Do You Have A Specialty-Specific Policy?

Your ability to collect benefits under your insurance policy depends first and foremost on how “total disability” is defined under your policy. As we have previously discussed, if you are a professional choosing a policy, you will want to look for a policy that defines “total disability” in terms of your inability to perform your “own occupation,” and you will want to be sure to look for a true “own-occupation” policy.

While most professionals are aware of the importance of seeking out an “own-occupation” policy, you may not be aware that insurance companies also offer specialty-specific own occupation policies that are tailored to physicians and dentists who are specialists. These policies have a more precise definition of “total disability” that requires the insurance company to not only consider your occupation, but also your specialty when assessing eligibility for benefits.

Here’s a few examples of what these specialty-specific policies look like:

Oftentimes, the premiums charged for these types of policies are higher than other policies, but if you end up needing to file a claim down the road, and you are a physician or dentist with a board recognized specialty, this type of “total disability” provision can help ensure that your specialty (and corresponding job duties) are given proper weight. If you have a specialty-specific definition, and your insurance company is not taking into consideration the unique demands and duties of your specialty, you should contact an experienced disability insurance attorney and he or she can ensure that this important provision is enforced.

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How Do I Know if My Insurer Might Be Interested in a Lump Sum Settlement?

We are often asked whether a particular claim is the type of claim that an insurance company would be interested in settling for a lump sum buyout.  The answer, as explained in more detail below, is always, it depends, because there are a number of factors that come into play, and many of those factors are not even directly related to whether the claim itself is legitimate or whether the insured’s condition is permanent (although those are important factors that impact whether a buyout is a possibility).

What is a Lump Sum Buyout?

You may be familiar with the terms of your disability policy, but you may not know that, in certain instances, insurers are willing to enter a lump sum settlement. Under a lump sum settlement, your insurer agrees to buy out your policy and, in return, you agree to surrender the policy and release the insurer from any further obligations to you going forward.

There are certain pros and cons to this sort of settlement.  Some claimants prefer a lump sum settlement, because it allows them to avoid having to rely on month-to-month payments from their insurer (which may or may not arrive, or if they do arrive, may not arrive on time) and/or to avoid the hassle of dealing with claim forms, medical exams, etc. for years to come.  A lump sum settlement can also allow you to take advantage of present investment opportunities that can provide for your and your family’s future.  But there are also other considerations that you will need to discuss with your attorney as well as your accountant and other financial advisors.  For example, if your benefit period lasts to age 65 (and you end up living to the end of the benefit period), you would likely receive more money cumulatively over time if you stayed on claim and received monthly benefits in lieu of a lump sum settlement.

Lump sum settlements can also be attractive to insurance companies.  A settlement can allow insurance companies to release money from their reserves and to eliminate administrative expenses associated with the ongoing review of your claim year after year. But just as you might receive more money cumulatively over time if you stayed on the claim, the insurer might benefit financially from not offering you a lump sum settlement. For example, if your policy provided for lifetime benefits, and you met an untimely demise, your insurance company’s obligation to pay benefits would cease, and they may end up ultimately paying out a lower amount in total monthly benefits than they would have if they paid out a lump sum settlement on your claim.

Because this process is completely discretionary on their part, insurance companies are very deliberate about offering lump sum settlements. Before doing so, they must weigh multiple factors including the following:

    • Permanency. The insurer is more likely to offer a settlement if its actuaries determine that you will likely be on claim for the maximum benefit period.
    • Reserves. Over the course of your claim, your claim’s reserves slowly peak as you are on claim for an extended period of time (and permanency is established) and then at some point, they start to diminish as the claim is paid out, and you get closer and closer to the end of the maximum benefit period. The insurer is more likely to offer a settlement when the reserves are at their peak (typically around 3-5 years into a claim), because that is when the insurance company would improve its bottom line the most by freeing up the reserves.
    • Mortality/Morbidity Issues. The insurer is more likely to offer a settlement if its actuaries determine that you will probably live to the end of the maximum benefit period. Or if you have lifetime benefits, the insurer will estimate your lifespan based on your health history to determine whether it is financially beneficial for the company to offer a lump sum settlement.
    • Offsets. The insurer is more likely to offer a settlement if it determines that you will probably not receive income in the future that would offset the benefit amount before the end of the maximum benefit period.
    • Anticipated Gain. Companies will not offer a buyout unless they stand to save money in the long run, so they have their actuaries calculate how much of a gain (percentage-wise) the company would net if they settle the claim. Insurers often have internal financial objectives that impact the amount they are willing to offer on settlements such as requiring a net gain amount of a certain percentage (e.g. 35%).
    • Cash Outflow. The insurer will be more or less willing to offer a settlement depending on their quarterly or even annual cash outflows. Thus, if a company had paid out a lot of buyouts recently, the company may not have enough cash available to offer additional lump sum settlements.

The bottom line is that offering a lump sum settlement is completely voluntary on the part of the insurer and doing so depends on the unique factual circumstances of your claim. Nevertheless, knowing the factors that insurers consider in making this decision can help you understand whether a lump sum settlement is appropriate in your case.

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Disability Insurance: What Residents Need to Know – Part 2

In our previous post, we looked at how important it is for residents to have a plan to protect themselves financially in the unfortunate event they become disabled.  In this post we will address some critical terms to look for when comparing potential policies.

Perhaps the most important provision in your policy is the definition of “Total Disability.”  For physicians, dentists, and other highly specialized professionals who have invested both years and hundreds of thousands of dollars in their careers, a policy that defines “Total Disability” in terms of your inability to perform the specific duties of your “own occupation” (as opposed to “any occupation”) is critical.  If your policy defines “Total Disability” as being unable to work in “any occupation,” it will be much more difficult to establish that you are entitled to benefits, in the event you suffer from a disabling condition.

In addition to knowing and understanding your policy’s definition of “total disability,” it is also crucial to know how working in another profession is treated by your policy.   For instance, if you happened to be an oral surgeon with an essential tremor, you may no longer be able to operate safely on patients, but you may still be able (and want) to teach. Alternatively, if you happened to be a physician who did not take steps to increase your disability coverage to match your increases in earnings, working in another capacity may be the only way to maintain your lifestyle in the event of disability.  Consequently, it is also important to know if your policy will allow you to work in another capacity and still collect benefits.  Along those lines, here are a few other provisions you will want to watch out for:

No Work Provisions

These provisions mandate that 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 financial needs.

Work Provisions

These types of provisions require you to work in another occupation.  This, of course, can make it impossible to collect on your benefits if your disability prevents you from working.

In our next post we will look at how you can select a plan that grows with you over time, as both your financial obligations and income change.

Watch Out for “Work” Provisions

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.

Case Study: Interpreting Policy Language – Part 2

In Part 1 of this post, we started to look at the recent case Leonor v. Provident Life and Accident Company[1].  The key issue in this case was whether the policy language “the important duties” meant “all the important duties.”  In Part 2 of this post, we will look at how the court addressed the parties’ arguments and see how the court ultimately resolved the dispute.

The Law

Under Michigan law, ambiguous words in a disability policy are construed in favor of the insured.  A word or phrase is ambiguous if the word or phrase may “reasonably be understood in different ways.”  Because of these rules, in order to win his case, the claimant, Leonor, did not have to come up with an interpretation that was superior to the interpretation offered by the insurer, Provident Life.  Instead, Leonor merely had to establish that the policy language was ambiguous and then come up with a reasonable interpretation of the policy language that supported his claim for benefits.

The Analysis

The court began its analysis by recognizing that context is important when interpreting a contract.  The court acknowledged that the definition of “residual disability” was obviously intended to be a less severe category of disability, and even acknowledged that the terms “total disability” and “residual disability” had to be mutually exclusive for the rest of the policy to make sense.  Nonetheless, the court determined that the phrase “the important duties” was ambiguous.

By way of illustration, consider the following continuum, beginning with no limitations and ending at the inability to perform all of the important duties of an occupation.

    |———————————–|———————————–|———————————–|

No Limitations            Unable to Perform            Unable to Perform                  Unable to Perform                                             Some Duties                      Most Duties                         All Duties

Essentially, the court determined that the “residual disability” definition was broad enough to encompass individuals who could not perform “some” of the duties of their occupation, but was not broad enough to encompass individuals who could not perform “most” or “all” of the duties of their occupation.  Thus, the policy language remained ambiguous because the “total disability” definition could still mean either the inability to perform “most” duties or the inability to perform “all” duties.

Next, the court determined that Leonor’s interpretation of the policy language was reasonable.  The court explained that, under the rules of grammar, the definite plural does not necessarily apply to each thing in the group referred to.  To support its position, the court noted that Provident Life’s own counsel argued at oral argument that its position was supported by “the rules of grammar” even though Provident Life’s counsel obviously did not mean to suggest that its position was supported by “all the rules of grammar.”

Finally, the court held that a claimant’s income is “far from dispositive” in disability cases.  Specifically, the court determined that Leonor should not be penalized for earning more income after his injury than he did before the injury.  The court noted that because investing in businesses is inherently risky, it was entirely appropriate for Leonor to insure himself against the loss of the guaranteed, steady income provided by the dental procedures.

The Decision

In the end, the court determined that Leonor was “totally disabled” under the policies because the phrase “the important duties” was ambiguous and Leonor had offered a reasonable application of the phrase that supported an award of benefits.  The court ordered Provident Life to pay Leonor his benefits under the policy, plus 12% interest as a penalty for failing to pay the claim in a timely fashion.

Conclusion

This case demonstrates how the presence or absence of a single word in a policy can dramatically affect your ability to recover benefits.  Even language that is not necessarily unfavorable, but merely ambiguous, can delay your recovery of benefits if you have to go to court to resolve a dispute with the insurer.  For example, in the Leonor case, Leonor made his initial disability claim in July 2009, but the court did not conclusively establish he was entitled to benefits until June 2015—nearly six years later.

If possible, you should avoid ambiguous and unfavorable language when purchasing a policy.  If you already have a policy, an experienced disability insurance attorney can review your policy and identify words or phrases that could impact your ability to recover benefits in a timely fashion.

[1] 790 F.3d 682 (6th Cir. 2015).

Case Study: Interpreting Policy Language – Part 1

Can the presence or absence of a single word in your disability policy determine whether you receive your disability benefits?

In the recent case Leonor v. Provident Life and Accident Company[1], the key issue was whether the policy language “the important duties” meant “all the important duties.”  In Part 1 of this post, we will look at each party’s position in the case and examine why this policy language was so important.  In Part 2 of this post, we will look at how the court addressed the parties’ arguments and see how the court ultimately resolved the dispute.

The Facts

In the Leonor case, the claimant, Leonor, was a dentist who could no longer perform dental procedures due to an injury and subsequent cervical spine surgery.  Prior to the injury, Leonor spent approximately two-thirds of his time performing dental procedures, and spent the rest of his time managing his dental practice and other businesses he owned.  After the injury, he no longer performed dental procedures; instead, he sought out other investment opportunities and devoted his time to managing his investments.  Interestingly, Leonor’s income actually increased after he stopped performing dental procedures because his investments turned out to be very successful.

The Policy

Leonor’s disability policy provided for benefits if he became “totally disabled,” and defined “totally disabled” as follows:

“Total Disability” means that because of Injury or Sickness:

You are unable to perform the important duties of Your Occupation; and

You are under the regular and personal care of a physician.

Leonor’s policy also provided for benefits if he became “residually disabled,” and defined “residually disabled” as follows:

“Residual Disability,” prior to the Commencement Date, means that due to Injury or Sickness:

(1) You are unable to perform one or more of the important duties of Your Occupation; or

(2) You are unable to perform the important duties of Your Occupation for more than 80% of the time normally required to perform them; and

Your loss of Earning is equal to at least 20% of your prior earnings while You are engaged in Your Occupation or another occupation; and

You are under the regular and personal care of a Physician.

The Arguments

The insurer, Provident Life, argued that Leonor’s managerial duties were “important duties” of his occupation prior to his injury, and therefore Leonor was not “totally disabled” because he could still perform managerial duties in spite of his injury.

Leonor responded that the policy language only required him to be unable to perform “the important duties” of his occupation.  He pointed out that Provident Life could have required him to be unable to perform “all the important duties” of his occupation.  Since Provident Life did not include the word “all,” Leonor argued that it did not matter whether he could still perform managerial duties because he could no longer perform other “important duties” of his occupation—namely, performing dental procedures.

In response, Provident Life argued that, when read in context, “total disability” plainly meant the inability to perform “all the important duties” because the policy separately defined “residual disability” as being unable to perform “one or more of the important duties.”  Thus, according to Provident Life there was already a category under the policy that covered individuals like Leonor who could not perform “some” of the important duties of their occupation.  Provident Life also argued that Leonor should not receive total disability benefits because Leonor’s income after the injury was higher than it was prior to the injury.

Stay tuned for Part 2, to find out how the court addressed Principal Life’s arguments and resolved the dispute.

[1] 790 F.3d 682 (6th Cir. 2015).

Disability Insurer Profiles: Hartford

Hartford is the next disability insurer we will look at that specifically markets its policies to physicians and dentists.

See our profiles of MassMutualMetLifeNorthwestern Mutual, and Guardian.

The Hartford Financial Services Group, Inc. (“Hartford”) was founded over 200 year ago and now has more than 100 offices located throughout the U.S.  In 2013, Hartford’s revenues were approximately $26.2 billion.  However, in 2014, Hartford’s revenues dropped to $18.6 billion.  Given this significant decrease in revenue, Hartford will likely go to great lengths to avoid paying high paying claims submitted by physicians and dentists, and may even attempt to revoke disability benefits that it approved before the company experienced this dramatic drop in profits.

Company: The Hartford Financial Services Group, Inc.

Location: Hartford, Connecticut.

Associated Entities:  Hartford Fire Insurance Company; Hartford Life, Inc.; Hartford Accident and Indemnity Company; Hartford Casualty Insurance Company; Hartford Life and Accident Insurance Company; Hartford Life and Annuity Insurance Company; Hartford Life Insurance Company; Property and Casualty Insurance Company of Hartford.

Assets: $245 billion in 2014.

Notable Policy Features:  Hartford offers policies that define total disability as being unable to perform one of your prior substantial and material duties.  If your policy contains such a definition, it will be much easier for you to demonstrate that you are totally disabled.  In contrast, if your policy does not define total disability in this manner, you may have to prove that you cannot perform any of your prior substantial and material duties in order to receive total disability benefits.

Claims Management Approach:  Hartford only offers group disability policies (as opposed to individual disability policies).  This means that if you have a Hartford policy, it will probably be governed by ERISA.  For many reasons, it will likely be harder for you to obtain your disability benefits if your policy is governed by ERISA.

For example, normally, if you become disabled and you have an individual disability policy, you can collect your disability benefits without filing for Social Security.  However, if you have a Hartford group policy, your policy may require you to apply for Social Security benefits before you can receive your disability benefits.  Hartford requires its policyholders to apply for Social Security because, under ERISA, any Social Security benefits the policyholder receives automatically offset the amount of disability benefits Hartford must pay the policyholder.

Read more about how ERISA claims are treated differently than non-ERISA claims.

These profiles are based on our opinions and experience. Additional source(s): Hartford’s 2014 Annual Report; “The Hartford Fact Sheet (2013),” and “The Hartford Fact Sheet (2014),” available at www.thehartford.com.

What to Do When Your
Disability Insurance Claim Is Denied

A large part of our practice consists of helping physicians and dentists whose disability insurance claims have been denied or terminated.  When our clients come to us, we carefully analyze their medical records, the claim file, and the law to craft a specific strategy for getting the insurer to reverse its adverse determination.  Unfortunately, we sometimes find that in between receiving notice that their claim has been denied or terminated and getting in touch with our firm, doctors will inadvertently take actions that prejudice their claims.  With that in mind, it’s important to review what to do and what not to do in the first few days after your claim is denied or terminated.

  1. In all likelihood, you will first find out that your insurer is denying or ending your disability benefits via a telephone call from the claims consultant who analyzed your claim.  As we’ve explained before, the consultant will be taking detailed notes about anything you say during that call.  Therefore, even if you are justifiably upset or angry, be very mindful of what you say.  Anything you tell the consultant will certainly be written down and saved in your file.
  2. During the call with your consultant, make your own notes.  You don’t have to ask a lot of questions at this stage, but you do want to make sure to record whatever information the consultant gives you.
  3. Following the phone call, you should receive a letter from the insurance company stating that it has denied your claim or discontinued your benefit payments.  According to most state and federal law, the letter should have a detailed explanation of the evidence the company reviewed and why the insurer thinks that evidence shows you aren’t entitled to benefits.  When you receive the letter, read through it carefully.  Make notes on a separate document about any inaccuracies you identify.
  4. Make sure you keep a copy of the denial or termination letter as well as the envelope it came in.  You should also make a note of the date on which you received the letter.  The date the letter was actually mailed and received could be important to your legal rights in the future.  Then, the best thing to do is to scan the documents electronically or make a photocopy for your file, just in case the original denial letter gets lost or damaged.
  5. Once you find out that your claim has been denied or terminated, you should contact a disability insurance attorney.  Some doctors and dentists attempt to handle an appeal of their claim on their own, but we strongly suggest at least consulting with a law firm.  Every insurance  company has its own team of highly-trained claims analysts, in-house doctors, and specialized insurance lawyers to help it support the denial of your claim.  Having your own counsel can level the playing field by making sure you know your rights under your policy and what leverage the applicable law provides you, and help you avoid the common traps that insurance companies lay for claimants on appeal.
  6. The lawyer you consult can be in your area, or it can be a firm with a national practice that’s physically located in another state.  You may want to review these questions to ask potential attorneys before you decide who you would like to represent you.
  7. Whatever attorney you choose to contact, make sure you do so as soon as possible.  In many circumstances, you will only have a limited amount of time to appeal the insurance company’s decision.  Particularly in claims governed by the federal law ERISA, the clock starts ticking as soon as you find out your claim has been denied or terminated.
  8. It’s usually best to contact an attorney before you respond to the denial letter, to avoid saying anything that could prejudice your appeal.  For instance, if you have a policy that is governed by ERISA, and you submit some additional information, the insurance company may not allow you to submit any additional information after your initial response.
  9. Before you meet with potential disability insurance lawyers, gather whatever documents you can to help them evaluate what’s going on with your claim.  Our firm will always want to review the insurance policy or policies.  (Here’s information on how to get a copy of your policy). We typically also like to see your relevant medical records and any correspondence between you and your insurance company.  If you aren’t able to locate this information, it could cause delays in starting the appeal process.
  10. If you are a physician or dentist that is totally disabled, you should not try to go back to work just because your insurance company thinks you don’t qualify for benefits.  Trying to practice when you aren’t in a physical or mental condition to do so could cause you to re-injure yourself or accidentally harm your patients.  Of course, trying to work on patients after you’ve claimed that you are totally disabled can expose you to professional liability as well.  Further, trying to return to work could impair your ability to collect your benefits upon appeal.

Understanding Residual Disability Benefits: Are They Worth The Cost?
Part 3 – Current Monthly Income

In our previous posts, we identified the basic formula disability insurers use to calculate residual (partial) disability benefits and discussed variations in how disability insurers calculate Prior Monthly Income.  Now, we will examine the other principal component in calculating a residual disability benefit: Current Monthly Income.

Current Monthly Income is the calculation of how much a doctor is earning now, versus how much he was earning prior to his disability.  Although this sounds like a simple concept, calculating Current Monthly Income can be challenging in the healthcare industry.  Many physicians and dentists own their own practices or are a partner in a practice group.  Their income is not only based on their productivity, but also includes a passive component from the other business activities of the practice.  For example, a dentist may employ one or more hygienists or associate dentists who generate additional revenue.  When a doctor becomes disabled, the practice revenue may remain relatively constant as associates increase their production to account for the doctor’s reduced schedule.

Some insurers take advantage of this by calculating Current Monthly Income not on the doctor’s production, but rather on the practice’s revenue.  This fails to take into account the true financial impact of a disability because, while revenue may remain high, expenses increase as associate doctors and hygienists work more (and earn more) to fill in for the disabled doctor.

Additionally, many doctors pay themselves based on a percentage of their own production, in addition to the income they earn as practice owners.  When a doctor becomes partially disabled, his income from working in the practice will drop, even if the practice’s overall profitability does not.  Depending on the language in a particular policy, the policy may not take into account the drop in production, and the doctor may not be able to recover the full loss caused by his disability.

Continue reading “Understanding Residual Disability Benefits: Are They Worth The Cost?
Part 3 – Current Monthly Income”

Disability Insurance for College Athletes

In a recent article, written in the wake of NCAA basketball player Kevin Ware’s traumatic leg fracture, The Atlantic explores whether college athletes should purchase disability insurance.

Like doctors and dentists, whose physical health can be crucial to performing their job duties, many professional athletes purchase disability insurance.  By doing so, they attempt to protect their income from sickness or injury that interferes with their work.

For college athletes, disability insurance is intended to protect potential, future income that they expect to earn once drafted to professional sports teams. Because the term of the policies is so short – ordinarily just one to two years – and the potential benefits so high – often millions – these disability policies can be extremely expensive.  The article discusses athletes and their families that paid upwards of $40,000 in premiums over one or two years.

As the article explains, though, this type of disability insurance is rarely collected. Though these athletes’ disability insurance policies are unique, the difficulty of collecting may sound familiar to many other types of professionals facing disability insurance claims:

[T]hese policies, meant to hedge against risk, are risky in themselves: None of these student-athletes is likely to ever collect a dime, even if they are hurt. These guarantees cover “permanent total disability,” meaning only policyholders who are never able set foot on a field or court again—not simply those who suffer injuries that may reduce their earning potential—can file a claim.

Read the full article here: The $5 Million Question: Should College Athletes Buy Disability Insurance?

For Doctors, Risk of Relapse Can Cause Total Disability

Because of the high-stress nature of their occupations and their ready access to pharmaceuticals, both physicians and dentists are at high risk of developing substance abuse issues.  In a recent disability insurance case, Colby v. Union Security Insurance Company & Management Company for Merrimack Anesthesia Associates Long Term Disability Plan, the United States Court of Appeals for the First Circuit recognized the challenges that doctors can face when they are disabled due to substance dependence.

The insured in this case, Dr. Colby, was a partner in an anesthesiology practice.  Like many anesthesiologists, she kept a demanding schedule, working 60 to 90 hours per week.  In 2004, her colleagues discovered that she had been struggling with chemical dependence after she was found sleeping or unconscious on a table in the hospital.  She tested positive for Fentanyl, an opioid used in her practice.

This led to the revelation that Dr. Colby had been self-administering opioids, and had become addicted.  Shortly thereafter, Dr. Colby entered inpatient substance abuse treatment.  As of January of this year, Dr. Colby had not resumed using Fentanyl.

When her drug dependence first came to light, Dr. Colby filed a claim with her disability insurer.  Even after completing her treatment, Dr. Colby feared that returning to the anesthesiology environment, where Fentanyl (along with many other drugs) was easily accessible, would lead to her relapsing.  However, the insurance company denied her claim for benefits.  The insurer argued that she had been discharged from substance abuse treatment, and that although she was still under a doctor’s care and feared a relapse, “a risk for relapse is not the same as a current disability.”

Ultimately, the Court of Appeals disagreed.  Judge Selya explained:

In our view, a risk of relapse into substance dependence—like a risk of relapse into cardiac distress or a risk of relapse into orthopedic complications—can swell to so significant a level as to constitute a current disability.

As this case demonstrates, doctors struggling with substance dependence should be cognizant of the fact that their occupation puts them at higher danger for relapse, and may contribute to their total disability from practicing.  If you are facing this situation, it’s important to talk to your treating providers, attorney, and disability insurer about how your work environment affects your risk of relapse.

Review the entire Colby opinion here.

Case Study: Berkshire Attempts to Use the “Dual Occupation Defense”

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.

Applying California’s Total Disability Standard

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.

Even Unum CEO Admits Their Insurance Policy Language Is Confusing

As we have blogged many times, even seemingly straightforward terms like “total disability” or “appropriate medical treatment” in your disability insurance policy may have different meanings in the context of a disability insurance claim than they do in everyday English.  In a video posted on YouTube, Jack McGarry, CEO, Unum UK, is surprisingly candid in addressing how their insurance policy language is confusing.

Insurance is so confusing, in large part because we’ve made it that way, the insurance companies.  We use acronyms instead of words, we use lingo instead of language.  We’ve made it easy for us to communicate with each other, but we’ve made it very, very difficult for consumers to understand what we’re saying, and we need to change that.

[Consumers] are confused by our products, they don’t understand the choices, they don’t understand the coverage, and one of the reasons they don’t understand it is because the language we use to describe it, they find it confusing, and a little scary, so we’re partnering with Plain English to help simply the language we use to describe what we do so everybody can understand it.

 

While Unum is apparently taking steps to clarify the language in its policies in the United Kingdom, it is of little help to American insureds who purchased policies written in language that is, in the words of Unum’s UK CEO, ”very, very difficult for consumers to understand.”  The help of an experienced disability insurance attorney to interpret the language of your policy can be critical in ensuring you receive the benefits to which you are entitled.

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. This entry’s 19th century disability insurance cases examine how 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.