We frequently emphasize how important it is to consult with a disability insurance law firm before filing a claim. But what about at the moment when you realize that you’re too sick to work? It is vitally important to consult with an attorney specializing in disability law as soon as possible. A recent case in which the insured was denied benefits illustrates the importance of consulting with an attorney from the very beginning of your illness. There are often clauses in your policy which require up-front strategic planning to preserve your claim. In the case discussed here, the insured found himself possibly covered by two plans but ultimately unable to collect from either.
Paul McKay was employed beginning in 1999 as an attorney at U.S. Xpress, which provided a long-term disability plan to its employees. Prior to January 1, 2004, this plan was provided by Unum. On that date, U.S. Xpress switched disability insurance providers to Reliance. Insurance coverage was supposed to be uninterrupted with employees retaining continuous disability insurance, and in fact it was. But McKay fell between the cracks due to disparate language in the policies.
During his employment, McKay developed significant cervical spine problems, and he eventually underwent surgery in June 2003. Unfortunately between September through December 2003, his condition continued to worsen. At that point he had severe cervical and lumbar disc disease, was frequently absent, and his medication made mental concentration more difficult. His last day of work at the office was December 19, 2003. He intended to work from home during January 2004, but there was no evidence that he was able to do so. U.S. Xpress continued paying McKay his usual salary until January 16 and then fired him on January 19, 2004.
McKay filed a claim with Unum (the insurer prior to January 1, 2004) for disability benefits, contending that he was disabled under the policy. Unum denied the claim. The court affirmed the denial. The problem for McKay was that his Unum policy contained a clause requiring a 20% loss in monthly earnings as a qualifying condition for disability benefits. Unum successfully argued that through December 31, 2003, McKay had not had any loss of earnings as U.S. Xpress had in fact paid him his full salary into January 2004. McKay argued that he may have received his salary but he was incapable of earning it. The court followed the plain language of the policy and regardless of whether McKay earned his keep in December, found no loss and ruled that he was ineligible for benefits.
Reasonably enough, McKay rationalized that if Unum wouldn’t cover him, then he must be covered by Reliance (who took over on January 1). He filed a claim with Reliance, only to discover that Reliance’s policy had two important but often-overlooked requirements: To be eligible for insurance without the usual 60-day waiting period (which would have started coverage on March 1), McKay had to be “actively at work” as of January 1 and his disability had to begin on or after January 1. Reliance denied the claim, asserting that McKay wasn’t “actively at work” because he was not working full-time (at least 33 hours per week) as of January 1. Recall that McKay had attempted to establish his eligibility under Unum by arguing that he had suffered a loss in earnings in December because after December 19 he wasn’t actually earning—just receiving—his salary. McKay’s statements, which had been made in support of his Unum claim, were outrageously used by Reliance to deny him benefits under Reliance’s plan.
The injustice gets worse. As a second reason for denying the claim, Reliance argued that since McKay had asserted a December disability date to Unum, had left the office after December 19, and had since received Social Security disability benefits based on a December 2003 disability date, McKay’s disability began before January 1. Thus, he was ineligible for benefits under Reliance’s plan. The court agreed with Reliance’s reasoning.
On appeal, the Circuit Court affirmed the lower court’s rulings. The Court noted that “McKay argues that because U.S. Xpress maintained uninterrupted LTD insurance coverage during the time period in which he sustained his disability, he must be covered by one of the two policies. McKay’s argument, while somewhat logical, is incorrect. Whether he is covered by either Unum or Reliance, or both, turns on the terms of each policy.” (emphasis added). And so it ends. Paul McKay, who was always “covered” by long-term disability insurance, turned out to not be covered at all. He receives no benefits from either policy, thanks to a coincidence of timing. Each insurer used his statements to the other to deny coverage, leaving him in a no-win scenario.
What can be done differently? Paul McKay should have immediately consulted a disability insurance attorney as soon as he suspected that he might become too ill to work. The attorney could have examined the policies and the upcoming switch in coverage and worked with Paul to develop a strategy to preserve his claim, such as resigning in December and immediately applying for benefits. This case underscores the importance of coordinated planning with an experienced disability insurance attorney.