Disability Insurance Bad Faith: Different States – Part 2 (California)
In this series of posts, we are outlining what constitutes insurer bad faith from state to state. Our previous post outlined Arizona’s standards, and today, we look at the bad faith law of California.
In California, the Unfair Trade Practices Act of the Insurance Code statute dealing with unfair claims settlement practices is merely a codification of its bad faith law. A policyholder can bring a suit in California against its disability insurance company under the tort law, but not under the statute itself.
The Statute: Cal. Ins. Code § 790.03(h)
The Rules:
An insurance company’s duties include the following:
- To investigate disability claims thoroughly.
- To not deny coverage based on unduly restrictive policy interpretations.
- To use standards it knows are improper to deny disability claims.
- To not unreasonably delay processing or paying claims.
- To give as much consideration to the insured’s interests as it does to its own.
An insurance company is not allowed to:
- Misrepresent pertinent facts or policy provisions.
- Fail to acknowledge or act reasonably promptly on communications about a disability insurance claim.
- Fail to adopt and implement reasonable standards for prompt claims investigation.
- Fail to make a decision on coverage within a reasonable time after a policyholder has submitted complete proof of loss.
- Tell claimants the company always appeals arbitration awards in favor of claimants to get them to accept lowball settlement offers.
- Not attempt to make prompt, fair, and equitable settlements in which it has become reasonably clear that the disability insurance company must pay a claim.
- Force an insured to litigate to recover under the policy by offering an unreasonable settlement.
- Delay investigation or payment of claims by requiring an insured to submit multiple forms containing the same data.
- Withhold a reasonable explanation of the basis relied on in the insurance policy for the denial of a disability claim or for the offer of a compromise settlement.
- Directly advise a disability claimant not to obtain the services of a lawyer.
- Deceive a claimant as to the statute of limitations that applies.
The Tort Law Standard: A disability insurer can be found to have acted in bad faith if it withholds benefits unreasonably and without proper cause, whether or not the insurance company had a conscious awareness of wrongdoing or intent to harm the policyholder.
Disability Insurance Bad Faith: Different States – Part 1 (Arizona)
When a disability insurance company wrongly denies a disability claim in Arizona, it can be subject to a suit for bad faith. What constitutes insurer bad faith varies from state to state. Over the next several days, we will be outlining the first-party insurance bad faith law of Arizona and nearby states.
In many states, an insurance company can be held liable for its wrongful conduct in two ways: (i) under the tort law of the state or (ii) under a state statute. Though tort law and the statute usually overlap somewhat, they are sometimes meant to create separate and distinct causes of action. The tort law makes the insurance company pay damages to a private policyholder, while a violation of the statutes can often lead to either a suit by a private policyholder or charges brought by the state.
Arizona Insurance Bad Faith Law
The Arizona Unfair Claim Settlement Practices Act was intended to give the state Department of Insurance, headquartered in Phoenix, Arizona, guidelines for determining whether an insurer’s procedures and practices occur with such frequency as to indicate an unacceptable general business practice. This statute does not allow an individual to bring a lawsuit based solely on its provisions.
However, dentists and physicians can bring an action under the state’s tort law. Under Arizona insurance law relating to disability claims, the core of the duty of good faith and fair dealing is that the insurer must act reasonably towards its insured, giving equal consideration in all matters to the insured’s interest.
The Statute: A.R.S. §20-461. Unfair claim settlement practices.
The Rules: An insurance company’s duties include the following:
- To act reasonably in handling the claim.
- To not misrepresent facts of policy provisions to avoid paying benefits.
- To reasonably interpret contract provisions.
- To not take unreasonable legal positions.
- To not impose requirements on the insured that are not contained in the policy.
- To properly investigate the claim.
- To treat the policyholder fairly and honestly at all times.
- To give as much consideration to the insured’s interests as it does to its own.
- To make claims decisions without regard to profitably.
- To not attempt to influence the opinions of independent medical examiners.
- To not destroy or alter documents to conceal evidence of claim handling.
- To not lie about actions taken on a claim.
The Tort Law Standard: An insurer can be liable for bad faith if there is an absence of a reasonable basis for denying benefits of the policy and the disability insurance company had knowledge or a reckless disregard of the lack of a reasonable basis for denying the claim.
If you have concerns that your disability insurance claim has been denied in bad faith, an experienced Arizona disability can help you determine if you have a lawsuit to file against your insurer.
Disability Claim Investigation:
What Can My Insurer Do In Arizona?
What your disability insurance company can do when it is investigating an Arizona claim for disability benefits largely depends on your specific circumstances and the language in your policy. However, there are some common tactics that Arizona courts will often allow – and some they will not.
What the disability insurance company can do
- Audit your tax returns and billing records
- Review your medical files
- Use a private investigator to conduct video and photograph surveillance
- Look at your public Facebook profile and pictures
- Follow you on Twitter
- Order an Independent Medical Exam
- Have an insurance company doctor opine about your disability
- Ask for a Functional Capacity Evaluation
- Contact your treating physician
- Schedule face-to-face interviews with you
- Interview your family, friends, co-workers and employees
- Demand precise quantifications of your time spent in every professional activity pre- and post-disability
- Pay your claim under a reservation of rights
What the disability insurance company cannot do
- Impose requirements on you that are not in your policy
- Attempt to influence the opinions of independent medical examiners
- Misrepresent policy provisions
- Conduct abusive interviews
- Unfairly delay a decision on your claim
- Fail to conduct a timely, adequate investigation of your disability claim
- Destroy key documents
- Lie about actions taken on a claim
- Place their financial interests ahead of your contractual rights
- Force you to litigate by offering an unreasonably low lump-sum buyout
When it comes to claims investigation, disability insurance companies often skirt the limits of what they can legally do. If you think your insurer might be acting in bad faith, contact an experienced Arizona disability insurance attorney to protect your disability benefits.
How Specific is Your “Own Occupation”?
We have discussed many times the importance of an “own occupation” disability insurance policy. Such policies provide benefits if the insured is unable to perform the substantial and material duties of his own occupation, rather than requiring that the insured be unable to perform any occupation anywhere. But how specific is your own occupation?
John Simon, an environmental trial lawyer with a national practice, became disabled after an automobile accident. Pain in his legs made sitting, standing, and driving difficult. He had hand tremors, and pain medication caused a cognitive decline. He was diagnosed with regional pain syndrome and post-traumatic stress disorder. Yet Prudential Insurance only paid benefits for a year before terminating Simon, claiming that law was a sedentary profession and that there was no proof that he was incapable of performing his “occupation.”
As the District Court found in its decision, Simon “was no ordinary lawyer.” He was able to establish that his national environmental law practice required extensive travel by air and automobile, including carrying heavy files. Simon spent most of his time outside of the office developing a client base, litigating, lecturing on environmental law, and serving on a government commission.
Most of Simon’s practice was originating clients for the firm rather than performing extensive legal work on each case. During his disability period, his bonuses from the firm actually increased—from his fee sharing for bringing in new clients. Thus his bonuses reflected past rather than present efforts. Though the insurer pointed to Simon’s increasing compensation as evidence of his ability to practice law, it failed to investigate the nature of that compensation.
The court found that Prudential failed to consider the functional requirements of Simon’s particular work activities. It held that all of the factors weighed in favor of concluding that Prudential’s termination of benefits was arbitrary and capricious. John Simon had his disability benefits reinstated.
This case is an excellent example of how important it is to ensure that a disability claim is properly presented to the insurance company. All too often, disability insurers attempt to misclassify insureds’ occupations as to scope or type of duties. It may be necessary, as it was in this case, to litigate to force the insurer to recognize its obligations under the disability insurance policy. Thus, if you are filing a disability insurance claim, it is important to consult with an experienced disability insurance attorney.
Unum: Celebrating More than a Century of Claim Denials
Looking back at old disability insurance cases can be just as fascinating as reading old newspapers. Unum, the largest disability insurer in the U.S., is the product of numerous mergers. Unum’s corporate history (available on its website) proudly traces its lineage, which includes the Masonic Protective Association, later acquired by Paul Revere, which was subsequently acquired by Unum. Under a heading of “The company with a heart,” Unum notes that “The Masonic Protective Association, which later became Paul Revere, traded on its reputation of paying claims quickly and without fuss to become a powerhouse in providing accident insurance to members of the Brotherhood.”
For an example of Unum’s predecessor “paying claims quickly and without fuss,” examine the 1901 case of Scales v. Masonic Protective Association, 48 A. 1084 (N.H. 1901). The insured’s disability policy required that “disability, to constitute a claim for sickness, shall require absolute, necessary, continuous confinement to the house.” The insured became sick and incapacitated for 67 days. He spent the first five days entirely inside his house. As his physician had suggested fresh air to assist his recovery, he spent a portion of each subsequent day in his yard, either sitting in a chair or lying in a hammock.
Though the insurer admitted that the insured had been sick, it denied the insured’s claim for disability benefits on the grounds that the insured was not “confined to the house” under the terms of the policy. The Supreme Court of New Hampshire held that it was unreasonable to suppose that the insured could not sit in his yard for the purpose of recovery. It noted that the insurer’s interpretation of the policy would lead to the inference “that the [insurer] intended to deceive the insured.”
In what seems woefully naïve in light of what we know today regarding Unum’s claims practices, the court went on to state: “It cannot be presumed that an association of the character of the defendant association would be capable of such intent.” The court then applied a strict interpretation of the policy language and, finding “to a house” different in meaning from “in a house,” held that the insured had been confined to his house within the terms of the policy, and awarded him benefits.
What can we learn from a 110 year old case? Some things never change. Though the victorious attorney who represented the insured against Masonic Protective Association is long gone, today’s insureds should still consult an experienced disability insurance lawyer when considering filing a claim.
A Case Study in Benefit Denial
We frequently emphasize how important it is to consult with a disability insurance law firm before filing a claim. But what about at the moment when you realize that you’re too sick to work? It is vitally important to consult with a disability insurance attorney specializing in disability law as soon as possible. A recent case in which the insured was denied disability benefits illustrates the importance of consulting with an attorney from the very beginning of your illness. There are often clauses in your disability policy which require up-front strategic planning to preserve your claim. In the below case study in benefit denial, the insured found himself possibly covered by two plans but ultimately unable to collect from either.
Paul McKay was employed beginning in 1999 as an attorney at U.S. Xpress, which provided a long-term disability plan to its employees. Prior to January 1, 2004, this plan was provided by Unum. On that date, U.S. Xpress switched disability insurance providers to Reliance. Insurance coverage was supposed to be uninterrupted with employees retaining continuous disability insurance, and in fact it was. But McKay fell between the cracks due to disparate language in the policies.
During his employment, McKay developed significant cervical spine problems, and he eventually underwent surgery in June 2003. Unfortunately between September through December 2003, his condition continued to worsen. At that point he had severe cervical and lumbar disc disease, was frequently absent, and his medication made mental concentration more difficult. His last day of work at the office was December 19, 2003. He intended to work from home during January 2004, but there was no evidence that he was able to do so. U.S. Xpress continued paying McKay his usual salary until January 16 and then fired him on January 19, 2004.
McKay filed a disability claim with Unum (the insurer prior to January 1, 2004) for disability benefits, contending that he was disabled under the policy. Unum denied the claim. The court affirmed the denial. The problem for McKay was that his Unum policy contained a clause requiring a 20% loss in monthly earnings as a qualifying condition for disability benefits. Unum successfully argued that through December 31, 2003, McKay had not had any loss of earnings as U.S. Xpress had in fact paid him his full salary into January 2004. McKay argued that he may have received his salary but he was incapable of earning it. The court followed the plain language of the policy and regardless of whether McKay earned his keep in December, found no loss and ruled that he was ineligible for benefits.
Reasonably enough, McKay rationalized that if Unum wouldn’t cover him, then he must be covered by Reliance (who took over on January 1). He filed a claim with Reliance, only to discover that Reliance’s policy had two important but often-overlooked requirements: To be eligible for insurance without the usual 60-day waiting period (which would have started coverage on March 1), McKay had to be “actively at work” as of January 1 and his disability had to begin on or after January 1. Reliance denied the claim, asserting that McKay wasn’t “actively at work” because he was not working full-time (at least 33 hours per week) as of January 1. Recall that McKay had attempted to establish his eligibility under Unum by arguing that he had suffered a loss in earnings in December because after December 19 he wasn’t actually earning—just receiving—his salary. McKay’s statements, which had been made in support of his Unum claim, were outrageously used by Reliance to deny him benefits under Reliance’s plan.
The injustice gets worse. As a second reason for denying the claim, Reliance argued that since McKay had asserted a December disability date to Unum, had left the office after December 19, and had since received Social Security disability benefits based on a December 2003 disability date, McKay’s disability began before January 1. Thus, he was ineligible for benefits under Reliance’s plan. The court agreed with Reliance’s reasoning.
On appeal, the Circuit Court affirmed the lower court’s rulings. The Court noted that “McKay argues that because U.S. Xpress maintained uninterrupted LTD insurance coverage during the time period in which he sustained his disability, he must be covered by one of the two policies. McKay’s argument, while somewhat logical, is incorrect. Whether he is covered by either Unum or Reliance, or both, turns on the terms of each policy.” (emphasis added). And so it ends. Paul McKay, who was always “covered” by long-term disability insurance, turned out to not be covered at all. He receives no benefits from either policy, thanks to a coincidence of timing. Each insurer used his statements to the other to deny coverage, leaving him in a no-win scenario.
What can be done differently? Paul McKay should have immediately consulted a disability insurance attorney as soon as he suspected that he might become too ill to work. The attorney could have examined the policies and the upcoming switch in coverage and worked with Paul to develop a strategy to preserve his claim, such as resigning in December and immediately applying for benefits. This case underscores the importance of coordinated planning with an experienced disability insurance attorney.
What Happens If Your Plan Description Doesn’t Match Your Policy’s Terms?
Many people aren’t used to reading insurance policies. With their legal clauses, insurer-defined terms, and dry content, understanding them can be a challenge for insureds. For these reasons, disability insurers provide plain English summaries of their disability policies, both for marketing purposes and as a guide to benefits. But what happens if you rely upon the plan description in filing a disability claim only to be told that the actual policy language precludes your claim? Your insurer wouldn’t be alone in exploiting a situation where your plan description doesn’t match your policy’s terms.
In the recent case of Weitzenkamp v. Unum Life Insurance Company, the Seventh Circuit Court of Appeals addressed such a discrepancy in a disability insurance policy and plan description. Susie Weitzenkamp was diagnosed with fibromyalgia, chronic pain, anxiety, and depression—all self-reported symptoms. Her summary plan description listed a twenty-four month restriction on disabilities due to mental illness and substance abuse. What the summary failed to mention, however, was that the policy also had a twenty-four month cap on benefits for disabilities primarily based on self-reported symptoms. Ms. Weitzenkamp suddenly found her benefits abruptly terminated.
On appeal, the Circuit Court noted that a summary plan description is intended to be a “capsule guide [to the plan] in simple language.” The relevant law required that the summary include “the plan’s requirements respecting eligibility for participation and benefits” and “circumstances which may result in disqualification, ineligibility, or denial or loss of benefits.” Because the summary failed to mention this important policy provision denying benefits for self-reported symptoms, it violated federal law. The court prohibited Unum from relying upon the policy provision in denying Ms. Weitzenkamp’s claim, reinstating her past benefits though still leaving her to prove her ongoing eligibility under the merits of the policy.
This case illustrates but a portion of the complexity in disability insurance cases. What can physicians do to protect themselves? It is important to thoroughly understand both your actual policy and the insurer’s marketing literature. Physicians should retain all insurer-provided materials from both before and after the purchase of their policy, and consult with an experienced disability insurance attorney should they need to file a claim.
Even Athletes Need Disability Insurance
Many physicians have long been aware of the need to buy disability insurance to protect their income from a disabling injury, but physicians are not the only group needing high-dollar insurance policies. Everyone is at risk of a disabling injury. According to statistics, one-third of all Americans between ages 35 and 65 will become disabled for more than ninety days. Athletes are no exception to the norm, though we usually don’t think of Tiger Woods or Alex Rodriguez as owning disability insurance. For the wealthiest athletes, who can earn a living off of endorsements or other business ventures, disability insurance is probably unnecessary. But for most, it is an often-overlooked yet vitally important safety net.
Consider the June 2003 motorcycle crash of Jay Williams, a promising 2002 NBA draftee who suddenly found himself with a mangled leg, hundreds of thousands of dollars in medical expenses, and, because of a certain motorcycle-riding clause in his contract, suddenly out of a salary. The Chicago Bulls charitably bought out Williams for $3 million, but eight years later, he remains unable to return to the game.
Professional athletes all too commonly fail to realize that disability insurance protects their income as much as it protects the income of a doctor or attorney. It’s no surprise that a recent article suggested disability insurance as one of the first things a new professional athlete should buy. Some prepare even before they turn pro: Shaquille O’Neal played at Louisiana State University while covered under a $2.7 million dollar policy. In fact, one of the NCAA’s lesser known programs is its group disability insurance through which exceptional student-athletes can purchase protection against disabling injuries or sickness. Each year, about 75 top athletes buy insurance through the NCAA program.
There are more similarities than differences between the NCAA’s disability insurance policy and physicians’ disability insurance policies. The NCAA caps its benefits at a maximum of $5 million for first-round NFL draft picks and men’s basketball players, a figure roughly equivalent to the lifetime earnings of many physicians (though the NCAA pays the entire benefit over a fixed 30-month period). And like physicians’ policies, the key question is what constitutes a disability? Continue reading “Even Athletes Need Disability Insurance”
Are Disability Insurance Benefits Marital Property in Arizona?
Imagine that you become disabled from your own occupation and the insurer is paying your disability claim. You are entitled to disability benefits until you turn 65, die, or are no longer disabled (according to most policies). What happens to your monthly benefit if your spouse should now leave you?
A recent Minnesota Court of Appeals case addressed the question of whether disability insurance benefits are considered marital property and as such, to be divided among the spouses. During most of Brent and Lori Luginbill’s 23-year-marriage, Brent was employed as a chiropractor. When he became disabled from practicing chiropractic, he applied for and received disability benefits under his employer-provided, own-occupation disability insurance policy. Lori Luginbill petitioned for divorce in August 2007. The question for the court was whether the disability insurance policy and its payments were marital property or income. As marital property, it would be subject to division with the wife receiving a share. As income, it would remain the husband’s income and would not be divided between him and his wife.
The husband argued that because the policy was intended to compensate him for his inability to earn income, the policy’s payments ought to be treated as income. However, because the policy was purchased during the marriage with marital property, the husband became injured during the marriage, and he received the disability insurance funds substituted for earned income during the marriage, the court upheld the classification of the policy’s benefits as marital property.
The court ordered 35% of the benefits to be paid to the wife, with the other 65% remaining the husband’s property. In setting these percentages, the court reasoned that the husband would no longer receive payments if he secured economically beneficial employment, which he had been so far unable to do. The wife, on the other hand, was free to pursue gainful employment without concern for any reduction or discontinuation of the benefits.
What about the dentist or physician who lives in Phoenix, Tucson, or other cities in Arizona? As Arizona is a community property state, the legal analysis differs. The question of whether disability insurance benefits are considered community property was addressed in the case of Hatcher v. Hatcher, a case involving a lump-sum payment received prior to the dissolution of marriage. The Arizona Court of Appeals held that the portion of the payment which represented compensation for the husband’s loss of earning ability was community property, while the portion of the payment which represented compensation for future, post-dissolution lost earning capacity remained the husband’s separate property. Although the facts of each case are different and should be reviewed by an attorney, had the Luginbills lived in Arizona, it is likely that the husband would have retained a complete share of his future disability insurance benefits.
Every claim is unique and the discussion above is only a limited summary of the courts’ rulings in these cases. If you have questions regarding about insurance benefits and dissolution, an experienced Arizona disability insurance attorney can help you assess your claim and determine what action, if any, needs to be taken.
Disability Claims by Diagnosis
According to a survey conducted by the Council for Disability Awareness (“CDA”), a non-profit organization that attempts to educate the American public about disability and its financial impact, the most common causes of new long-term disability claims in 2010 are musculoskeletal/connective tissue injuries and cancer and neoplasms. The most common causes of existing long-term disability claims are musculoskeletal/connective tissue injuries, problems with the nervous system, and cardiovascular/circulatory disorders.
May is Disability Insurance Awareness Month — A Good Time To Ask Yourself If You Can Collect on Your Disability Insurance Policy
May is Disability Insurance Awareness Month. While the insurance industry likes to increase awareness of purchasing disability insurance, medical professionals who long ago purchased disability insurance and have been paying premiums on disability policies for many years may opt to instead raise their awareness of the obstacles they are likely to encounter should they ever need to make a claim on their disability insurance policy. The article below by disability insurance attorney Edward O. Comitz provides some food for thought.
DISABILITY INSURANCE: CAN YOU COLLECT UNDER YOUR POLICY?
By: Edward O. Comitz, Esq.
You have practiced medicine for your entire career. Your spouse and children rely on you, and you have numerous financial obligations. The stress and trauma of a disability can cause you significant problems. To protect yourself in case of total or partial disability, you have purchased disability insurance.
Unfortunately, you suffer an injury or become so ill that you cannot continue your practice, and you then file a claim with your insurance agent. Of course, you expect it to be honored. Instead, shortly thereafter, you are contacted by an insurance adjuster, not your agent. Unlike your agent, the insurance adjuster is hostile; the questions he asks imply that you are malingering. You try to be cooperative, providing the insurance adjuster with the additional information he requests, but again your claim is denied. Adding insult to injury, you learn from the adjuster that the insurance company has secretly videotaped your activities and, based on the tapes, believes that you are not disabled at all. Dumbfounded by the insurance company’s response, you ask yourself if there is anything that you can do to make the insurance company pay the benefits it promised. The answer is yes.
Typically, the type of policy that medical and dental professionals purchase is what is known as an “own occupation policy.” Such policies provide compensation following a disability that prevents the insured (the person who purchased the policy) from performing the particular duties of his or her profession. Thus, the insured may be entitled to benefits even if he or she could in fact perform work of a different nature. For example, if a surgeon purchases an “own occupation policy” and severely injures his hand, but could nevertheless perform some or all of the duties of a general practitioner, the surgeon is considered disabled under an “own occupation policy” and entitled to benefits.
Disability provisions greatly vary in the language used, and coverage is often circumscribed and restricted by qualifying words and phrases. Accordingly, each policy of insurance must be individually reviewed to determine whether a particular claim is covered. What may appear to be an “own occupation policy” could in fact be an “occupational policy” if “total disability” is defined to include the insured’s inability to perform “all” duties or “every” duty pertaining to the insured’s occupation. In such a case, the insured may not be entitled to benefits if he or she can perform comparable employment for which the person is suited by education, experience and physical condition. Continue reading “May is Disability Insurance Awareness Month — A Good Time To Ask Yourself If You Can Collect on Your Disability Insurance Policy”
Dental Hygienist Awarded $4.2 Million in Disability Insurance Lawsuit Against Unum
A jury in the Los Angeles Superior Court has awarded dental hygienist Laura Kieffer $4.2 million in damages against Unum Group for wrongfully terminating her disability benefits. Ms. Kieffer purchased her individual disability insurance policy from Paul Revere in 1988. In 1996, she developed disabling conditions, including carpal tunnel syndrome and severe cervical pain. By 1999, she had to stop working. After paying her disability benefits for nearly ten years, Unum terminated her claim despite recommendations from Ms. Kieffer’s treating physician.
Ms. Kieffer sued for breach of contract, insurance bad faith, and for punitive damages. The $4.2 million jury verdict included compensatory and punitive damages.
Update (April 18, 2011): The Los Angeles Superior Court upheld the 4.2 million verdict and denied Unum’s motion for a new trial.
Disability Insurance Adjusters, Investigators, Lawyers — and Judges — Looking You Up on Facebook and Twitter
As we have blogged previously, anyone who has a disability insurance claim needs to think twice about the content of what they post in the social media (e.g., Facebook, Twitter, MySpace), lest an insurance adjuster or investigator conduct online surveillance and misconstrue activities depicted in photos, stories about personal activities, etc. It has come to light that some judges are also conducting online research on plaintiffs and basing their opinions in part upon what they find out on Facebook. In a footnote to an opinion issued in Purvis v. Commissioner of Social Sec., 2011 WL741234 (D.N.J., Feb. 23, 2011), the judge wrote:
Although the Court remands the ALJ’s decision for a more detailed finding, it notes that in the course of its own research, it discovered one profile picture on what is believed to be Plaintiff’s Facebook page where she appears to be smoking. Profile Picture by Theresa Purvis, Facebook [link omitted] (last visited Feb. 16, 2011). If accurately depicted, Plaintiff’s credibility is justifiably suspect.
It is important for disability claimants to remember that what they post in the social media may be taken out of context and to be prudent when deciding what to share with not only their friends, but also with their disability insurance company and possibly an arbitrator or judge.
Disability Insurer Unum Group Said to Have Been in Talks with Sun Life Financial
Bloomberg Businessweek reports that the nation’s largest disability insurance company, Unum Group, was in private talks earlier this year about a potential takeover by Sun Life Financial, Inc. Sun Life, Canada’s third-largest insurer, said in November 2009 that it wanted to expand its presence in the U.S. significantly with an acquisition.
A source for the Wall Street Journal said that the talks broke down in January, but Unum may still be open to approaches. The source also reported that Unum and Sun Life officials couldn’t agree on deal terms and governance.
Following the breakdown in the talks, Unum announced a $1 billion buyback of stock over 18 months.
Texas Insurance Commissioner Forbids Insurers’ Provisions that Allowed Them to Interpret Policies
The Texas Department of Insurance has adopted new rules that prohibit the inclusion of discretionary clauses in health, life, and disability insurance policies delivered in Texas. Discretionary clauses are contract provisions that provide insurers with sole discretion in deciding what, when, and if benefits are due under an insurance policy. The Office of Public Insurance asserted that these provisions alter the way courts review insurers’ decisions on appeal and make meaningful review of an insurer’s decision virtually impossible.
In prohibiting discretionary clauses, Texas Commissioner of Insurance Mike Geeslin wrote:
[d]iscretionary clauses are unjust, encourage misrepresentation, and are deceptive because they mislead consumers regarding the terms of coverage.
Discretionary clauses are present in nearly all employer-provided disability policies because they are allowed by The Employee Retirement Income Security Act of 1974 (“ERISA”).
Twenty-three states and the National Association of Insurance Commissioners have now adopted statutes, rules or policies prohibiting discretionary clauses. The new rules in Texas will take effect February 1, 2011 for some types of disability insurance and June 1, 2011 for all other forms of health, life, and disability insurance policies issued in Texas.
Senate Finance Committee Hearing Held to Discuss Abuses in Long-Term Disability Insurance Industry
On September 28, 2010, the United States Senate Finance Committee held a full committee hearing titled, “Do Private Long-Term Disability Policies Provide the Protection They Promise?” At the hearing, the Finance Committee and expert witnesses discussed the sometimes abusive practices of insurance companies when handling legitimate long-term disability claims.
Senate Finance Committee Chairman Max Baucus, D-Mont., said LTD insurers use doctors with conflicts of interest to review claims. “Many of these doctors are employed either by the insurance company or by companies that do a lot of business with the insurance company,” Baucus said. “These arrangements make it far too easy for the doctors to deny claims, terminate claims, or reject appeals.”
It’s time for long-term disability insurance companies to clean up their act and treat people fairly. They have acted with impropriety for too long. We need to evaluate the laws that we have on the books and make sure that they are true to their original purpose – to protect people from abuse, and to guarantee that they can get the insurance funds to which they are entitled. Hard-working Americans with long-term disability insurance should not have to deal with corporate abuses if they suffer an injury that keeps them out of work. They are entitled to insurance payments. They should not face roadblock after roadblock to see that money, nor should they face unfair rescissions or payment terminations.
Baucus convened the hearing in response to recent media reports of unfair claim denials and terminations that threaten the livelihoods of those beneficiaries who are unable to work. Both Baucus and the expert witnesses cited instances of long procedural delays and the use of in-house doctors to avoid making claim payments.
Ronald Leebove, a rehabilitation counselor who appeared for the American Board of Forensic Counselors, Springfield, Mo., said private group long-term disability policies fail to provide the protection insurers promise. “There are many tricks and tactics used by the insurance companies to deny claims,” Leebove said.
Baucus stated his desire to work in conjunction with the Senate Commitee on Health, Education, Labor and Pensions to move toward a solution that gives beneficiaries the fair process and justice they deserve.
Video of the hearing and transcripts of testimony are available at: http://finance.senate.gov/hearings/hearing/?id=1c1bd578-5056-a032-5237-4dd9283e52ed
Senate Committee Concerned Over
Disability Insurers’ Unfair Practices
The Senate Finance Committee recently met to discuss laws surrounding private disability insurance. Members of the Committee expressed concern over current federal law, which gives private disability insurers substantial flexibility to engage in questionable practices. The Committee Chairman, for example, commented about the conflict of interests that hired physicians face when an performing “independent” medical examination (IME) on claimants:
Many of these doctors are employed either by the insurance company or by companies that do a lot of business with the insurance company. These arrangements make it far too easy for the doctors to deny claims, terminate claims, or reject appeals.
Committee members were also concerned about discretionary clauses that private disability insurance companies include in their disability insurance plans. These clauses give the disability insurance company discretion to review disability benefits determinations. They also enable disability insurance companies to avoid certain challenges to disability benefits decisions.
Disability insurance companies have financial incentive to deny disability insurance claims. As the discussion from the Committee meeting demonstrates, current holes in the law may actually provide insurance companies with means to engage in unfair practices for their benefit. Before filing a disability benefits claim, consider consulting with an attorney first. It is important to know your rights and to have an experienced professional guide you through this process.
To read more about the Senate Finance Committee Meeting, click here.
Regulate Yourself: Physicians Underreport Impaired Colleagues
A study by the Journal of the American Medical Association suggests that patients must increasingly rely on their doctor’s honest assessment of his own health, rather than the supervision of his colleagues. Physicians are simply not reporting colleagues whose disability endangers patients.
Traditionally, the medical profession has relied on internal mechanisms to guarantee that patients’ needs are met. A number of ethical codes require a physician to report a colleague who is suffering any disability or impairment that leaves him unable to safely care for his patients. As Matthew K. Wynia, MD, Director of the AMA Institute for Ethics, noted in an interview with American Medical News, “[r]eporting incompetent or impaired colleagues is a clear-cut professional obligation.”
Unfortunately, physicians are not following through on that obligation, even when the disability causes an unquestionable risk to patients.
The most common explanation given for failing to report a colleague was the belief that “someone else was taking care of the problem.” Physicians may conclude that their colleague is already aware of the effect his disability could have on patients, and that he would take time off if he felt his condition merited it. They may even assume that he is already taking steps to file a disability claim. They may also be reluctant to intrude on a personal crisis, preferring to leave their colleague to his own social and financial safety nets, such as close friends, family, or disability insurance.
Perhaps more revealing is the fact that 8% of respondents “believed it could easily happen to them.” The thought of being deprived of one’s own occupation, livelihood, and income by the sudden onset of an impairment or disability is certainly troubling at best. Physicians may feel that, if they were disabled and could not safely continue working, their colleagues might doubt their personal fitness for the medical profession. Moreover, they may fear a loss of income or the intense scrutiny imposed by disability insurers and claims representatives. They cannot bring themselves to put a colleague—and perhaps a friend—in that position.
One solution is increased reliance on the physician’s own evaluation of his disability—he must remain cognizant of his own health, and recognize when it is appropriate to take disability leave. Combined with an ongoing reporting obligation, the result would be a higher standard of care and safety for patients.
While the medical profession has always been self-regulating, the regulation of self—the honest evaluation of one’s own disability and capacity for fulfilling the obligations of his own occupation—may become an invaluable means for guaranteeing patient safety. As Dr. Wynia points out, “It’s not just a matter of doctors peeping over each others shoulders.”
Disability Insurance: Who Gets Denied?
Answer: Individuals with neck and back pain.
Musculoskeletal disorders make up 23 percent of new disability claims each year, says the Council for Disability Awareness, an insurance industry trade group. You can expect extra scrutiny if you file a claim for disability benefits, says Arizona disability insurance attorney Ed Comitz. The challenge with musculoskeletal claims is that there may be little objective evidence to verify the pain. Most insurers conduct surveillance on individuals with neck and back problems, attempting to portray them in the worst light notwithstanding the varying nature and severity of pain.
Claim Analytics, a provider of predictive modeling solutions to the insurance industry, published the results of its “2010 Long Term Disability Benchmarking Report.” The results show significantly varying results (a 22% difference) when it comes to dealing with claims,especially those based on back injuries. According to Claim Analytics, this reflects on the claim management practices employed by each carrier, and specifically how different carriers treat back pain.
Presenteeism: A Chronic Condition Among Doctors
A new article in the Journal of the American Medical Association suggests that presenteeism—showing up to work with an illness, impairment, or disability that limits productivity—has reached epidemic proportions among doctors. The study, which surveyed residents at multiple hospitals, found that three out of five had continued working while sick. At one hospital, 100% of residents had done so. Half the residents noted that they simply didn’t have the time to see a doctor.
Presenteeism imposes productivity costs on any business, but in the practice of medicine, these costs can include a noticeable decline in the quality of care patients receive. A physician suffering from an illness or disability—or distracted by severe physical pain—can make serious mistakes in judgment, which in turn can have life-threatening consequences for the patient.
Moreover, the presentee habit can become life-long. Later in their careers, physicians may not seek medical care for chronic conditions, injuries, or disabilities, even when they are legitimately unable to work. They may attempt to continue even the most physically and mentally demanding duties, aggravating the injury and putting patients at risk, even when they hold a disability insurance policy that could provide a safety net for their personal and professional finances.
Finally, a change in medical culture may be in order. Doctors should feel comfortable seeking the medical care they need, or even filing a disability insurance claim when appropriate. Dr. Vineet Arora, Associate Professor of Medicine at University of Chicago and one of the study’s authors, argues that “Hospitals need to build systems and create a workplace culture that enables all caregivers, not just residents, to feel comfortable calling in sick. Their colleagues and their patients will thank them.”
