, the Ninth Circuit cited seven other federal courts that follow similar rules, including the Second Circuit Court of Appeals, the Sixth Circuit Court of Appeals, the District of Oregon, the Central District of California, the Northern District of New York, the Southern District of New York, and the District of Vermont.

While this case is not binding in every jurisdiction, it does serve to reinforce the common sense argument that a claimant who cannot sit for extended periods of time due to his or her disability cannot perform sedentary work.  Additionally, though this rule was created in the context of a disability insurance policy governed by ERISA, the court did not qualify its definition or expressly limit its holding to cases involving employer-sponsored policies.  Accordingly, in light of this recent ruling, it would be reasonable to argue that a court assessing an “own occupation” provision of an individual policy should similarly consider whether sitting for extended periods of time is a material and substantial duty of the insured’s occupation.  If it is, and the insured has a condition that prevents him or her from sitting for more than four hours of a time—such as deep vein thrombosis (DVT) or chronic pain due to degenerative disc disease—then the insured arguably cannot perform his or her prior occupation and is entitled to disability benefits.

In short, the Armani case is noteworthy because its reasoning could potentially be applied to not only ERISA cases, but also disability cases involving individual policies and occupations—such as oral surgeon, endodontist, periodontist, attorney, accountant, etc.—that require the insured to sit for long periods of time in order to perform the occupation’s material duties.  It will be interesting to see if, in the future, courts expand the Armani holding to cases involving individual policies outside of the ERISA context.

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Source: Armani v. Northwestern Mutual Life Insurance Company, No. 14-56866, 2016 WL 6543523 (2016)

 

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Can Your Disability Insurance Company Dictate The Medical Treatment You Must Receive To Collect Benefits? Part 4

Care Dictation Provisions

Throughout this series of posts we’ve addressed the increasingly restrictive medical care provisions in disability insurance policies.  In Part 1, we discussed the evolution of the care standard and its effect on an insured’s ability to collect benefits and control their own medical treatment.  In Part 2 we looked at the “regular care” standard, which places no obligation on the insured to undergo any unwanted medical treatment.  In Part 3 we looked at the “appropriate care” and “most appropriate care” standards, which require much more vigilance on the part of policyholders, because they must be prepared at any time to establish that the treatment they are receiving is justified under the circumstances.  In this final post, we are going to look at the most aggressive and intrusive language that has been adopted by insurance companies in an effort to dictate the care of their policyholders.

Here is an example of a very strict care provision, taken from a Great West policy:

Regular Care of a Physician means personal care and treatment by a qualified Physician, which under prevailing medical standards is appropriate to the condition causing Total Disability or Residual Disability.  This care and treatment must be at such intervals as will tend to lead to a cure, alleviation, or minimization of the condition(s) causing Total Disability or Residual Disability and which will lead to the Member’s return to the substantial and material duties of his own profession or occupation or maximum medical improvement with appropriate maintenance care.

Clearly, this provision was designed with one goal in mind:  to give the insurer nearly unlimited power to scrutinize a policyholder’s course of treatment, including the ability to insist that any given procedure is necessary to cure or minimize the disability and maximize medical improvement.  It is easy to see how an insurer might invoke this provision to assert its control over the medical decision making of their policyholder and use the leverage of benefit termination and claims denial to dictate their treatment.

Imagine that you are a surgeon with a herniated disc in your cervical spine, and that your policy contains the provision cited above.  Your insurer insists that a fusion of the surrounding vertebra is the procedure most likely to alleviate your disability. Your doctor disagrees, recommending a more conservative course of treatment, such as physical therapy, modified activity and medication, such as muscle relaxants.  Your doctor also warns you that if you have the surgery, you will experience reduced mobility and risk adjacent segment degeneration.  However, your disability benefits are your only source of income.  Fearing a claim denial, you agree to the procedure despite your doctor’s concerns.  This results in a no-lose scenario for the insurer.

The best case scenario, from your insurer’s perspective, is that the surgery (for which you bore all the risk both physically and financially) is successful and you are no longer disabled.  At worst, the procedure fails and the insurer merely has to pay the benefits it was obligated to pay to you in the first place.  For you, however, an unsuccessful procedure can mean exacerbation of your condition, increased pain, and prolonged suffering.  It is therefore vital that you understand your rights under your policy.

Insurers are risk-averse by nature, and disability insurance is no different.  Modern disability insurance policies, and particularly the medical care provisions, are designed to minimize the financial risk to the insurer. Insurers place an enormous burden on claimants to prove that their course of treatment meets the rigorous standards in their policy. Though stringent policy language can make it significantly more difficult to obtain the benefits you are entitled to, it does not strip you of your right to make your own medical decisions.

In order to preserve your medical autonomy in the disability claims process, you must become familiar with the details of your policy before filing a claim.  Understanding the terms of your policy—including the care provision in your policy—is critical to successfully navigating a disability claim.  You need to be familiar with your policy’s care requirements from the outset, so that you can communicate effectively with your physician to develop a plan of treatment that you are comfortable with and that comports with the terms of your policy.

Even if you have a basic understanding of your rights under you policy, it can be daunting to deal with an insurer that is aggressively seeking to dictate your medical care.  In some cases, you may be forced to go to court to assert your right to make your own medical decisions—particularly if your policy contains one of the more recent, hyper-restrictive care provisions like the Great West provision above.  Insurers know this, and they also know that most claimants are in no position to engage in a protracted court battle over whether they are receiving appropriate care.  However, simply submitting to the medical mandates of your insurer to avoid the stresses and costs associated with litigation can have drastic consequences, depending on the nature of the medical care you are being asked to submit to.  If you should find yourself in this difficult position, you should contact an experienced disability insurance attorney.  He or she will be able to inform you of your rights under your policy and help you make an informed decision.

 

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Can Your Disability Insurance Company Dictate The Medical Treatment You Must Receive To Collect Benefits? Part 3

“Appropriate Care” and “Most Appropriate Care”

In this series, we are looking at the different types of care provisions disability insurers insert into their policies so that they can later argue that they have a right to dictate the terms of your medical care.  In Part 1, we discussed how many policyholders do not even realize that their policy contains a care provision until the insurance company threatens to deny their claim for failure to obtain what the insurer perceives as sufficient medical care.  We also discussed how care provisions have evolved over time to become more and more onerous to policyholders.  In Part 2, we looked at one of the earliest and least stringent care provisions—the “regular care” provision—in detail.

In this post, we will be looking at a stricter care provision—the “appropriate care” provision.  Here is an example of a typical “appropriate care” provision:

Appropriate Care means you are receiving care by a Physician which is appropriate for the condition causing the disability.”

Disability insurance carriers implemented this policy language to allow their claims handlers and in-house doctors to weigh in on the type and quality of care their policyholders receive.  As you’ll remember from Part 2 of this series, “regular care” provisions only required policyholders to be monitored regularly by a physician.  Thus, under a “regular care” provision, as long as the policyholder was seeing a doctor, the insurer could not scrutinize or direct his or her treatment.  Only by changing the policy language could they hope to have greater influence over the medical decisions of their policyholders.

This prompted insurers to add the additional requirement that the care must be “appropriate.”  But what is “appropriate?” If you are suffering from cervical spinal stenosis, you likely have several reasonable treatment options available to you. For example, your physician might recommend physical therapy, but also indicate that you would be a candidate for more invasive treatment, such as steroid injections.  If you have an “appropriate care” provision, does that mean that your insurer gets to decide which treatment you receive?

When presented with this question, most courts determined that “appropriate care” limits the insurer’s review of its policyholder’s care to whether it was necessary and causally related to the condition causing the disability.[1]  Courts also held that “appropriate” care does not mean perfect care or the best possible care—it simply means care that is suitable under the circumstances.[2]  Thus, if physical therapy, steroid injections, and surgery are all suitable treatments for cervical stenosis, most courts agree that your insurer cannot deny your claim or terminate your benefits based upon your decision to undergo a course of treatment they view as less effective than another.

In response to these cases, disability insurers again modified their policy language and created the “most appropriate” care provision.  Here is an example of what a “most appropriate” care provision looks like:

“[You must receive] appropriate treatment and care, which conforms with generally           accepted medical standards, by a doctor whose specialty or experience is the most      appropriate for the disabling condition.”

This change places significant restrictions on a claimant’s autonomy not only because it limits the type of physician the claimant may choose, but because it restricts the claimant’s medical care to a singular “appropriate” course of treatment.

These types of provisions can make collecting disability benefits extremely difficult.  For example, take the experience of Laura Neeb, a hospital administrator whose chemical sensitivity allergies became so severe that they rendered her totally disabled.  After one of her doctors—Dr. Grodofsky—concluded that she had no identifiable allergies, Ms. Need sought another opinion from Dr. William Rea, founder of the Environmental Health Center in Dallas, Texas.  Dr. Rea concluded that Ms. Neeb’s hypersensitivity to chemicals was so severe that she was “unable to engage in any type of work,” and required extensive treatment to manage the condition.  Ms. Neeb’s insurer, Unum, nonetheless denied the claim.  The court ultimately held that Ms. Neeb failed to obtain the “most appropriate care” by treating with Dr. Rea, agreeing with Unum that Dr. Grodofsky’s conclusions were correct.[3]

Ms. Neeb’s case illustrates just how restrictive the “most appropriate care” provision can be. It places the burden squarely on the policyholder to show that their chosen course of treatment and treatment provider are most appropriate for their condition.  If your policy contains a “most appropriate care” provision, it is essential that you find a qualified, supportive treatment provider who is willing to carefully document your treatment and the reasoning behind it.  You do not want to place yourself in a position where you cannot justify the treatment you are receiving and must choose between an unwanted medical procedure and losing your benefits.

In the final post of this series, we will discuss the hyper-restrictive care provisions appearing in disability insurance policies being issued today and the serious threats they pose to patient autonomy.

[1] 617 N.W.2d 777 (Mich. Ct. App. 2000)

[2] Sebastian v. Provident Life and Accident Insurance Co., 73 F.Supp.2d 521 (D. Md. 1999)

[3] Neeb v. Unum Life Ins. Co. of America, 2005 WL 839666 (2005).

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Can Your Disability Insurance Company Dictate The Medical Treatment You Must Receive To Collect Benefits? Part 2

“Regular Care”

If you are a doctor or dentist and you bought your individual disability insurance policy in the 1980s or 1990s, the medical care provision in your policy likely contains some variation of the following language:

Physician’s Care means you are under the regular care and attendance of a physician.”

This type of care provision is probably the least stringent of all the care provisions.  If your policy contains a “regular care” provision, courts have determined that you are under no obligation to minimize or mitigate your disability by undergoing medical treatment.[1]  In other words, you cannot be penalized for refusing to undergo surgery or other procedures—even if the procedure in question is minimally invasive and usually successful.[2]

Let’s look at an actual case involving a “regular care” provision.  In Heller v. Equitable Life Assurance Society, Dr. Stanley Heller was an invasive cardiologist suffering from carpal tunnel syndrome who declined to undergo corrective surgery on his left hand.  Equitable Life refused to pay his disability benefits, insisting that the surgery was routine, low risk, and required by the “regular care” provision of Dr. Heller’s policy.  The U.S. Court of Appeals disagreed, and determined that the “regular care” provision did not grant Equitable Life the right to scrutinize or direct Dr. Heller’s treatment.  To the contrary, the Court held that “regular care” simply meant that Dr. Heller’s health must be monitored by a treatment provider on a regular basis.[3]

Unfortunately, the Heller case didn’t stop insurance companies from looking for other ways to control policyholders’ care and threaten denial of benefits.  For instance, some disability insurance providers argued that provisions requiring policyholders to “cooperate” with their insurer grants them the right to request that a policyholder undergo surgery.  Remarkably, when insurers employ these tactics, they are interpreting the policy language in the broadest manner possible–even though they know that the laws in virtually every state require that insurance policies be construed narrowly against the insurer.

Why would insurance companies make these sorts of claims when it is likely that they would ultimately lose in court?  Because insurance companies also know that even if their position is wrong, most insureds who are disabled and/or prohibited from working under their disability policy cannot handle the strain and burden of protracted litigation.  They know that if they threaten to deny or terminate benefits, many insureds will seriously consider having surgery—if only to avoid the stress and expense of a lawsuit.  Unfortunately, this can lead to insureds submitting to unwanted medical procedures, despite having no legal obligation to do so.

As time went on, and more and more courts began to hold that “regular care” simply meant that the insured must regularly visit his or her doctor, Unum, Great West, Guardian, and other insurers stopped issuing policies containing that language.  Instead, insurers started to insert “appropriate care” standards into policies.  In the next post, we will discuss this heightened standard and how insurers predictably used it as a vehicle to challenge the judgment of policyholders’ doctors, in a renewed effort to dictate their policyholders’ medical care.

[1] Casson v. Nationwide Ins. Co., 455 A.2d 361, 366-77 (Del. Super. 1982)

[2] North American Acc. Ins. Co. v. Henderson, 170 So. 528, 529-30 (Miss. 1937)

[3] Heller v. Equitable Life Assurance Society, 833 F.2d 1253 (7th Cir. 1987)

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The Devil Is In the Details: Long Term Disability Policies and Benefit Offsets

In a previous post, we discussed a feature of long-term disability insurance policies that is easily overlooked and frequently leaves policyholders feeling cheated and deceived by their insurer:  the benefit offset provision.  When a person signs up for a disability insurance policy, he or she expects to pay a certain premium in exchange for the assurance that the insurance company will provide the agreed-upon monthly benefit listed in the policy, should they ever become disabled.  What many people do not realize is that some disability insurance policies contain language that permits the insurer to reduce the amount of monthly benefits it is required to pay if the policyholder receives other benefits from another source.

Worker’s compensation, supplementary disability insurance policies, state disability benefits, and social security are some of the most common “other sources” from which policyholders may unexpectedly find their disability insurance benefits subject to an offset.  The frequency of offset provisions varies by policy type.  They are more likely to appear in group policies and employer-sponsored ERISA policies, and are rarely found in individual disability insurance policies.

Benefit offset provisions can have significant and often unforeseen financial repercussions, as illustrated by the recent account of a couple from Fremont, Nebraska.  As reported by WOWT Channel 6 News, Mike Rydel and his wife Carla were receiving monthly benefits under Mr. Rydel’s disability insurance policy with Cigna.  Mr. Rydel had suffered a stroke in the fall of 2015 that had left him incapacitated and unable to work.  The Rydels’ financial situation was made even more dire by Mr. Rydel’s need for 24-hour care, which prevented Mrs. Rydel from working as well.

In an effort to supplement his family’s income, Mr. Rydel applied for Social Security disability benefits.  When his claim was approved, the Rydels expected a much needed boost to their monthly income.  Unfortunately, due to an offset provision in Mr. Rydel’s policy, his monthly benefits under the Cigna policy were reduced as a result of the approved Social Security claim, and his family did not realize any increase in income.

The Rydels were understandably shocked when they were informed by Cigna that Mr. Rydel’s monthly disability insurance benefits would be reduced by the amount he was now receiving from Social Security, and that Cigna would be pocketing the difference.  Perversely, the only party that benefited from Mr. Rydel’s SSDI benefits was Cigna, which was off the hook for a portion of Mr. Rydel’s monthly benefits.  In response to an inquiry from WOWT, Cigna simply asserted that “coordination” of private insurance benefits and government benefits was a long-standing practice – an assurance that likely provided no solace to the Rydels.

The Rydels’ story highlights the importance of carefully reviewing every aspect of your disability insurance policy before signing.  Benefit offsets, policy riders, occupational definitions, and appropriate care standards in your policy can significantly impact your ability to collect full benefits if you become disabled.  You should review your policy carefully to determine if it contains any offset provisions that may affect your benefits.  If it does, you will need to take them into account when estimating your monthly benefits.

References:

http://www.wowt.com/content/news/Stroke-Victim-Suffers-Disability-Insurance-Set-Back-385758411.html

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Unum Study Shows an Increase in Musculoskeletal Disability Claims Over the Past Decade

As we have discussed in previous posts, musculoskeletal disorders are very common among dentists due to the repetitive movements and awkward static positions required to perform dental procedures. Unum, one of the largest private disability insurers in the United States, recently released statistics showing an increase in the filing of musculoskeletal disability claims over the past 10 years.

According to Unum’s internal statistics, long term disability claims related to musculoskeletal issues have risen approximately 33% over the past ten years, and long term disability claims related to joint disorders have risen approximately 22%.  In that same period of time, short term disability claims for musculoskeletal issues have increased by 14%, and short term disability claims for joint disorders have risen 26%.

This trend may lead to Unum directing a greater degree of attention towards musculoskeletal claims as the volume of these claims continues to increase.  Musculoskeletal claims are often targeted by insurance companies for denial or termination because they are easy to undercut—primarily due to the limitations of medical testing in this area.  For instance, it can be difficult to definitively link a patient’s particular subjective symptoms to specific results on an MRI, and other tests, such as EMGs, are not always reliable indicators of the symptoms that a patient is actually experiencing.  Insurers also typically conduct surveillance on individuals with neck and back problems in an effort to collect footage they can use to deny or terminate the claim.  While such footage is usually taken out of context, it can be very difficult to convince the insurance company (or a jury) to reverse a claim denial once the insurer has obtained photos or videos of activities that appear inconsistent with the insured’s disability.

As we have noted in a previous post, Unum no longer sells individual disability insurance policies, so its disability insurance related income is now limited to the premiums being collected on existing policies.  Because benefit denials and termination are the primary ways insurers like Unum can continue to profit from a closed block of business, and musculoskeletal claims are on the rise, Unum may begin subjecting this type of claim to even higher scrutiny.

References:

http://www.businesswire.com/news/home/20160505006009/en/Aging-obesity-tip-scales-10-year-review-Unum

 

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Thinking About a Policy Buyout? How Lump Sum Settlements Work: Part 2

In this two-part series we are addressing the two most common scenarios in which insurance companies pursue lump sum buyouts.  In Part 1, we talked about buyouts for individuals who are totally and permanently disabled and have been on claim for several years.  In Part 2, we will address the other scenario in which buyouts occur: after a lawsuit has been filed.

In the context of an individual disability insurance policy, a lawsuit is generally filed in one of two common scenarios: (1) a person on claim with a legitimate disability has their benefits terminated; or, (2) a person with a legitimate disability has their claim denied.  A lawsuit is typically considered to be the last line of defense in the claims process.  By the time a lawsuit has been filed, the claimant’s attorney has likely exhausted every available means to resolve the claim without legal action.  Litigation is costly, time-consuming, and can drag on for years.

If an insurance company offers a lump sum buyout during litigation, it will typically be at one of three stages in the case: (1) after the Complaint and Answer are filed; (2) after all stages of pretrial litigation and discovery are complete; or (3) after the claimant/plaintiff wins at trial.

The first stage of any lawsuit is the filing of the Complaint.  This is a document the plaintiff files with the court outlining all of the claims and allegations against the defendant.  After receiving a copy of the Complaint, the defendant then has a specified period of time in which to file an Answer responding to the plaintiff’s allegations.

Prior to the filing of a lawsuit, a contested claim has likely been reviewed only by the insurance company’s in-house attorneys.  However, once litigation begins, the insurance company will retain a law firm experienced in insurance litigation to handle the case.  After the filing of the Complaint, the insurance company’s outside counsel will have the opportunity to evaluate the strength of the case and the claim.  Viewing the case through the prism of their experience, the insurer’s litigation team may recommend offering a buyout to avoid the risk, costs, and time associated with the lawsuit.

The second point of a lawsuit at which a buyout may occur is after all stages of pretrial litigation are complete.  Once the parties have had the opportunity to conduct discovery and litigate any pretrial motions, they will have a full picture of the case and their prospects at trial.  Through discovery both sides will be able to obtain all documents and interview all witnesses the other side intends to use at trial.  Through the filing of pretrial motions the parties can attempt to prevent or limit the use of certain evidence or witnesses at trial.

At this juncture, the insurance company may seek to avoid the risks of trial and settle the claim before the first juror is ever impaneled.  The insurance company’s incentive to resolve the case at this point – even after both sides have invested substantial resources in the litigation – is the financial exposure and bad publicity it faces with a loss at trial.  Additionally, a bad result at trial for the insurance company could create undesirable legal precedent for future cases.

If a jury (or a judge, depending on the case) determines that the insurance company has unlawfully denied or terminated a legitimate disability claim, the insurer will not only be required to pay the benefits the claimant/plaintiff is entitled to, but may also be liable for damages and other costs.  The insurer may be required to pay back benefits, plaintiff’s attorneys’ fees and costs, consequential damages, and punitive damages.

In the context of a disability insurance lawsuit, consequential damages come in the form of any financial harm to the claimant/plaintiff resulting from the insurer’s denial or termination of benefits.  For example, if the insurer’s termination of benefits led to the claimant/plaintiff losing their house in foreclosure, the insurer could be liable for consequential damages.  Punitive damages are designed to deter the insurer from denying legitimate claims in the future, and can be multiplied several times over if the insurer is found to have acted in bad faith.  Additionally, some states allow acceleration of benefits – in which the courts can order the insurer to immediately pay future benefits that would owed to the claimant/plaintiff over the full life of the policy.

The final stage at which a lump sum buyout may be offered is after a victory at trial by the claimant/plaintiff.  You may be wondering why anybody would entertain a settlement offer right after a being awarded back benefits, damages, and costs at trial – why accept anything less?  The answer is simple: appeals.  The insurance company can tie up a trial court victory in the court of appeals for years, which they can use as leverage to offer a settlement smaller than the trial award.

Though these three stages of litigation are the most common points at which a buyout may occur, buyouts themselves are uncommon during litigation.  Depending on the situation, the specter of a long, drawn out legal battle can either provide the insurance company with the incentive to settle the lawsuit early with a buyout or harden its resolve to fight the claim to the bitter end.  You cannot count on simply filing a lawsuit and expecting the insurance company to be eager to settle.  Some insurance companies want to settle early and avoid the financial risks and bad publicity of a defeat at trial, while others take a hard line and use their nearly limitless resources to fight a war of attrition.  Ultimately, whether or not an insurer offers a lump sum buyout in the midst of litigation depends largely on the individual facts of the case, the risks at trial, and the parties and attorneys involved.

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Thinking About A Policy Buyout? How Lump Sum Settlements Work: Part 1

Lump sum buyouts are a frequent source of questions from our clients and potential clients. With that in mind, the next few posts will address different aspects of the buyout process.

Buyouts typically occur in one of two situations: 1) after you’ve been on claim for several years, or 2) after a lawsuit has been filed.  This blog post will focus on the first scenario.

Lump sum buyouts that occur outside of litigation normally won’t occur unless and until the insurance company decides that you are totally and permanently disabled under the policy definition.  Typically, the insurer won’t consider whether this is the case until you’ve been on claim for at least two years.  If the insurer determines that you’re totally and permanently disabled, it will then determine whether it makes sense financially for the company to offer you a percentage of your total future benefits rather than keep paying your monthly benefits for the entire duration of your claim.

To understand how the insurance company calculates whether a buyout is in its financial interest, you should understand how insurance company reserves work.  The purpose of reserves is to ensure that the insurance company has the resources to fulfill its obligations to policyholders even if the company has financial difficulties.  Thus, disability insurers are required by state regulators to keep a certain amount of money set aside, or “reserved,” to pay future claims.  Any money required to be kept in a reserve is money that the insurer can’t spend on other things or pay out in dividends.  The amounts required to be kept in the reserve are determined by the state, depending on factors like how much the monthly benefit is and how long the claim is expected to last.

For a disability insurance claim, a graph of the required reserve amount over time looks like a Bell curve: low at the beginning, highest in the middle, and low again towards the end of the benefit period.  The ideal time for a settlement, from an insurance company’s perspective, is at or just before the high middle point–typically about five to seven years into the claim, depending on the claimant’s age and the duration of the benefit period.  At this point, the company is having to set aside the highest amount of money in the reserve.

If the insurance company can pay you a percentage of your total future benefits, it can not only save money in the long run, but it can release the money in the reserve.  The insurer can then use those funds for other purposes, including providing dividends for its investors.  In addition, the insurance company will save all of the administrative expenses it was putting towards monitoring your claim.

In the next post, we’ll address how and why buyouts occur after a lawsuit has been filed.

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