What You Do Not Know About Disability Insurance Can Be Devastating

What You Do Not Know About Disability Insurance Can Be Devastating

Insight by: Milton Blaut.

I cannot think of a single day that has gone by that I have not heard a TV commercial for some type of insurance. Many people actually take a particular job and/or stay with a job because of the various insurance benefits that their job provides. One of those benefits is group disability insurance coverage. But the real question is, have you read your group disability insurance policy? I would almost bet that you have not.

Congress passed an act called ERISA which was supposed to protect employees. In my opinion what it has actually done is protect insurance companies and has taken away some employee rights. Would it surprise you that Congress actually helped the insurance companies and hurt individuals?

The purpose of disability insurance is to provide income in the event that you are disabled and unable to work. Most disability policies define being totally disabled with “unable to perform the substantial and material duties of your job” or language that is similar. Some disability policies require you to be disabled from any job that you are qualified to perform. Some disability policies at least initially have an “own occupation” clause. This means you are disabled from the job which you were performing.

There is a significant difference between ERISA and non-ERISA policies. Many group policies are ERISA policies. If you work for a company you need to find out if your policy is or is not an ERISA policy. You can ask for a copy of the policy, but most probably and surprisingly your HR department will only have a copy of the “plan summary” and not actual the insurance policy. I have represented professionals who have brought their “policy” to me which was nothing more than the “plan summary.” I then went to the disability insurance carrier to obtain a copy of the actual insurance policy. You need to also understand that the policy language trumps the “plan summary.” Whether or not your company gives you the “plan summary” or the policy, the policy determines your rights or lack thereof.

Under any disability policy you will be required to complete the insurance carrier’s forms as will your attending physician and employer. The carrier will also want signed medical authorizations to obtain your medical records. You can supplement the documents. You most probably will also be required to provide an interview and may be examined by a physician or physicians selected by the carrier.

Many policies contain language that you need to prove to the insurance company that you are disabled and that the decision as to whether or not you are disabled is the insurance company’s decision. But what happens if you and the insurance company disagree? Often the insurance company has its own adjuster make the decision as to whether you are disabled under the policy. The adjustor will almost always have had your medical and financial records reviewed either by in-house specialists or sent it to an outside physician for review. Let’s assume that the decision is not favorable and the carrier “regretfully informs you” that is has reached the decision that you are not disabled under the terms and conditions of its policy.

Then under ERISA, you need to take an administrative appeal. That administrative appeal is taken, and you guessed it, may be with the same insurance company. This time a different adjuster would review your file. Again you are given an opportunity to submit additional documentation and information to explain to the carrier why the first adjuster’s decision was incorrect. Once again the carrier can have you examined, can and most likely will have the materials reviewed by a healthcare provider of its choosing, etc. Now let’s assume that once again “regretfully” you are informed that the carrier has again determined that you are not disabled under the terms and conditions of the group disability policy.

Well, you can file a lawsuit. However, under ERISA you do not get a jury trial. In fact the lawsuit will either be filed in federal court or the carrier will transfer the lawsuit to federal court. In federal court the judge reviews the administrative record. What is the administrative record, you ask? The administrative record is all of the documents which you submitted and all of the documents which the carrier maintained in its file including its analysis of why you are not disabled and the reviews which it obtained. Almost everything in its file is the administrative records. It is very difficult for you to supplement the administrative record.

A federal district court judge then determines two things. First of all are you disabled based upon the administrative record? If the court determines that you are not disabled then the analysis ends there. However, if the court determines that you are disabled, then comes the necessary second prong in the test: was the decision by the carrier against you “arbitrary and capricious”? If the court determines that you were disabled, but that the decision was not “arbitrary and capricious” guess what, you lose.

So, you go back and you look at the insurance policy and again guess what, the test of “arbitrary and capricious” is not in the policy. The policy states that you must prove to the carrier that you are disabled. Our appellate courts in the 11th Circuit Court of Appeals have determined that puts you on notice of the “arbitrary and capricious” standard. Florida is in the 11th Circuit. Different Federal Circuits have very different ERISA laws and rules.

Compare that with non-ERISA policies and individual policies in which if the carrier declines or rejects your application for disability you can file a lawsuit. And unlike our federal

court ERISA case you get to submit evidence. The court and the jury get to hear from your doctors who will testify under oath why they believe you are disabled. A very different situation.

By the way, I did forget one thing. If you lose the ERISA case the insurance company might be able to get a judgement against you for its attorney fees and costs.

If you have group insurance you might want to find out whether or not it’s an ERISA policy. And you also might want to get a copy of your insurance policy before you become disabled. There are cases where unsurprisingly the insurance carriers which provided individual or non-ERISA policies determine that the insured was disabled while the ERISA policy insurance companies reach the determination that the insured was not disabled.

Nothing in this blog should be relied upon by you as legal advice. This is merely to provide you with information that you should think about. Legal advice needs to be tailored to your case and you should consult an attorney before making any determinations.