Can I Sell My Practice and Collect on My Business Overhead Expense Policy?
Business overhead expense (BOE) policies cover business-related expenses (e.g. rent, employees’ salaries, utilities, etc.) if the policyholder becomes disabled and cannot work. But can you sell your practice and still collect BOE benefits?
One dentist tried to do just that in the case of Richardson v. Guardian.[1] Dr. Richardson was a dentist and practice owner with BOE policies through Guardian. Dr. Richardson found himself unable to work due to a disabling condition and sold the stock in his practice to an employee. His employee worried that she would not be able to afford overhead while she increased her clientele and Dr. Richardson offered to cover the practice’s expenses for a period of time, believing that his BOE would cover these expenses. However, Guardian refused to pay BOE benefits.
When Dr. Richardson sued, Guardian pointed to policy language stating that the policy only covered expenses “which you normally incur in the conduct of your business or profession.” Dr. Richardson argued that this policy language was ambiguous and the phrase should be examined in light of the policies as a whole. He argued that “business or profession” applied to his circumstances because he remained contractually obligated to pay for the purchasing employee’s overhead expenses, even though he had sold the stock in the company.
The Court looked to the word “conduct” and “your [business]” in terms of plain meaning and ultimately ruled that the policies’ definition of covered expenses shows “the intention that the insured must actually be in business in order to incur covered expenses”. The Court concluded that Guardian did not breach its obligation under the polices because Dr. Richardson did not personally “conduct” a business or profession after he sold his stock.
This case highlights the importance of reading and understanding the terms of your policy and how they may affect your ability to file a disability claim before making any changes to your work duties or your practice (including selling it). If you have questions about how your BOE policy works, an experienced disability attorney can help you analyze the terms of your policy and determine the best transition plan for you and your practice.
Every claim is unique and the discussion above is only a limited summary of the court’s ruling in this case. If you are concerned that your claim has not received a full and fair review, an experienced disability insurance attorney can evaluate your claim and help you determine what options are available.
[1] Richardson v. Guardian Life Ins. Co., 161 Or.App. 615 (1999).
