Articles Posted in LTD Policy Issues

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Almost every Long Term Disability Insurance Policy I have ever reviewed contains a limited period (usually 24 months) of time that it will pay benefits if a claimant is unable to perform the duties of  his/her “Own” (see prior post on how “Own” occupation is misleading) occupation.  The plans most commonly contain a change in the definition of disability from “Own”occupation to “Any” occupation after the 24 month period runs.  So, after 24 months the claimant must be able to establish that they are unable to perform the duties of “Any” occupation in order to continue to receive benefits.  A few caveats-there is also usually a qualifier for “Any” occupation that the claimant may be qualified to perform the identified occupation by education, training or experience.   There is also usually an earnings qualified that the identified “Any” occupation  must usually pay some percentage (commonly 60 or 80%) of the  claimants “Own” occupation.

We see many claims where the Long Term Disability insurer refuses payment past the 24 month “Own” occupation period by identifying some less demanding occupation it asserts the claimant can perform.

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I was recently asked to review a claim denial by a well know disability insurer for a nice lady who suffered a terrible crush injury  to her foot.  She had worked at a production facility where her job duties required her to be  on her feet for extended parts of the work day.  Her employer was not able to accommodate her standing restrictions so she filed a claim for LTD benefits with Lincoln Financial.  The Lincoln policy defined her “Own Occupation” as a collective description of related jobs, as defined by the US Department of Labor Dictionary of Occupational Titles.  It includes any work done for pay or profit, regardless of: 1. whether such work is with the employer, or some other firm…; or 2. whether a suitable opening is currently available with the Employer or in the local labor market.”

Despite the fact that her employer would not allow her to return to work if she was unable to stand for extended periods of time, Lincoln’s in-house vocational consultant determined that her Occupation was best defined as a Project Planner.  Lincoln then denied her claim for benefits finding that her “Own Occupation” could be performed sitting most of the time at some other employer. Since she had already exhausted her administrative remedies we were unable to offer any evidence to supplement the record.

This is a classic example of the difficulty with LTD claims.  The insurers policy language allows them to disregard the actual duties of a claimant’s own job in favor of some imaginary “collective description of related jobs” which, in effect, turns logic on its head.  Even though your own employer specifically says you must be able to stand for 80% of the day, Lincoln says “your occupation” can be performed sitting most of the time.

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As a follow up to the last post, the US Supreme Court sided with the Hartford Life and Accident Insurance Company enforcing its contractual limitations period. In Heimeshoff v Hartford Life and Acc. Insur. Co., ______S.Ct. _______ (2013). the Court concluded that:

Because proof of loss is due before a plan’s administrative process can be completed, the administrative exhaustion requirement will, in practice, shorten the contractual limitations period. The question presented is whether the contractual limitations provision is enforceable. We hold that it is.

In other words, even though a claimant is precluded from filing suit before they have exhausted their administrative remedies, the clock starts ticking on the time they have to file a lawsuit. The practical effect of this ruling is that many LTD claimants will have a (sometimes markedly) shorter period of time to file a lawsuit after the claims denial decision is finally issued.

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In my continuing effort to do the best job that I can for my Long Term Disability Insurance clients I attended that ACI Long Term Disability Insurance Conference in Boston this past week. For the the second year in a row that I have attended this conference I thought it was excellent. The seminar presenters were all top notch-clearly some of the best and brightest practicing in this niche area.

There were a number of very interesting and useful sessions dealing with the Supreme Court’s Metlife v Glenn decision and how it is impacting cases across the country as well as various other in depth discussions on a number of relevant issues. The last day we had a panel of a half-dozen federal court judges discuss their view’s of these cases.

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Colorada recently passed a law banning the use of discretionary clauses in any Long Term Disability insurance policy. This ban also applies to group policies. Colorado’s new law reflects the same policy decision of the Michigan Insurance Commissioner.

Banning these discretionary clauses, and requiring that a court review the claim on a “de novo” basis means that the court must perform its own review and decide whether the administrator’s decision was right or wrong, with absolutely no deference given. This will, in all likelihood, have a huge effect on the number of viable Long Term Disability claims in Colorado.

Thanks to Attorney Shawn McDermott for his blog on this subject.

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Most Long Term Disability policies only provide benefits for a limited time while the insured is disabled from his or her own occupation. This time period is known as the “own-occupation” period. Typically, it is easier for a policy holder to meet this definition of disability because he or she only need establish that they cannot perform the duties of a single occupation-their own. For instance, in a recent case we handled, a registered nurse who was in a serious car accident and suffered a back injury was found disabled because she could not stand on her feet for eight hours and had lifting restrictions that prevented her from assisting patients in and out of bed.

However, after a limited time, usually 24 months, the typical policy provides that benefits are only payable if the insured is disabled from performing any occupation. The Long Term Disability insurance companies normally perform a complete review of every claim when the definition changes and will often use this change to terminate benefits finding that the insured can perform some job. Frequently some nonexistant job for some nonexistant company.

Accordingly, anyone looking to purchase Long Term Disability Insurance should be aware of this important issue.

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Not all long term disability policies provide the same quality, type, degree and level of coverage.
The Consumer Federation of America has a nice article discussing various aspects to consider before purchasing a Long Term Disability Insurance Policy.