Northwestern Mutual Offers Insight Into How Disability Insurers Interpret and Apply “Own Occupation Coverage”
Northwestern Mutual Life Insurance—a major provider of disability income insurance for physicians and dentists—has just launched a new website, the “Disability Income Insurance Knowledge Center,” which it claims will help policyholders understand the terms of their “own occupation” disability insurance coverage.
“Own occupation” policies are often marketed by disability insurers as allowing physicians and dentists to receive their full disability insurance benefit, while at the same time working in another occupation, as long as they can no longer practice medicine or dentistry. Some disability insurance policies further specify that the insured’s specialty will be considered his “occupation” for purposes of “own occupation” coverage. Under these disability policies, as they are frequently marketed, an insured could receive his full benefit, even if he is still working as a physician or dentist, as long as he is disabled from his former specialty.
As an example, a neurosurgeon who develops a hand tremor may still be a capable doctor, but he can no longer perform surgery. Since he can no longer perform the principal medical duty of neurosurgery (i.e., surgery), it would be logical to conclude that he would be disabled from his occupation as a neurosurgeon. However, Northwestern’s new website has an interactive “Fact or Fiction” quiz in which it offers its interpretation as to how these “own occupation” provisions should be interpreted. Northwestern’s conclusions are gross oversimplifications that fail to consider the nuances of a disability claim, and ignore differences in policy language and the manner in which the policies have been interpreted under Arizona law. These oversimplifications appear designed to dissuade individuals with legitimate disability claims from pursuing their remedies. Nevertheless, they offer a glimpse into how disability insurers often view an insured’s occupational duties. Some samples from the “quiz” include the following statements:
Statement: If I could not perform my principal medical duty, the one that’s my “bread and butter,” I’d be considered totally disabled under an “own occ” policy.
Northwestern Mutual: FICTION. “To be totally disabled under traditional ‘own occ’ disability income insurance definitions, you would have to be unable to do ALL of your principal duties.”
Depending on the terms of his “own occupation” policy, an Arizona physician or dentist may be totally disabled if he cannot perform any substantial part of his ordinary duties in his usual and customary manner. In one major case, an invasive cardiologist was no longer able to perform invasive procedures—a substantial part of her original duties—but continued work in non-invasive cardiology and geriatrics. The jury found her totally disabled under her “own occupation” policy and held that her insurer had denied her disability insurance claim in bad faith. It then awarded her $84.5 million.
This statement also reflects an important issue in interpreting these policies – while countless words and phrases are defined, the phrase “principal duties” is generally not defined. Taking advantage of this fact, insurers often attempt to transmute incidental duties, such as staff oversight or pre- and post-operative patient consultation, into principal duties, without any justification for doing so. If insurers were permitted to do this, as Northwestern suggests, it would render “own occupation” coverage illusory since, absent a catastrophic injury, the insurer would always be able to find that the insured could perform some duty of his prior occupation. Fortunately, Arizona courts do not permit insurers to classify all duties as “principal duties.” As one Arizona court noted “[f]ew specialty occupations could survive such piecemeal scrutiny. If separated into an hour-by-hour analysis, only asking the question whether these tasks are also performed in a more general setting, specialists who choose to continue to work in a more general practice after becoming disabled from their specialty could never qualify for total disability benefits, although the policy specifically allows for this.” Continue reading “Northwestern Mutual Offers Insight Into How Disability Insurers Interpret and Apply “Own Occupation Coverage””
Insurers Use High-Pressure “Return to Work” Programs to Terminate Disability Insurance Benefits
A personal return to work plan can be useful and empowering when it is the product of careful consideration between a disability insurance claimant, his doctor, and his attorney.
In the hands of a disability insurer, however, a return to work strategy is simply a means of beefing up the bottom line by pushing a claimant to give up his benefits and return to work before it’s safe.
To compound the problem, insurers increasingly market their return-to-work pressure methods to employers who seek to minimize disability-related absenteeism, dubbing the relationship a “strategic partnership.” Prudential, a major provider of disability insurance policies, offered its approach at the annual Disability Management Employer Coalition (DMEC) Conference in San Diego. In describing its methods, Prudential argued that “[s]ome disability absences are driven by subjective feelings about work,” a problem best solved by “an environment that breeds commitment.” Unum, one of the nation’s largest disability insurance providers, has given similar presentations, including one on strategies for managing employees’ chronic pain conditions—callously titled “A Pain in the Workplace.”
The unfortunate outcome is that the claimant faces pressure from both her employer and her insurer to return to work prematurely, often on a “trial” basis—a decision that can lead to forfeiture of benefits, aggravation of medical problems, and other complications.
Consult your doctor and a reliable, knowledgeable attorney before you consider returning to work, even for a “trial” period. The effect on your benefits and health could be profound.
Disabled Doctor Wins Fight Against Unum Life
On June 11, 2010, Salient News reported on a disabled doctor who prevailed against Unum in court to receive disability insurance benefits to which he was entitled. The attorney for the doctor discussed the tactics used by the insurance company:
Unum has shown a long-standing pattern of denying occupation specific policies focusing on denying high earning professionals such as doctors, lawyers, chiropractors and the like. Unum uses its own appeal process to unjustly prejudice and deny valid and deserving claims.
Disability Insurance Policies: Which type do you own?
The type of disability insurance policy you have can affect the disability benefits you receive and the legal rights to which you are entitled. Below is an overview of the basic types of disability insurance policies.
Individual Disability Insurance:
As the name suggests, individual disability insurance policies are purchased by individuals directly from the carrier and provide long-term disability benefits in the event of sickness or injury. Individual polices fall into two categories: “general” and “occupational.” A “general” disability policy insures against sickness or injury that precludes the insured from performing all work while an “occupational” policy provides relief if the insured cannot perform the material and substantial duties of his or her own occupation. Thus, an “occupational” policy will provide greater coverage to the insured, who will be entitled to benefits even if he or she is able to engage in another occupation. Individual policies usually provide coverage in set amounts, e.g., $5,000 per month, rather than as a percentage of the insured’s salary.
Group Disability Insurance:
Group disability insurance polices are made available to participants of organizations, such as members of the American Medical Association. Unlike most individual policies, group policies typically confer benefits calculated as a percentage of the insured’s base salary, usually from 50-75%. These policies may limit the maximum amount of disability benefits payable, e.g., no more than $5,000 per month, regardless of base salary. Further, group policies often reduce disability benefits when the insured receives income from other sources such as Social Security disability benefits or worker’s compensation.
Employer-Sponsored Disability Insurance:
Employer-sponsored disability insurance policies are typically the least expensive policies and are similar to the “group” policies described above, providing employees with disability insurance based on a percentage of their base salary as part of the employer’s overall benefits package. Unlike group policies, however, employer-sponsored policies are governed by the Employee Retirement Income Security Act of 1974 (ERISA), which has significantly affected the administration and litigation of disability insurance claims. Unfortunately, ERISA deprives insureds of significant rights to which they would normally be entitled under state law. These include the right to a trial by jury and the possibility of punitive damages where the carrier has acted unreasonably or maliciously.
Has My Disability Insurer Acted in Bad Faith Under Arizona Law?
Under Arizona insurance law, the relationship between a disability insurance company and its policyholder/insured is a special relationship giving rise to heightened duties not ordinarily found in other contractual agreements. Rawlings v. Apodaca, 151 Ariz. 149, 163, 726 P.2d 565, 579 (1986); Dodge v. Fidelity & Deposit Co., 161 Ariz. 344, 346-47, 778 P.2d 1240, 1242-43 (1989). Arizona courts further recognize that a disability insurance company’s duties to its insured are non-delegable and that an insurer remains liable for actions taken by a delegate (like reinsurers and third-party claim administrators) who take over disability claims and act in bad faith:
[A]n insurer who owes the legally imposed duty of good faith to its insureds cannot escape liability for a breach of that duty by delegating it to another, regardless of how the relationship of that third party is characterized. Clearly, an insurer may seek assistance by delegating performance of its duty of good faith to non-servants through whatever organizational arrangement it desires. In doing so, however, the insurer cannot give this delegate authority to deprive its insureds of the benefit of the insured’s bargain. If the insurer were allowed to delegate the duty itself, an injured insured would have no recourse for breach of the duty against either the insurer, from whom the duty is owed, or its delegate, with whom the insured has no contractual relationship. Such a result would render a cause of action for breach of the duty virtually meaningless. Thus, we hold that, although an insurer may delegate the performance of its duty of good faith to a non-servant, it remains liable for the actions taken by this delegate because the duty of good faith itself is non-delegable.
Walter v. Simmons, 169 Ariz. 229, 238, 818 P.2d 214, 223 (Ct. App. 1991) (citations omitted) (emphasis added); see also State Farm Mut. Auto. Ins. Co. v. Mendoza, 2006 WL 44376, at *12 (D. Ariz. Jan. 5, 2006) (“Insurers cannot escape their duty of good faith and fair dealing by delegating tasks to third-parties . . . .”) (citing Walter).
To establish a claim for bad faith, the a dentist or physician must show: (1) that the insurer acted unreasonably in the investigation, evaluation or processing of his/her claim; and (2) that the insurer acted knowingly or with reckless disregard as to the reasonableness of its actions. Leavey v. Unum/Provident Corp., No. CV-02-2281-PHX-SMM, 2006 WL 1515999, at *3 (D. Ariz. May 26, 2006); Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234, 238, 995 P.2d 276, 280 (2000); Acosta v. Phoenix Indem. Ins. Co., 214 Ariz. 380, 153 P.3d 401, ¶ 13 (Ct. App. 2007). Intent can be inferred from the defendant’s conduct. Services Holding Co. v. Transamerica Occidental Life Ins. Co., 180 Ariz. 198, 207, 883 P.2d 435, 444 (Ct. App. 1994) (noting that “the intent requirement of the second element [of a bad faith claim] can be established by conduct”). Moreover, an insurer can be held liable in insurance bad faith for the distinct acts of misconduct discussed on our Homepage, regardless of whether the insured’s claim is even paid. As the Zilisch court held:
The carrier has an obligation to immediately conduct an adequate investigation, act reasonably in evaluating the claim, and act promptly in paying a legitimate claim. It should do nothing that jeopardizes the insured’s security under the policy. It should not force an insured to go through needless adversarial hoops to achieve its rights under the policy. It cannot lowball claims or delay claims hoping that the insured will settle for less. Equal consideration of the insured requires more than that.
196 Ariz. at 238, 995 P.2d at 280; see also Leavey, 2006 WL 1515999, at *5 (noting that “reasonable jurors could conclude that defendants acted unreasonably in their evaluation and processing of Plaintiff’s claim,” despite the fact that the insurer never missed a payment).
Disability insurance companies’ duties include the following:
To not impose requirements on the insured that are not contained in the policy.
To treat the insured fairly and honestly at all times.
To not try to gain an unfair advantage over the insured. To give as much consideration to the insured’s interests as its does to its own.
To make claims decisions without regard to profitability. 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.
To act reasonably in handling the claim.
To not misrepresent facts or policy provisions to avoid paying benefits.
To reasonably interpret contract provisions.
To not take unreasonable legal positions.
Each of the foregoing duties remain the liability of the primary insurer and are non-delegable as noted above.
If you think that your Arizona disability claim has been denied in bad faith, a disability insurance attorney can help you determine what legal claims you might have against your insurer.
$60 Million Verdict Against Unum and Paul Revere
In Merrick v. Paul Revere, a Nevada jury returned a bad faith disability verdict against Unum and Paul Revere in the amount of $60 million. The prior jury had returned a verdict of $11.65 million, but Unum appealed and a new trial was ordered. The second trial focused on the proper punishment for Unum and Paul Revere, based on an alleged longstanding scheme to improperly deny and terminate legitimate disability claims. Like Nevada, many states (including Arizona, California, Pennsylvania, Florida, New Mexico, Montana and Vermont) have viable “bad faith” laws that allow claimants to sue in court for extra-contractual damages, including punitive damages.
AAJ Names Ten Worst Insurers
The American Association for Justice (AAJ) recently released the report The Ten Worst Insurance Companies in America. The AAJ reached its conclusions after a comprehensive investigation of insurers’ legal and financial filings.
Read the entire report here: https://www.justice.org/ten-worst-insurance-companies-america.
Ophthalmology Management:
Disability Insurance Roulette
Attorney Ed Comitz’s article, Disability Insurance Roulette: Can You Collect on Your Policy?, was published by nationally-regarded Ophthalmology Management. The article discusses difficulties physicians experience with collecting on their disability insurance, and how certain obstacles can be overcome.
California Insurance Commissioner Labels Unum
an “Outlaw” Insurer as the California Department of Insurance Fines Unum $8 Million
When the insurance commissioners of 48 states agreed to a $15 million multi-state settlement last year against Unum, California Insurance Commissioner John Garamendi rejected the settlement, stating that it did not go far enough to protect California insureds. This week, the California State Department of Insurance instead fined Unum $8 million, the largest settlement in the agency’s history, with Garamendi calling Unum an “outlaw company” that harmed consumers by denying their disability claims.
This company engaged in a strategy to increase its bottom line at the expense of its customers. — California Insurance Commissioner John Garamendi
State regulators determined that UnumProvident misinterpreted job classifications, improperly overruled doctors’ opinions and knowingly used incorrect insurance definitions to avoid payment of disability benefits owed to insureds.
While the multi-state settlement required Unum to reopen 215,000 claims and pay a fine of $15 million, the $8 million California settlement includes a third-party review by insurance experts, limits the discretion insurers have to interpret policy language and establishes a model policy that Unum and other disability insurers will be required to adhere to in California.
Federal Court Affidavit of Former Unum Employee
A sworn affidavit by a former UnumProvident employee in a 2004 case in the United States District Court for the District of Maine (Case No. 2:2004cv-00001) provides interesting insight into some of the tactics used by Unum. Daniel Donatelli’s affidavit appears below.
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
Daniel Donatelli, Plaintiff vs. UNUMPROVIDENT CORP., Defendant
Civil No. 04-1-P-S
AFFIDAVIT OF DANIEL DONATELLI
NOW COMES Daniel Donatelli and hereby states as follows under oath:
- My name is Daniel Donatelli. I am 18 years of age or older and believe in the obligation of an oath. The facts stated below in this affidavit are based on my personal knowledge.
- I was hired by Unum as a Disability Benefit Specialist to process long term disability claims. Disability Benefit Specialists at Unum had authority to make decisions on claims.
- After Unum’s merger with Provident, I became a customer care specialist and later was transferred to the Cardiac Psych Unit. Customer Care Specialists at UnumProvident did not have authority to make decisions on claims including approval, denial, and settlement. Our role became primarily processing and not managing.
- I did not begin working in the Cancer Unit until after February 25, 2002.
- While working in the cancer unit, Dennis Hersom told me that I would not survive a performance management program regardless of any improvement that I made with my work performance. Therefore, I resigned.
- While working in the Cardiac Unit and the Cancer Unit, I had some ethical and moral concerns regarding claims not being paid properly due to the pressure to meet quotas for closing claims.
- While I was at Unum, Unum provided insurance policies for employee sponsored plans, union or employee organization sponsored plans, employer sponsored plans, church plans, government plans, and many individual disability policy contracts.
- There was at least one individual Customer Care Specialist in my Cardiac Psych Unit, as well as an individual in my Cancer Unit, that was responsible for handling claims under individual disability insurance policies issued by Unum.
- I understood that all of these policies were subject to the same claims handling process and procedures. When I expressed concern about how the claims were handled, I was expressing concern for all claims and not just those on my caseload.
- I personally handled processed claims under church plans (for example, priests) and government/school plans (for example, teachers).
- Advance pay and closure was a way of closing claims based on a hypothetical ramp up of hours that was established by a customer care specialist or a vocational rehabilitation consultant. It was also based on an opinion from a UnumProvident doctor who made a determination of what the claimant was capable of doing. I believe that the advance pay and closure procedure is illegal because it could result in a claimant being subjected to higher scrutiny by UnumProvident if the claimant reopened his or her claim for benefits after a period of advancement has lapsed. Because the claimant had no right of appeal, and the claimant was not notified in advance, the claimant would be subject to higher scrutiny thereby misleading the client into agreeing to take an advance pay and close. Continue reading “Federal Court Affidavit of Former Unum Employee”
