In a previous post, we discussed the importance of how your policy defines the key term “total disability,” and provides several examples of “total disability” definitions. The definition of “total disability” in your policy can be good, bad, or somewhere in-between when it comes to collecting your benefits.
Policies with “true own occupation” provisions are ideal. Here’s an example of a “true own occupation” provision:
Under this type of provision, you are “totally disabled” if you can’t work in your occupation (for example, you can no longer perform dentistry). This means that you can still work in a different field and receive your benefits under this type of policy.
Insurance companies often try to make other policies look like true own occupation policies, and include phrases like “own occupation” or “your occupation,” but then tack on additional qualifiers to create more restrictive policies.
One common example of a restriction you should watch out for is a “no work” provision. Although these provisions can contain the phrase “your occupation” they only pay total disability benefits if you are not working in any occupation. Here’s an example from an actual policy:
As you can see, under this type of provision, you cannot work in another field and still receive benefits. This can be problematic if you do not have sufficient disability coverage to meet all of your monthly expenses, as you’re not able to work to supplement your income.
A “no work” provision is something that is relatively easy to recognize and catch, if you read your policy carefully. Recently, we have come across a definition of “total disability” that is not so easy to spot, but can dramatically impact you ability to collect benefits. Here’s an example, taken from a 2015 MassMutual policy:
At first glance, this looks like a standard “own-occupation” provision—in fact, it is entitled “Own Occupation Rider.” But if you take the time to read it more closely, you’ll notice that the second bullet point requires you to be working in another occupation in order to receive “total disability” benefits.
Obviously, this is not a policy you want. If you have a severely disabling condition, it may prevent you from working in any occupation, placing you in the unfortunate position of being unable to collect your benefits, even though you are clearly disabled and unable to work in any capacity. Additionally, many professionals have limited training or work history outside their profession, so it can be difficult for them to find alternative employment or transition into another field—particularly later in life.
These “work” provisions appear to be a relatively new phenomenon, and are becoming increasingly more common in the newer policies being issued by insurance companies. It is crucial that you watch out for these “work” provisions and make sure to read both the policies definition of “own-occupation” and “total disability.” While many plans contain the phrase “own-occupation”, including this example, they often aren’t true own-occupation policies and you shouldn’t rely on an insurance agent to disclose this information. Oftentimes, your agent may not even realize all of the ramifications of the language and definitions in the policy that they are selling to you.
Lastly, you’ll also note that this particular provision was not included in the standard “definitions” section of the policy, but was instead attached to the policy as a “rider,” making it even harder to spot. It’s important to remember that many definitions and provisions that limit coverage are contained in riders, which typically appear at the end of your policy. Remember, you should read any policy from start to finish before purchasing.
Provisions Appearing As Policy Terms or As Riders (2 of 2)
In this series of posts we are discussing policy riders, the add-ons to your basic disability insurance policy that provide additional terms or benefits in exchange for higher premiums. In part one, we walked through the basics of policy riders and evaluated the commonly-purchased COLA rider. In part two, we analyzed two benefit-based riders that enable you to increase your monthly benefits without the hassle of applying for additional coverage.
In the part three, we looked at a pair of provisions that may appear as policy terms or as riders, depending on the insurer. Some of these provisions can have a significant effect on your rights and benefits in the event of a disability, and identifying where and how they may fit into your policy is critical to ensuring you are fully protected. In this fourth post, we’ll look at two more provisions that sometimes appear as policy terms and sometimes appear as riders, depending on the insurer.
On this blog we have spent a significant amount of time writing the importance of purchasing an individual disability insurance policy to that defines “Total Disability” in terms of your own occupation, rather than any occupation. This is especially true for doctors, dentists, and other highly specialized professionals who have invested years of time and hundreds of thousands of dollars in their careers.
To determine if you have an own occupation policy, look under the “Definitions” section of your policy for the definition of “Total Disability”:
Total Disability or Totally Disabled means that, solely due to Injury or Sickness, You are not able to perform the material and substantial duties of Your Occupation.
Your Occupation means the regular occupation in which are engaged in at the time you become disabled.
This is a typical own occupation definition of Total Disability. If your policy does not define total disability in terms of Your Occupation, Your Regular Occupation, Your Current Occupation, or similar language, it is unlikely that you have an own occupation policy. If that is the case, you may nonetheless be able to purchase an own occupation rider. An own occupation rider will likely come with a significant premium increase, but for most medical professionals the high cost is justified by the additional income security the provision provides.
Most modern-day disability insurance policies pay benefits until the policyholder reaches age 65, though in some unique cases a standard policy may pay lifetime benefits. More often, however, a lifetime benefits provision must be purchased as a policy rider. The provision usually includes language stipulating that the disabling condition must occur before a certain age (typically between 45 and 55) in order for the policyholder to be eligible for lifetime benefits at 100% of their monthly benefit. If the condition occurs after the cutoff age, the policyholder will only be paid a percentage of their monthly benefits for the remainder of their lifetime. For example, the provision may structured as follows:
Lifetime Benefit Percentage is determined based upon the following table:
If Your continuous The Lifetime Benefit
Total Disability started: Percentage is:
Prior to Age 46 100%
At or after Age 50, but before Age 51 75%
At or after Age 55, but before Age 56 50%
At or after Age 60, but before Age 61 25%
At or after Age 64, but before Age 65 5%
At or after Age 65 0%
A lifetime benefit extension rider can be enormously advantageous if you become disabled prior to the cutoff age. However, as you can see from the table, it can also have rapidly diminishing returns if you become disabled later in life, depending on your policy’s terms.
In the last post of this series on disability insurance policy riders, we’ll be taking a look at some of the more recent policy rider products disability insurance companies are offering to the next generation of professionals, such as the student loan rider.
We have written about Unum, arguably the most notorious disability insurance company, in great detail. However, we realize that many physicians and dentists may not know very much about other disability insurance companies, including those whose policies they own. In the next few posts, we’ll profile some of the most common doctors’ disability insurers.
Company: Massachusetts Mutual Life Insurance Company, a.k.a. MassMutual.
Location: Springfield, Massachusetts.
Associated Entities: Mass Mutual Financial Group (parent company), C.M. Life Insurance Company, MML Bay State Life Insurance Company.
Assets: Over $195 billion in 2013.
Notable Policy Features: As part of its product offerings, MassMutual sells own-occupation disability insurance policies to physicians and dentists. One notable aspect of some MassMutual policies we’ve seen recently is an especially restrictive definition of “Total Disability,” which we sometimes refer to as a “no work” own-occupation definition. Under the “no work” own-occupation definition, an insured is Totally Disabled if he or she is unable to perform the material and substantial duties of his or her own occupation and not working in any occupation. Unlike traditional own-occupation policies that allow a physician or dentist to collect total disability benefits and return to work in a different occupation, this one will not pay total disability benefits if the policyholder is doing any type of gainful work.
Claims Management Approach: MassMutual is a highly successful insurer. In June 2014, it was ranked number 96 in the Fortune 500. However, Fortune reports that MassMutual is currently experiencing a dramatic reduction in profits. If MassMutual follows the current trends in the disability insurance industry, we believe it will increase scrutiny on disability insurance claims in order to try to regain its former profit levels.
In our experience, one of the ways MassMutual aggressively approaches claims is to hire a medical consultant to evaluate claimants’ medical records. The consultant then tries to insert himself or herself between the claimant and the treating physician, writing or calling the treating physician and suggesting treatment methods that, in the consultant’s opinion, will get the claimant back to work as soon as possible.
These profiles are based on our opinions and experience. Additional source(s): MassMutual’s 2013 Annual Report; Fortune 500 2014; Bloomberg.com
When a professional that owns her own business files a disability insurance claim, the insurer will often try to exploit the claimant’s ownership status to deny total disability benefits. The insurance company will argue that the professional has not one, but two occupations: 1) professional and 2) business owner. The disability insurer will argue that the claimant isn’t actually disabled because she can still perform administrative or managerial functions, even if she can’t do the duties of her actual profession. This is sometimes called the “dual occupation defense.”
For example, in Shapiro v. Berkshire Life Insurance Company, Berkshire attempted to use the dual occupation defense to deny total disability benefits to a dentist. The dentist, Paul Shapiro, had an own-occupation policy, with “total disability” defined as “the inability to perform the material and substantial duties of your occupation.”
Dr. Shapiro owned his own practices, but spent the overwhelming majority of his time and effort doing clinical work. He spent 90 percent of his time in chairside dentistry, working on patients, and just 10 percent of his time doing the administrative work that any practice owner needs to accomplish. In fact, in the year before he became disabled, Dr. Shapiro saw nine to eleven patients each day, and performed an average of 275 dental procedures per month, working 40 to 45 hours each week. He only spent one and a half to four hours each week attending to various administrative and managerial duties like personnel decisions, staff meetings, and computer troubleshooting.
After progressive osteoarthritis and spondylosis of the elbow, neck and other joints left Dr. Shapiro unable to perform chairside dentistry, he filed for total disability benefits with Berkshire. Rather than paying him total disability benefits, however, Berkshire determined that Dr. Shapiro was only entitled to partial disability benefits:
Berkshire’s coverage position was that Shapiro’s occupation immediately preceding the onset of his disability was as an administrator and manager of his various dental practices as well as a practitioner of chair dentistry; because the disability did not prevent Shapiro from doing his administrative or managerial work, Berkshire reasoned, Shapiro did not satisfy the policies’ definition of total disability: “the inability to perform the material and substantial duties of your occupation.”
Dr. Shapiro brought a suit against Berkshire in the United States District Court for the Southern District of New York for breach of contract, among other things. That court found in his favor on the breach of contract claim, but Berkshire appealed. The Second Circuit Court of Appeals agreed with the lower court and affirmed the decision in Dr. Shapiro’s favor. The Court of Appeals determined that Dr. Shapiro “spent the vast majority of his time performing chair dentistry,” and that his administrative work was merely incidental to his material and substantial duties as a full-time dentist.
Though Berkshire’s attempt at the dual occupation defense was unsuccessful in this case, the Court of Appeals indicated that there could be some situations in which it might work:
At some point, a medical entrepreneur’s administrative and managerial responsibilities may well become the material and substantial duties of the insured’s occupation.
The message for disability insurance policyholders that own a business is to be careful how much time you spend in administrative tasks, and how you explain your occupation to your insurer. Otherwise, you could be inadvertently setting your claim up for denial.
Under California law, “the term ‘total disability’ does not signify an absolute state of helplessness but means such a disability as renders the insured unable to perform the substantial and material acts necessary to the prosecution of a business or occupation in the usual or customary way. Recovery is not precluded under a total disability provision because the insured is able to perform sporadic tasks, or give attention to simple or inconsequential details incident to the conduct of business.” Erreca v. Western States Life Ins. Co., 19 Cal.2d 388, 396 (1942). Thus, a disability claimant may be “totally disabled” in California despite being physically capable of performing some occupational duties. However, California courts are generally chary to find total disability if a disabled claimant continues working after filing for disability benefits, notwithstanding his physical limitations, and when the income generated from that work is substantially the same as it was before becoming disabled.
Hecht v. Paul Revere Life Ins. Co. offers a good illustration of this. In Hecht v. Paul Revere Life Ins. Co., an executive owner of a successful retail clothing business in Southern California filed for disability benefits with his disability insurance company, Paul Revere, after a car accident resulted in his suffering from neck pain and upper and lower back pain. Although the disability claimant was President and Owner, he involved himself with significant portions of laborious tasks such as lifting, loading and unloading merchandise and climbing ladders. After the accident, he could no longer perform the physical labor.
The disability claimant argued he was “totally disabled” under his disability insurance policy because he could no longer perform the physical labor aspect of his work in “the usual or customary way” as he did pre-disability. The California court agreed that he could no longer perform the physical labor; however, it concluded that such was not a “substantial and material” aspect necessary to the prosecution of his business. In reaching this conclusion, the California court found persuasive the fact that the disabled claimant continued to work every day, notwithstanding his physical limitations, and that the income generated from his contributions to the business was substantially the same as the income pre-disability. Applying Erreca’s “total disability” standard, the California court said:
He has proven by his own actions that he is able to perform “substantial and material acts necessary to the prosecution of a business,” that he is doing more than “sporadic tasks,” and that he is performing more than “simple or inconsequential details incident to the conduct of business.
Therefore, for the purposes of the disability insurance policy, he could not be considered “totally disabled.”
In California, what constitutes “substantial and material acts necessary to the prosecution of a business” is a fact-intensive inquiry. In this case, the facts favored the disability insurance company because the disabled business executive was still capable of performing some occupational duties post-injury, and his participation in these occupational duties generated significant income. When total disability cases involve disabled doctors and disabled dentists, however, they may not be so black-and-white (for an example, check out this blog post). In part, this is because the success of doctor and dental practices depends almost exclusively on a doctor’s or dentist’s ability to perform certain physical acts, such as drilling a hole in a patient’s tooth or performing surgery; this is quite different than the physical demands required of the disability claimant in the California case above. Additionally, injuries deemed less crippling in other fields could have a more substantial impact on medical and dental professionals whose highly specialized skills require greater precision to ensure patient safety.
Thus, even though the California standard for “total disability” is the same across the board, it applies differently to different professions. For this reason, when you file for disability benefits, you should seek a disability insurance attorney who has experience representing clients within your own occupation.
May is Disability Insurance Awareness Month — A Good Time To Ask Yourself If You Can Collect on Your Disability Insurance Policy
May 2011 is Disability Insurance Awareness Month. While the insurance industry likes to increase awareness of purchasing disability insurance, medical professionals who long ago purchased disability insurance and have been paying premiums on disability policies for many years may opt to instead raise their awareness of the obstacles they are likely to encounter should they ever need to make a claim on their disability insurance policy. The article below by disability insurance attorney Edward O. Comitz provides some food for thought.
DISABILITY INSURANCE: CAN YOU COLLECT UNDER YOUR POLICY?
By: Edward O. Comitz, Esq.
You have practiced medicine for your entire career. Your spouse and children rely on you, and you have numerous financial obligations. The stress and trauma of a disability can cause you significant problems. To protect yourself in case of total or partial disability, you have purchased disability insurance.
Unfortunately, you suffer an injury or become so ill that you cannot continue your practice, and you then file a claim with your insurance agent. Of course, you expect it to be honored. Instead, shortly thereafter, you are contacted by an insurance adjuster, not your agent. Unlike your agent, the insurance adjuster is hostile; the questions he asks imply that you are malingering. You try to be cooperative, providing the insurance adjuster with the additional information he requests, but again your claim is denied. Adding insult to injury, you learn from the adjuster that the insurance company has secretly videotaped your activities and, based on the tapes, believes that you are not disabled at all. Dumbfounded by the insurance company’s response, you ask yourself if there is anything that you can do to make the insurance company pay the benefits it promised. The answer is yes.
Typically, the type of policy that medical and dental professionals purchase is what is known as an “own occupation policy.” Such policies provide compensation following a disability that prevents the insured (the person who purchased the policy) from performing the particular duties of his or her profession. Thus, the insured may be entitled to benefits even if he or she could in fact perform work of a different nature. For example, if a surgeon purchases an “own occupation policy” and severely injures his hand, but could nevertheless perform some or all of the duties of a general practitioner, the surgeon is considered disabled under an “own occupation policy” and entitled to benefits.
Disability provisions greatly vary in the language used, and coverage is often circumscribed and restricted by qualifying words and phrases. Accordingly, each policy of insurance must be individually reviewed to determine whether a particular claim is covered. What may appear to be an “own occupation policy” could in fact be an “occupational policy” if “total disability” is defined to include the insured’s inability to perform “all” duties or “every” duty pertaining to the insured’s occupation. In such a case, the insured may not be entitled to benefits if he or she can perform comparable employment for which the person is suited by education, experience and physical condition. Continue reading “May is Disability Insurance Awareness Month — A Good Time To Ask Yourself If You Can Collect on Your Disability Insurance Policy”
Northwestern Mutual Offers Insight Into How Disability Insurers Interpret and Apply “Own Occupation Coverage”
Northwestern Mutual Life Insurance—a major provider of disability income insurance for physicians and dentists—has just launched a new website, the “Disability Income Insurance Knowledge Center,” which it claims will help policyholders understand the terms of their “own occupation” disability insurance coverage.
“Own occupation” policies are often marketed by disability insurers as allowing physicians and dentists to receive their full disability insurance benefit, while at the same time working in another occupation, as long as they can no longer practice medicine or dentistry. Some insurance policies further specify that the insured’s specialty will be considered his “occupation” for purposes of “own occupation” coverage. Under these policies, as they are frequently marketed, an insured could receive his full benefit, even if he is still working as a physician or dentist, as long as he is disabled from his former specialty.
As an example, a neurosurgeon who develops a hand tremor may still be a capable doctor, but he can no longer perform surgery. Since he can no longer perform the principal medical duty of neurosurgery (i.e., surgery), it would be logical to conclude that he would be disabled from his occupation as a neurosurgeon. However, Northwestern’s new website has an interactive “Fact or Fiction” quiz in which it offers its interpretation as to how these “own occupation” provisions should be interpreted. Northwestern’s conclusions are gross oversimplifications that fail to consider the nuances of a disability claim, and ignore differences in policy language and the manner in which the policies have been interpreted under Arizona law. These oversimplifications appear designed to dissuade individuals with legitimate disability claims from pursuing their remedies. Nevertheless, they offer a glimpse into how disability insurers often view an insured’s occupational duties. Some samples from the “quiz” include the following statements:
Statement: If I could not perform my principal medical duty, the one that’s my “bread and butter,” I’d be considered totally disabled under an “own occ” policy.
Northwestern Mutual: FICTION. “To be totally disabled under traditional ‘own occ’ disability income insurance definitions, you would have to be unable to do ALL of your principal duties.”
Depending on the terms of his “own occupation” policy, an Arizona physician or dentist may be totally disabled if he cannot perform any substantial part of his ordinary duties in his usual and customary manner. In one major case, an invasive cardiologist was no longer able to perform invasive procedures—a substantial part of her original duties—but continued work in non-invasive cardiology and geriatrics. The jury found her totally disabled under her “own occupation” policy and held that her insurer had denied her disability insurance claim in bad faith. It then awarded her $84.5 million.
This statement also reflects an important issue in interpreting these policies – while countless words and phrases are defined, the phrase “principal duties” is generally not defined. Taking advantage of this fact, insurers often attempt to transmute incidental duties, such as staff oversight or pre- and post-operative patient consultation, into principal duties, without any justification for doing so. If insurers were permitted to do this, as Northwestern suggests, it would render “own occupation” coverage illusory since, absent a catastrophic injury, the insurer would always be able to find that the insured could perform some duty of his prior occupation. Fortunately, Arizona courts do not permit insurers to classify all duties as “principal duties.” As one Arizona court noted “[f]ew specialty occupations could survive such piecemeal scrutiny. If separated into an hour-by-hour analysis, only asking the question whether these tasks are also performed in a more general setting, specialists who choose to continue to work in a more general practice after becoming disabled from their specialty could never qualify for total disability benefits, although the policy specifically allows for this.” Continue reading “Northwestern Mutual Offers Insight Into How Disability Insurers Interpret and Apply “Own Occupation Coverage””
Phoenix and Tucson-area disability attorney Ed Comitz recently responded to some common disability insurance questions for the Pima County Medical Society’s January 2010 issue of Sombrero. He answers questions doctors and other healthcare professionals often ask, such as, “What is the difference between ‘own occupation’ and ‘any occupation’ in disability insurance?” and “Why do so many doctors’ claims get denied, and how can a law firm help?”