Reducing the risk of having to fight for disability benefits requires understanding the terms of your disability insurance policy from the beginning, carefully and thoroughly filling out the application, and ensuring accuracy and consistency in your claim packet and subsequent filings. As the saying goes, the best defense is a good offense, and the best way to avoid litigation is to file the disability claim correctly the first time.
Although filing a successful disability claim is not easy, it is the ideal. Unfortunately, insurance companies have a strong incentive to increase their bottom lines and often they practice aggressive tactics in improper attempts to justify the denial or termination of even a wholly legitimate disability claim. If your disability claim has been terminated or denied, it can seem overwhelming or hopeless to try to reverse the decision. In the event of a denial or termination, many insureds know they can sue their disability insurer and go to trial. Yet, even if you are ultimately successful in a lawsuit, litigation can sometimes drag on for years. While a lawsuit is pending, you’ll not only have legal expenses, but will also not be receiving disability benefits (and likely not be in a position to work to offset your expenses, due to the nature of your disability or your policy’s language). There are, however, some alternative options that can be attractive to both parties that policyholders may not be aware of, namely mediation and lump sum settlements.
All too often we see legitimate disability claims denied or terminated, with the insurance company refusing to reconsider their position. If your disability claim is terminated, the company knows that it wields a lot of power over the denied individual, including the power of money, the power of time, the power of institutional knowledge, and the power to tolerate litigation. In other words, insurers calculate that spending money on even protracted litigation will end up being cheaper than continuing to pay disability benefits, and they know that many claimants will just give up and go away if they draw out court proceedings long enough.
While this might sound bleak, there can be alternatives to a full-fledged lawsuit that culminates in a trial (and potentially drawn-out appeals). One such method is mediation. Mediation is where the parties to a lawsuit meet with a neutral third party in an effort to settle the case.
For the most part, mediators are retired judges, or active or retired attorneys. The mediator reviews the case file and then meets with both parties, seeking to facilitate discussions between the parties and try to find common ground in order to reach an acceptable compromise. Because mediation is not binding, the mediator’s recommendation and any subsequent agreement between the parties is not final until the parties memorialize it by putting all the agreed upon terms in writing and signing the document.
Often the insurance company will offer to draft the agreement so they can have control over what the agreement says, and so it is important to stay engaged in the process even after the mediation has ended, in order to ensure that the parties’ agreement is accurately documented. The settlement agreement itself is a very important document, so you should be sure to take the time to carefully review it before signing, to be sure it encapsulates all the agreed upon terms.
It is also important to keep in mind that mediation typically does not result in a full restoration of disability benefits nor is not always successful. The non-binding nature of mediation means that if the insurance company low-balls and refuses to budge in its offer, the claimant may need to just walk away and resume litigation.
Lump Sum Settlement
Another way of avoiding trial is through negotiating a lump sum settlement. This typically occurs outside of the mediation setting, but sometimes requires the filing of a lawsuit before the insurance company is willing to come to the table. When this happens, your insurer agrees to buy out your disability insurance policy and you release your right to collect disability benefits under your policy and your insurer from any obligation to you. The buyout amount will be your disability insurance policy’s “present value” (i.e. the amount of money you could invest upon receipt, based on a determined interest rate, and end up with the same amount of money you would have received in disability benefits at the end of your policy), discounted by a percentage that is negotiated by the parties.
A buyout can be an attractive offer and can occur at any stage of the litigation process. A lump sum buyout could even be a preferable alternative to having disability benefits reinstated, as you would no longer have to deal with your insurer. Your disability benefit payments would cease being on hold pending the outcome of a trial and you could invest the lump sum in order to provide for your and your family’s future. In addition, unlike monthly disability benefits, the lump sum settlement you receive would be inheritable and available to be passed on to your heirs, should something happen to you.
There are, however, certain drawbacks to a lump sum buyout, including the fact that you and your disability insurers cannot accurately predict the future of the market with 100% certainty, so the calculations will only be a best estimate. If you are healthy and have lifetime benefits, you could also receive more money cumulatively over time if you were to stay on claim. So, while attractive, especially when faced with litigation, the pros and cons must be carefully weighted when considering lump sum buyouts during the litigation process.
We often see claimants who face the loss of their disability benefits simply give up and accept a denial, daunted by the thought of protracted litigation. While litigation may sometimes be the most advisable way to get benefits, and possibly punitive damages, there are other avenues to explore, advisably with the help of a disability insurance attorney, that can end in your retaining at least some of the disability benefits you stand to lose completely when an insurance company denies your disability claim.
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).
Apparently, the Unum employee suffered from carpal tunnel—due to all the typing that her job required—and also suffered a back injury in her home office. Naturally, the Unum employee saw a hand specialist for the carpal tunnel, and a back specialist for the back injury. After the Unum employee had surgery on her hand to treat the carpal tunnel, the Unum employee’s primary care physician placed her on work restrictions. However, the primary care physician did not send the work restrictions to Unum because she thought that the other doctors had already documented the restrictions.
Unfortunately for the Unum employee, the other doctors had not forwarded the restrictions to Unum. Instead of reaching out to the Unum employee’s doctors to see if the disability claim was legitimate, Unum simply denied the long term disability claim due to a lack of documentation. At that point, the primary care physician came forward and expressly told Unum that she supported the restrictions, but Unum still refused to pay any benefits.
 See http://www.lawyersandsettlements.com/articles/first_unum/interview-unum-lawsuit-insurance-29-20883.html#.VfhBwxFVikp.
Legal Requirements for Denial Letters: What Your Insurance Company Has to Tell You When It Denies or Terminates Your Claim
If your claim for disability insurance benefits is denied or terminated (i.e., if the insurance company discontinues benefits they were once paying), the insurance company will send you a letter notifying you of that denial or termination. Depending on the state you live in and the type of disability policy you have, the insurance company’s denial or termination letter has to include certain information. Most doctors have individual (a.k.a. private) disability insurance policies governed by state law. Below are some examples of denial letter requirements in several states.
Arizona: Under Arizona law, the denial letter should reference any specific policy provision, condition, or exclusion upon which the denial or termination was based. The letter should also provide a reasonable explanation why, given the facts of your disability claim and/or the applicable law, the insurer believes you do not qualify for disability benefits under the terms of your particular policy.
California: In California, insurers must advise claimants of the acceptance or denial of a claim within 40 calendar days of receipt of proof of claim, unless they provide written notice of a need for additional time within that 40 days. All denials must be in writing (as opposed to simply given over the telephone), and the denial or termination letter must state reasons for the decision, including reference to specific policy provisions. Like in Arizona, denial or termination letters from California disability insurance companies should provide a reasonable explanation of the basis the insurer relied on in the disability insurance policy, in relation to the facts or applicable law, for the denial.
Nevada: Nevada disability insurers have 30 working days after receiving properly executed proofs of loss to advise claimants of the acceptance or denial of the claim, unless the insurer advises otherwise within the 30-day period. Nevada law requires that denials be in writing, and it must include whatever specific policy provision, condition or exclusion upon which the insurer based its decision. Just like Arizona and California, Nevada law indicates that disability insurance denial letters should provide a reasonable explanation of the basis the insurer relied on in the insurance policy, in relation to the facts or applicable law, for the denial of the disability claim.
Utah: Utah follows the same 30-day rule as Nevada with respect to the time the insurer has to provide a claims determination. In Utah, the insurance company must not only put the basis for the denial or termination of the disability claim in a letter to the claimant, it must also record that basis in its claim file. Consistent with the other states mentioned, insurers are prohibited from denying a disability claim on the grounds of a specific provision, condition, or exclusion in the policy unless they reference that provision, condition or exclusion in the denial letter.
We always recommend contacting a disability insurance attorney if your disability claim is denied or terminated. If your denial or termination letter does not include the required information, be sure to let the attorney know, as you may have additional legal rights that you need to enforce.
 A.R.S. § 20-461(15).
 Cal. Code Regs. tit. 10, § 2695.7(b).
 Cal. Code. Regs. tit. 10 § 2695.7(b)(1).
 Cal. Ins. Code § 790.03(h)(13).
 Nev. Admin. Code ch. 686A.675(1), (3).
 Nev. Admin. Code ch. 686A.675(1).
 N.R.S. § 686A.310(1)(n).
 Utah Admin. Code. R590-190-10(2).
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 disability 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 disability 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.
- 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.
- 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.
- Following the phone call, you should receive a letter from the insurance company stating that it has denied your disability claim or discontinued your disability 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 disability benefits. When you receive the letter, read through it carefully. Make notes on a separate document about any inaccuracies you identify.
- 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.
- Once you find out that your disability 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.
- 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.
- 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 disability claim has been denied or terminated.
- It’s usually best to contact a disability insurance attorney before you respond to the denial letter, to avoid saying anything that could prejudice your appeal. For instance, if you have a disability insurance 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.
- 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.
- 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 disability 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 disability benefits upon appeal.
Over the last ten years, there has been an increasing movement away from paper records and toward Electronic Medical Records (EMR). This move has been accelerated by the federal government’s mandate that doctors who treat Medicare and Medicaid patients must have adopted and implemented EMR systems as of January 1, 2014.
There are many benefits to using EMR. They can facilitate patient care between referring doctors, improve data tracking over time, increase efficiency and reduce errors. However, EMR systems have drawbacks when they are used for purposes never intended, such as to document a disability claim.
Many EMR systems allow the doctor to input his findings for every major system in the human body, such as the cardiovascular, musculoskeletal, gastrointestinal, neurological and psychiatric systems. However, if the doctor does not put in something regarding one of the symptoms, the default setting on the EMR will report the system as being “within normal limits” or that the patient has “no complaints.” The concern with this from a disability perspective occurs when a patient sees his doctor for a condition unrelated to his disability.
For example, a patient with a history of degenerative disc disease could visit his doctor for an unrelated infection or illness. Since the doctor is conducting only a limited examination for purposes of treating the presenting illness, he may not input any information related to the patient’s disabling condition. The EMR will then generate an inaccurate record stating that the patient’s musculoskeletal system and neurological system are within normal limits.
Disability insurance carriers can then use these default settings to their own advantage to raise questions about the severity of the claimed disability, justify an independent medical examination or functional capacity evaluation, or support a claim termination. For patients who are receiving disability benefits, it is therefore important to know what their medical records look like and to effectively communicate with their physicians to ensure that their conditions and symptoms are accurately recorded on each visit.
What role should your insurance company play in determining your treatment options? In our article, “Can Your Disability Insurer Dictate the Terms of Your Care?” by Ed Comitz and Michael Vincent, we discussed how, depending on the terms of your disability insurance policy, insurers can dictate what care you should receive, and whether you can be forced to undergo surgery in order to continue to receive policy benefits.
When prescribing you a specific treatment or medication, your doctor usually has very specific goals in mind. First, they want to medically treat you in the best way possible. They want to provide you with the best means for curing or coping with your situation after considering the totality of your circumstances and your recovery goals. Second, they want to make you feel better and help you recover from your ailments if possible.
For example, if surgery isn’t an option for your consistently high levels of pain, your doctor may prescribe strong medication to give you the relief you need. They may effectively manage the pain you struggle, but the side effects may impede you from returning to work.
Unlike doctors, insurance companies have one goal in mind: to get you off of their claims list and not pay monthly claim benefits. They want you treated in a way that returns you to work in the short run and may not be as concerned about the long term side effects or repercussions of alternative treatment options.
One way they accomplish this is by having their doctor contact your doctor to discuss treatment alternatives. Such alternative methods include using less effective medications that would allow you to return to work. A strategy they employ is to point your doctor to studies like those outlined in articles like “Disability experts question long-term opioid use,” or “Reed Group Releases New Opioid Treatment Guidance in Disability Guidelines.”
What many people don’t realize is that the Reed Group, the company who released the “updated expert guidelines,” is a subsidiary of Guardian Life Insurance Company, parent company of Berkshire Life. This company has a substantial incentive to downplay the safety and effectiveness of drugs, like opioids, that are able to manage acute pain, but render patients unable to return to work because of medication side effects. These companies want to point your doctors to these guidelines to influence their bottom line by getting you back to work quickly.
The problem with this tactic is that these blanket guidelines do not take into account your pain, your needs, or your situation. Yes, the alternative options may get you back to work, but in the long run you may experience repercussions. Letting claims consultants, who aren’t medical professionals, or the insurance company’s doctors determine your care and treatment is a conflict of interest for insurance companies and is not always in your best interests.
A recent disability insurance case from the Southern District of California, Barbour v. Unum Life Insurance Company of America, 803 F. Supp. 2d 1135 (S.D. Cal. 2011), illustrates yet another way in which insurers sometimes improperly use surveillance to deny or terminate policyholders’ claims. In this instance, Unum (parent company of Paul Revere, Provident, and UnumProvident) actually based its decision to deny a claimant benefits on surveillance footage of the wrong person.
Patricia Barbour was insured under a group disability insurance plan through her job as a school principal. Ms. Barbour filed a claim under her policy due to “severe right quadrant abdominal pain—inflammation small intestines,” for which she had undergone two hernia surgeries, with serious complications. She and her physician explained to Unum that her condition restricted her from driving, walking or standing, and sitting for extended periods of time, and that she was totally disabled from performing hers or any other occupation. Ms. Barbour also reported that she used a cane, and that she needed her mother’s help for her daily activities.
As typically occurs, Ms. Barbour’s claims consultant at Unum retained a private investigator to perform three days of surveillance on Ms. Barbour.
Provident Loses the Battle Over Discovery of Employee Compensation and Bonus Information Tied to the Denial of Insurance Benefits.
In previous posts entitled “Why Is It So Hard To Collect On My Disability Insurance Policy?” and “Does Your Unum Claims Handler Have a Personal Financial Incentive to Deny or Terminate Your Disability Claim?”, we reviewed a leading reason behind insurance companies denying disability insurance claims: claims managers often receive incentives, including bonuses, depending on the amount of money they save the company. For the claims department, saving the company money is frequently achieved by denying the claims of existing customers who are receiving disability insurance benefits. This conflict of interest is a probable basis for denial or termination of many legitimate disability claims.
A recent discovery decision by the United States District Court, N.D. California in Welle v. Provident Life & Accident Ins. Co., 2013 WL 5663221 (N.D. Cal., Oct. 17, 2013) comes as a major win for those with legitimate disability claims. There, Doctor Dana Welle injured her left arm in a bike accident. After multiple surgeries, she was diagnosed with ulnar neuropathy and left medial epicondylitis. This condition gave her pain and weakness in her left arm that impacted her ability to safely care for her patients. After Provident Life Insurance (a Unum company) had paid almost three years of disability insurance benefits to Ms. Welle, the company denied her benefits.
In her suit against Provident, which claimed bad faith denial of her benefits, Dr. Welle alleged that Provident’s “incentive structure was based on performance, and performance may be measured, in terms of resolution of claims, including her own.” Dr. Welle requested Provident to produce “any and all documents that reflect, refer or relate to bonus awards, including but not limited to the performance rating and percent of bonus awarded” to claims managers and claim handlers.
Provident objected to the request because, as they argued, it was overly broad and sought to obtain information that was private, proprietary and confidential. The Court overruled Provident’s objections and allowed the discovery. The Court reasoned that the information she sought in her requests “speaks to whether her claim was improperly denied and whether Provident encourages bad faith practices.”
The Court further reasoned that Dr. Welle had shown compelling need for the documents that related to the bonuses of those involved in adjusting her disability insurance claim, and that the information was “highly relevant to her bad faith claim.” The Court disagreed with Provident’s concern with the request being overly broad because it only requested bonus and performance related information of specific individuals. The Court also disagreed with Provident’s defense that discovering the information would breach the employees’ privacy rights, or that the information was proprietary and confidential, because Dr. Welle had already stipulated to a confidentiality agreement and protective order that covered the entire proceeding.
Thus, the Court allowed discovery of the employees’ bonus and performance related compensation documents. Though this is not the end of Dr. Welle’s fight to receive her legitimate disability insurance benefits, it is a major step in helping her get the ammunition she needs to assure her of future benefits under the policy.
 Welle v. Provident Life & Accident Ins. Co., 2013 WL 5663221 (N.D. Cal., Oct. 17, 2013).
UPDATE: Since this story was originally posted in 2008, the insurance regulators of Maine and Massachusetts initiated targeted market conduct examinations of CIGNA’s disability claims handling practices. The concerns raised by Maine and Massachusetts prompted the insurance commissioners of Connecticut and Pennsylvania to also open market conduct examinations and for the California Insurance Commissioner to reopen his previous examination of CIGNA. In 2013, the examinations resulted in fines against the CIGNA companies, corrective actions being required in its handling of disability claims, and for CIGNA to reevaluate certain claims that were denied or terminated. Information on the CIGNA Multi-State Regulatory Settlement Agreement can be found here.
ABC News/Good Morning America‘s investigation by Chris Cuomo into CIGNA disability claim denials has uncovered some disturbing stories. In the video above, claimants describe some of the hardships they have been forced to endure due to denials of their claims or unreasonable delays in having their claims paid.
One breast cancer survivor, who eventually was paid on her claim with the assistance of a disability insurance attorney, describes her two-year ordeal with CIGNA as a “daily, eight-hour job just to fulfill the information that CIGNA was requesting.” The tactic of wearing down a disabled claimant with repeated requests for documentation that has already been provided multiple times — thereby deliberately delaying payment of the claim — is called “slow walking” by some in the industry. While CIGNA denies engaging in this practice, many claimants who are already emotionally and physically vulnerable due to their disability will eventually quit pursuing benefits to which they are entitled in this battle of attrition that is widespread in the disability insurance industry. In this situation, it is often necessary for a claimant to retain the services of an attorney, not only to take on legal issues with the insurance company but also to shoulder the burden of the excessive and repetitive requests for documentation.
Other claimants in Chris Cuomo’s GMA piece describe (a) three years of fighting CIGNA for their benefits, all the while sinking deeply into debt and losing everything; (b) being caught between a rock and a hard place when told by an employer that he could not return to work due to his disability, but simultaneously having CIGNA deny disability benefits; (c) purchasing insurance to protect herself and her family, only to have her business destroyed, savings depleted and fighting to keep her family home when benefits were denied or delayed.
Another of the claimants profiled, Ursula Guidry, a young wife and mother with advanced breast cancer, initially had her benefits paid by CIGNA, but after awhile, they terminated her benefits and told her she could return to work full-time. Eventually CIGNA settled the claim with her. She passed away three months later. As her husband says, it is tragic that her last year on earth was spent being in a panic over financial issues and fighting an unethical insurance company instead of enjoying as much time as possible with her husband and children.
CIGNA did not respond to GMA re any of the specific claimants profiled, but their Chief Medical Officer stated they pay 90% of disability claims filed and that the majority of their customers are satisfied.
Under Pennsylvania law, as affirmed by the Third Circuit Court of Appeals, insurance companies can legally void a disability insurance policy if the insured has made fraudulent misstatements about their past mental or medical history. This is known as “rescission” and is a common tactic insurance companies use to avoid paying claims. In Sadel v. Berkshire Life Insurance Company of America, 473 Fed.Appx. 152 (2012), pharmacist Michael Sadel (“Sadel”) owned two pharmacies in Philadelphia. In 2002, Sadel underwent treatment with Linda May, a clinical social worker, for abuse of prescription narcotics. Sadel continued treatment, in individual and group therapy sessions, through 2006. In 2005, Sadel purchased disability insurance from Berkshire Life Insurance Company of America (“Berkshire”), whose parent company is Guardian, but did not disclose his past drug use or treatment for various mental or emotional disorders to Berkshire when completing the disability insurance coverage application. This could have been due to an ambiguous question on the application form. For example, if the question had asked if Sadel had been or was under the care of a medical doctor, he may not have understood that this also includes care for mental or emotional disorders.
In January of 2007, Sadel lost several fingers on his left hand during a robbery at one of his pharmacies. When treated for the injury, Sadel admitted his past drug use to emergency room workers so that they would not administer drugs to him that would cause a relapse. In February of 2007, Sadel exercised an option to purchase a Future Increase Option policy with Berkshire, which increased his disability insurance coverage. Sadel returned to work at his two pharmacies, but stopped working after an incident at his pharmacy in June of 2007, in which a customer approached him from behind and said “stick ‘em up.” During the incident Sadel said his life flashed before his eyes and he realized he could no longer work at the pharmacy. Sadel put his pharmacies up for sale, and notified Berkshire, in August of 2007, of his intent to claim disability benefits under his Berkshire disability insurance policies.
After receiving Sadel’s notification, Berkshire sent Sadel several forms to fill out, and obtained Sadel’s emergency room medical records documenting the robbery incident and treatment. Berkshire also received a report and chart prepared by Linda May, where she indicated that she had treated Sadel for narcotics abuse from 2002 through the time he purchased the original disability insurance coverage with Berkshire. In June of 2008, Berkshire notified Sadel that they had found inconsistencies with his medical records and the insurance policies. Berkshire informed Sadel, in November of 2008, that they were still reviewing the validity of his policies.
Sadel filed suit against Berkshire in January of 2009, alleging bad faith and breach of contract, and sought money damage for the unpaid disability income benefits. Berkshire counterclaimed for rescission of his disability insurance policies, alleging that Sadel had made fraudulent statements on his disability insurance coverage applications. Berkshire was able to make this counterclaim because the disability insurance benefits contract specifically stated that the policy could be voided due to fraudulent misstatements during the application process. Berkshire was successful in District Court, and Sadel appealed to the Third Circuit.
Though Sadel tried to justify his application statements by arguing that he was doing well when he filled out the initial disability insurance application, and that his drug abuse was a small matter which he dealt with in a matter of weeks, Sadel did not prevail in his Berkshire disability claim. The Third Circuit Court upheld the Pennsylvania District Court’s ruling that Berkshire had not acted in bad faith. In fact, the Third Circuit agreed with the District Court finding that Sadel had “knowingly provided fraudulent misrepresentation on his disability insurance applications . . . and he [could not] establish bad faith on the grounds that Berkshire lacked a reasonable basis to deny him benefits.”
This Pennsylvania case is important because it shows that inaccurate or fraudulent statements on a long term disability insurance coverage application, though undiscovered at the time of purchasing disability insurance, will likely come to light when the insured tries claim disability insurance benefits under their policy. Thus, for the insured, when in doubt about what to disclose on long term disability insurance application forms, it is better to err on the side of caution and always disclose your medical history. Insurance purchasers should also keep a copy of the application, which is considered part of the disability insurance policy that will be delivered with the final executed policy to the inured. Furthermore, when filing an insurance claim it is important to have a disability insurance attorney review not just the policy, but the application as well, to see if there are potential problems to claiming the benefits of a disability insurance policy.
Question: Why do many doctors’ disability claims get denied, and how can a law firm help?
Answer: Doctors’ and dentists’ disability claims can be expensive for insurance companies to accept. The troubled economy and the rising number of disability claims filed by healthcare professionals have led to financial hardship. This strain on resources creates an incentive for insurance companies to deny medical professionals’ claims. Thus, many insurers closely scrutinize the terms of doctors’ and dentists’ policies in order to find ways to deny disability insurance benefits, as the long-term financial benefit to the insurance company is significant.
Our firm has years of experience in cases in which disability benefits have been rescinded based on alleged misrepresentation or non-disclosure in the original policy application. We also have a strong history of prosecuting cases in which benefits have been denied based on the insurance company’s insistence that a dentist’s or doctor’s “subjective claim” doesn’t provide objective evidence of disability.
Further information on our law firm’s services and what you can expect when filing a disability claim is available on our website at this link.
CIGNA fined in Multi-State Regulatory Settlement Agreement Re Group Long-Term Disability Claims Handling; Some CIGNA Claims to be Re-Evaluated
Following a Targeted Market Conduct Examination of CIGNA’s disability insurance claims handling practices, CIGNA companies — Life Insurance Company of North America, Connecticut General Life Insurance Company, and Cigna Health and Life Insurance Company (fka Alta Health and Life Insurance Company) — entered into a Regulatory Settlement Agreement in May 2013 with the California Department of Insurance, the Connecticut Department of Insurance, the Maine Bureau of Insurance, the Massachusetts Division of Insurance, and the Pennsylvania Insurance Department. Insurance regulators of other states may adopt the terms by becoming a Participating State. As of this time, Arizona is not amongst the Participating States.
The targeted market conduct examinations were initiated by the Maine Superintendent of Insurance and the Massachusetts Commissioner of Insurance in 2009 to investigate whether CIGNA’s claim handling practices conformed with the standards upheld by the National Association of Insurance Commissioners. The regulatory concerns raised by the initial examinations prompted Connecticut and Pennsylvania’s insurance commissioners to open similar examinations and for the California Department of Insurance to reopen its 2006 examination.
As a result of the examination, the CIGNA companies were ordered to pay fines in the amounts of $500,000.00 to the California Commissioner of Insurance, $175,000.00 to the Maine Superintendent of Insurance, and $250,000.00 to the Massachusetts Commissioner of Insurance, and to take certain corrective actions in the handling of group disability insurance claims, to include:
- Giving significant weight in a claimant’s favor if the SSA has awarded SSDI disability income;
- Improving procedures for gathering medical information, attempting to resolve discrepancies in medical statements or conclusions, documenting and outlining the medical conclusions upon which a determination of disability is made, and evaluating functional capacity with the presence of co-existing or co-morbid conditions;
- Following written guidelines for using external medical resources if medical opinion/information is unclear or contradictory or if the claims adjuster disagrees with the opinions of the treating physician(s); Continue reading “CIGNA fined in Multi-State Regulatory Settlement Agreement Re Group Long-Term Disability Claims Handling; Some CIGNA Claims to be Re-Evaluated”
Does Your Unum Claims Handler Have a Personal Financial Incentive to Deny or Terminate Your Disability Claim?
The transcript of Unum Group’s May 23, 2013 Annual Shareholder Meeting provides some disturbing insight into what may motivate claims personnel at Unum to deny or terminate a legitimate disability claim.
Unum’s Chief Executive Officer, President and Director, Thomas R. Watjen reported to the shareholders that they had “overwhelmingly approved” an employee cash incentive system based on performance:
The fourth item of business is the approval of our annual incentive plan, which provides employees the opportunity to earn cash incentive awards based primarily on the company’s performance each year. Our company performs well, employees get treated well from a financial standpoint. Our company doesn’t perform well, employees don’t get treated as well. . . . So our shareholders see, as we as directors and managers see, how to run the company successfully by creating an incentive system based on performance. So that has been overwhelmingly approved.
Later in the meeting, Unum’s Chief Financial Officer, Richard P. McKenney, spoke about the performance of Unum’s “closed block of business,” which includes its individual disability policies issued prior to the mid-1990s–the type of policies that Unum no longer sells.
We do have our Closed Block business. These are policies which are written some time ago. We serve those customers equally as well. But the returns in these businesses are lower.
Taken together, the two statements paint a picture of claims personnel handling the closed block of business under pressure to improve the returns, or else they “won’t get treated as well” or receive as sweet an incentive bonus.
We often hear from claimants who are incredulous that their claims have been denied or terminated despite a mountain of evidence of their disability. This may be one explanation, and having an attorney to advocate for you as a claimant can be essential when you have a financially-motivated adjuster reviewing your claim.
The full transcript of the Unum Annual Shareholder Meeting is available at Seeking Alpha.
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.