In the last post, we discussed the facts of the court case Massachusetts Mutual Life Insurance Company v. Jefferson. In that case, the court was asked to determine whether a clinical psychologist whose license had been suspended was entitled to disability benefits. In this post, we will discuss how the court ultimately ruled, and go over some takeaways from this case.
The Court’s Ruling
As explained in the last post, the key question was whether Dr. Jefferson’s legal disability (i.e. the suspension of his license to practice psychology) happened before the onset of Dr. Jefferson’s factual disability (i.e. his depression). In the end, the court determined that Dr. Jefferson was not entitled to disability benefits for the following reasons:
- Dr. Jefferson’s claim form stated that he was not disabled until April 29, 1990, which was two days after the licensing board revoked his license.
- Although Dr. Jefferson later claimed that his depression went as far back as May 1989, the court determined that such claims were inconsistent with:
- Jefferson’s representations to the licensing board that he was a “highly qualified and competent psychologist”;
- The fact that Dr. Jefferson had been consistently seeing patients up until the day his license was revoked; and
- The fact that Dr. Jefferson had scheduled patients during the month following the licensing board’s hearing.
Thus, under the circumstances, the evidence showed that Dr. Jefferson’s was not entitled to benefits because his legal disability preceded his factual disability.
Dr. Jefferson’s case provides a good example of the challenges that can arise in a disability claim if the claimant has lost his or her license. Here are some of the major takeaways from this case:
Be Precise When Filling Out Claim Forms. The date you list as the starting date of your disability can be very significant. Take your time when filling out claim forms, and make sure that the date you provide is accurate and consistent with the other information you are submitting with your claim forms. It is always a good idea to double check everything on the form at least once after you have completed it, to make sure that you did not make a mistake.
Recognize that Your Claim Will Not Be Evaluated in a Vacuum. Other proceedings—such as board hearings—can directly impact your disability claim. You should always assume that anything you say in such a proceeding will at some point end up in front of the insurance company. This is particularly problematic when, as in Dr. Jefferson’s case, the goals of the other proceeding are inconstant with the goals of the disability claim. In such a situation, you may have to decide which goal is more important to you. An experienced disability insurance attorney can help you assess the strengths and weaknesses of each available option so that you can make an informed decision.
Do NOT Engage in Activities that Place Your License in Jeopardy. Losing a license that you worked hard for several years to obtain is not only emotionally devastating, it can severely limit your options going forward. Even if you have a disability policy, it is very difficult to successfully collect on a disability claim if your license has been revoked or suspended. Once again, if you find yourself in Dr. Jefferson’s position, you should talk with an experienced attorney who can help you determine what your available options are, if any.
 104 S.W.3d 13, 18 (Tenn. Ct. App. 2002).
In the last post, we discussed the distinction between “factual” and “legal” disability and why that distinction matters. In this post, we will begin looking at a court case involving “factual” and “legal” disability. Specifically, in this post we will begin looking at the facts of the case and the test that the court applied. In Part 3, we will see how the court ultimately ruled.
In the case of Massachusetts Mutual Life Insurance Company v. Jefferson, the court assessed whether Dr. Jefferson—a clinical psychologist—was entitled to disability benefits. Here are the key facts of the case:
- From October 1987 to February 1989, Dr. Jefferson had an affair with a former patient.
- When Dr. Jefferson’s wife found out about the affair, she filed a complaint with Dr. Jefferson’s licensing board.
- During the hearings in front of the licensing board, Dr. Jefferson argued that he was a competent psychologist, and that he should be permitted to continue to see patients.
- On April 27, 1990, the licensing board permanently revoked Dr. Jefferson’s license to practice psychology, effective as of May 15, 1990. On appeal, a chancery court reduced the permanent revocation to an eight year suspension ending on May 15, 1998.
- Up until the day his license was revoked, Dr. Jefferson continued to see patients and schedule future patients.
- On October 1, 1990, Dr. Jefferson filed a claim under his disability policy, claiming that he was disabled due to “major depression.”
- On his claim form, Dr. Jefferson listed the beginning date of his disability as April 29, 1990. Later on, Dr. Jefferson attempted to submit evidence that he had been depressed as early as May 1989.
The Court’s Test
As a threshold matter, the Court determined that the suspension of Dr. Jefferson’s license was a “legal disability” and assumed for the sake of argument that Dr. Jefferson’s “major depression” was a “factual disability.” As explained in Part 1 of this post, courts generally hold that disability policies only cover factual disabilities, not legal disabilities. However, the court’s decision becomes more difficult when a claimant like Dr. Jefferson has both a legal disability and a factual disability.
Although different courts approach this situation in different ways, here is the test that the court came up with in Dr. Jefferson’s case:
- Step 1: Determine which disability occurred first.
- Step 2: Apply the following rules:
- Rule # 1: If the legal disability occurred first, the claimant is not entitled to benefits.
- Rule # 2: If the factual disability occurred first, the claimant is entitled to benefits, if the claimant can prove the following three things:
- The factual disability has medical support.
- The onset of the factual disability occurred before the legal disability.
- The factual disability actually prevented or hindered the claimant from engaging in his or her profession or occupation.
In the next post, we will discuss how the court decided this case. In the meantime, now that you have the key facts and the court’s test, see if you can guess how the court ultimately ruled.
 104 S.W.3d 13, 18 (Tenn. Ct. App. 2002).
In the next few posts we will be looking at the distinction between “factual” and “legal” disability. In Part 1, we will discuss the difference between a factual and a legal disability, and why that distinction matters. In Parts 2 and 3, we will look at an actual court case involving “factual” and “legal” disability.
What is “Factual Disability”?
Factual disability refers to incapacity caused by illness or injury that prevents a person from being physically or mentally able to engage in his or her occupation. This is the type of disability that most people think of in connection with a disability claim.
What is “Legal Disability”?
Legal disability is a broad term used to encompass all circumstances in which the law does not permit a person to engage in his or her profession, even though he or she may be physically and mentally able to do so. Here are some examples:
- Revocation or suspension of a professional license;
- Surrendering a professional license as part of a plea agreement or to avoid disciplinary action; and
- Practice restrictions imposed by a licensing board.
Why the Distinction Matters
In sum, someone with a “factual disability” is mentally or physically unable to engage in their profession. In contrast, someone with a “legal disability” is not allowed to engage in their profession. Courts have repeatedly held that disability insurance policies provide coverage for factual disabilities, but not for legal disabilities.
If a claimant has both a factual and legal disability, things become more complicated. In the next few posts, we will look at an example of how one court determined whether someone with both a factual and legal disability was entitled to benefits.
In Part 1 of this post, we started to look at the recent case Leonor v. Provident Life and Accident Company. The key issue in this case was whether the disability 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.
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 disability 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 disability claim for benefits.
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.
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.
This case demonstrates how the presence or absence of a single word in a policy can dramatically affect your ability to recover disability 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 disability 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 disability policy, an experienced disability insurance attorney can review your policy and identify words or phrases that could impact your ability to recover disability benefits in a timely fashion.
 790 F.3d 682 (6th Cir. 2015).
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, 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.
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.
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 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.
 790 F.3d 682 (6th Cir. 2015).
In Part 1 of this post, we started looking at a case involving a mental disability claim where the court reversed Unum’s claim denial under ERISA de novo review. In Part 2, we are going to look at how the same court determined the extent of claimant’s disability benefits.
Turning back to the Doe case we examined in Part 1, after the court reversed the denial, the parties could not agree on the amount of benefits the claimant was entitled to. In previous posts, we have discussed how many disability insurance policies have a mental health exclusion that limits recovery to a particular period—usually 2-3 years. Unfortunately for our claimant, he had such a provision in his disability policy, which provided that his “lifetime cumulative maximum benefit period for all disabilities due to mental illness” was “24 months.”
Not surprisingly, Unum invoked this provision and asserted that it only had to pay benefits for a 24 month period. The court agreed, for several reasons:
- To begin, the policy defined “mental illness” as “a psychiatric or psychological condition classified in the [DSM], published by the American Psychiatric Association, most current at the start of disability.” All of claimant’s conditions (major depression, OCD, ADHD, OCPD, and Asperger’s) were classified in the DSM-IV.
- Claimant attempted to assert that his disability was not a “mental illness” because it was “biologically based.” Id. While this type of argument had been accepted by some other courts, the court in Doe determined that it was not convincing in this particular instance because the claimant’s policy expressly defined “mental illness” as a condition classified in the DSM-IV. The court also noted that DSM-IV itself notes that “there is much ‘physical’ in ‘mental’ disorders and much ‘mental’ in ‘physical’ disorders” Id.
- Accordingly, the court concluded that because the policy was “concerned only with whether a condition is classified in the DSM,” whether claimant’s conditions had “biological bases” was “immaterial.”
Thus, even though the Doe claimant was successful in obtaining a reversal of the claim denial, in the end, he only received 24 months of benefits due to the mental health exclusion.
If you are purchasing a new disability insurance policy, you will want to avoid such exclusions where possible. If you have a mental disability and are concerned about your chances of recovering benefits, an experienced disability insurance attorney can look over your policy and give you a sense of the likelihood that your disability claim will be approved, and the extent of the disability benefits you would be entitled to.
 See Doe v. Unum Life Ins. Co. of Am., No. 12 CIV. 9327 LAK, 2015 WL 5826696 (S.D.N.Y. Oct. 5, 2015).
In a previous post, we have discussed how ERISA claims are different from other disability claims. We have also looked at an ERISA case involving “abuse of discretion” review. However, there is another type of review under ERISA—“de novo” review. Unlike abuse of discretion review, under de novo review, the court assesses the merits of the disability claim without affording any deference to the insurer’s decision. Whether your claim is governed by abuse of discretion review or de novo review will depend on the terms of your plan. An experienced disability attorney can look at your disability insurance policy and let you know which standard will apply.
In this post, we will be looking at two things. First, we will be looking at a case where the court reversed the denial of disability benefits under de novo review. Second, we will be looking at some of the issues that commonly arise in mental health disability claims. In Part 1, we will be looking at the initial determination made by the court regarding whether the claimant was entitled to disability benefits. In Part 2, we will be looking at how the court determined the amount of disability benefits the claimant was entitled to.
In Doe v. Unum Life Insurance Company of America, the claimant was a trial attorney with a specialty in bankruptcy law. After several stressful events, including his wife being diagnosed with cancer, claimant started experiencing debilitating psychological symptoms. The claimant was ultimately diagnosed with anxiety, major depression, obsessive compulsive disorder (OCD), attention deficit hyperactive disorder (ADHD), obsessive compulsive personality disorder (OCPD), and Asperberger’s syndrome. He filed for long term disability benefits, but the insurer, Unum, denied his claim. The court reversed Unum’s claim denial under de novo review, for the following reasons:
- First, the court found the opinions and medical records of the claimant’s treatment providers to be “reliable and probative.” Id. More specifically, the court determined that claimant’s conditions fell within the expertise of the treating psychiatrist and that the psychiatrist’s conclusions were corroborated by neuropsychological testing.
- Second, the court determined that the opinions provided by Unum’s file reviewers were not credible or reliable. The court noted that while Unum’s in-house consultants claimed that the neuropsychological testing did not provide sufficient evidence of disability, the single outside independent reviewer hired by Unum concluded the opposite and determined that there was no evidence of malingering and that the tests were valid.
- Finally, the court rejected Unum’s argument that claimant’s psychiatrist should have provided more than a treatment summary. The court determined that this was “a problem of Unum’s own making,” because the evidence showed that Unum expressly stated in written correspondence that it was willing to accept a summary of care letter in lieu of the claimant’s original medical records.
Stay tuned for Part 2, where we will look at how much benefits the claimant actually ended up receiving.
 No. 12-CV-9327 LAK, 2015 WL 4139694, at *1 (S.D.N.Y. July 9, 2015).
In previous posts, we have discussed how it is oftentimes harder to collect under ERISA policies. One of the primary reasons ERISA claims are more difficult is the fact that in most ERISA cases courts are required to defer to the insurer’s decision unless the insurer “abused its discretion.” Under the abuse of discretion standard, an insurer’s decision is only reversed if the claimant can demonstrate that the insurer’s actions were “arbitrary and capricious.” This is a high standard to meet.
While ERISA claims can be more difficult, particularly under the “abuse of discretion” standard, they are not impossible. Sometimes a court will determine that the insurer did, in fact, abuse its discretion. In this post, we will be looking at the recent court case Jalowiec v. Aetna Life Insurance Company to illustrate some of the things that a court may find to be an abuse of discretion.
In Jalowiec, the claimant suffered from chronic migraine headaches, dizziness, nausea, vertigo, insomnia and fatigue after suffering a blow to the back of his head at a Tae Kwon Do event. After over a year of testing and treatment, the claimant was initially diagnosed with postural orthostatic tachycardia syndrome (“POTS”). Later on, claimant was diagnosed with an “unspecified disorder of autonomic nervous system.”
The insurer, Aetna, initially awarded the claimant short term disability benefits, but subsequently denied claimant’s claim for long term disability benefits. Ultimately, the court determined that Aetna’s denial of long term disability benefits was an abuse of discretion, for the following reasons:
- Aetna improperly classified claimant’s occupation as “sedentary,” which was not supported by substantial evidence.
- Aetna changed the classification of claimant’s occupation multiple times throughout the claims process, from “sedentary” at the short term disability phase, to “light’ at the initial stages of the long term disability claim, and then back to “sedentary” in order to deny the claim.
- Aetna relied on file reviews conducted by reviewers who were relying on incorrect and incomplete information about the claimant’s job classification (i.e. that the job was “sedentary,” not “light”).
- Aetna relied on file reviews conducted by reviewers who did not have the proper expertise to review claimant’s diagnosis of “unspecified disorder of autonomic nervous system.”
- Aetna relied on file reviews that were not based on informed consultation with the claimant’s treating physicians.
These are just a few examples of things that courts have found to be an “abuse of discretion” under ERISA. Remember, the law in each jurisdiction varies, so the courts in your state may not necessarily agree with the court in this case. An experienced disability insurance attorney should be able to give you a sense of whether a court would uphold or reverse your claim denial, under ERISA or otherwise.
 No. CV 14-4332 (DWF/LIB), 2015 WL 9294269, at *1 (D. Minn. Dec. 21, 2015).
In previous posts, we have discussed the importance of properly documenting your disability claim. From the moment you file your disability claim, most insurers begin collecting as much documentation as possible in the hopes that they can use the documentation to deny your initial claim, or terminate your disability benefits later on.
Oftentimes, disability benefits are terminated without warning. For example, an insurance company may conduct covert surveillance over an extended period of time, and then suddenly terminate your disability benefits once they feel that they have sufficient footage to assert that you are not disabled. If you are not consistently documenting the ongoing nature and extent of your disability, you may find yourself lacking sufficient evidence to contest a denial or termination of benefits.
For example, in the recent case Shaw v. Life Insurance Company of North America, the insurer refused to pay claimant her disability benefits. Although claimant saw multiple doctors and psychiatrists for PTSD and depression before filing her disability claim, the court ultimately found that the medical records she submitted were deficient, for several reasons.
First, even though claimant was asserting mental health claims, the claimant’s primary treatment provider was a family practice physician, not a psychologist or psychiatrist. Additionally, the court observed that the family practice physician’s records were “cursory, and contain[ed] minimal documentation of the frequency or intensity of [claimant’s] symptoms.” Id. To make matters worse, the claimant only saw the psychiatrists for a period of a few months, and the psychiatrists’ records showed that claimant had refused to follow the recommended treatment plan, which included both psychiatric medication and cognitive treatment.
The claimant attempted to supplement her medical records using a narrative letter she wrote describing her symptoms, along with several letters from family and friends. However, the court ultimately found the narratives unconvincing because there was a “significant potential for bias,” the severity levels described in the narratives conflicted with the psychiatrists reports, and claimant’s friends and family were not medical specialists or care providers and therefore could not diagnose claimant’s medical condition or assess claimant’s functional capacity. Id.
In the end, the court affirmed the denial of disability benefits, even under de novo review. Id.
What could the claimant have done better to avoid the denial? For one, she could have used a psychiatrist or psychologist as her primary treatment provider. She also could have followed the treatment plan recommended by her psychiatrists. Finally, she could have asked her physician to provide more thorough documentation.
Remember, courts will generally want to see medical records, not statements from friends and family. While such statements can be a useful way to provide background information, a court will want to see documentation of diagnosis and treatment by a health care provider. An experienced disability insurance attorney can help you review your medical records and determine if they are sufficient in comparison to the documentation that the insurance company will almost assuredly be collecting.
 No. CV1407955MMMFFMX, 2015 WL 6755187 (C.D. Cal. Nov. 4, 2015).
At least one court thinks so. In Daie v. The Reed Grp., Ltd., the claimant was denied long term disability benefits under an ERISA plan. Instead of merely asking the court to reverse the denial of disability benefits (a result that can be difficult to achieve under ERISA), claimant filed a complaint in state court alleging intentional infliction of emotional distress.
The claimant asserted that the insurer “repeatedly engaged in extreme and outrageous conduct with the aim of forcing plaintiff to drop his claim and return to work.” Id. More specifically, the claimant alleged that the insurer had falsely claimed the claimant was “lying” about his disability and “exaggerating” his symptoms. Id. According to the claimant, the insurer had also urged claimant to take “experimental medications,” induced claimant to “increase his medications,” forced claimant “to undergo a litany of rigorous medical examinations without considering their results,” and pressured claimant “to engage in further medical testing that it knew would cause . . . pain, emotional distress and anxiety.” Id.
The insurer filed a motion to dismiss, arguing that ERISA preempted claimant from bringing the state law claim. The court denied the motion to dismiss for two reasons. First, the court determined that the claim was based on “harassing and oppressive conduct independent of the duties of administering an ERISA plan.” Id. Second, the court determined the insurer had a “duty not to engage in the alleged tortious conduct” that existed “independent of defendants’ duties under the ERISA plan.” Id.
The federal court then sent the case back to state court, where, as of the date of this post, the state court has not yet determined whether claimant should be awarded damages for emotional distress.
At this point, this ruling has only been adopted by the District Court, and not the Court of Appeals, so it is not binding upon other courts. However, it could potentially persuade other courts to recognize similar claims. It will be interesting to see how many other courts follow suit, and whether this ruling will ultimately be adopted by courts at the appellate level.
 No. C 15-03813 WHA, 2015 WL 6954915, at *1 (N.D. Cal. Nov. 10, 2015).
In 2007, the Georgia Court of Appeals had to address this question in Pomerance v. Berkshire Life Insurance Company of America. 654 S.E.2d. 638 (2007). Alan Pomerance was an obstetrician/gynecologist with four disability insurance policies from Berkshire. These policies provided own-occupation coverage, meaning that “total disability” was defined as “your inability to perform the material and substantial duties of your occupation.”
Dr. Pomerance’s occupational duties included delivering babies, surgeries, C-sections, office visits, making hospital rounds, and being on call. After being diagnosed with a degenerative knee condition, Dr. Pomerance filed a total disability claim with Berkshire, explaining that he could no longer stand for long period of time, so he couldn’t perform deliveries and hospital surgeries, be on call, or assist in the emergency room. Because of his disability, Dr. Pomerance was forced to restrict his practice solely to wellness office visits, which included patient exams, counseling, nonsurgical care, and minor biopsies, but none of his other former duties.
Berkshire declined to pay Dr. Pomerance total disability benefits, arguing that he was only partially disabled because he could still perform one of his “substantial” duties, i.e., office visits. Dr. Pomerance contacted Berkshire and objected to its determination, but Berkshire still refused him total disability benefits. Dr. Pomerance filed suit against Berkshire, claiming breach of contract and bad faith refusal to pay the amounts owed. Continue reading “Case Study: What Does “Material and Substantial” Mean?”
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.