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”