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Disability Income Insurance Policy Issues

Disability Income Insurance Policy Issues

The issues described below occur more frequently, or are more peculiar to, individually-purchased disability income insurance policies.  A number of these issues arise because disability income insurance policyholders are not typically employed by large corporations, but are self-employed.  Such policyholders are frequently independent consultants, freelancers, sole proprietors, and small business owners.  
Our lawyers have experience with private disability income insurance policies, and stand ready to provide legal assistance.  Several of the issues described below are caused, or worsened, when a policyholder inadvertently delays the filing of a disability income insurance claim.  The best time to consult our disability insurance attorneys is when you first become aware of a potentially-disabling medical condition – even if you are not yet experiencing significant symptoms and have no immediate plans to stop working.  A consultation with our lawyers can help you to better understand your disability income insurance policy, and how adaptive modifications to your work or changes in income may give rise to a disability claim.  Our disability attorneys can also advise when such changes in work duties or earnings may need to be reported to your disability income insurance company to best preserve and protect any potential disability claim you may have.     

Issues more common to disability income insurance policies include:

  • Disability Due to Illness vs. Injury:  One recurring issue arises from the
    distinction drawn by some disability income insurance policies between
    disability due to illness and disability due to injury.  In such policies, extended or supplemental
    disability benefits are commonly provided for disabilities resulting from an
    injury or accident.  For example, a
    disability due to illness may be payable through age 65, whereas lifetime
    benefits are payable for a disability due to injury.  Whether a disability is due to an illness or
    injury can become extremely complex – and hotly contested – where injury and
    illness are concurrent or where they are linked in a causal chain.  For example, a claimant may have asymptomatic
    degenerative disc disease (that is, an illness), but, after a severe fall (the
    injury), suffers disabling back pain. 
    From the claimant’s perspective, the disability was due to injury
    because the back condition was latent and caused no work limitation or restriction
    until the fall occurred.  However, the
    disability insurance company might argue that the disability was due to the
    back condition, because the fall would not have been disabling in the absence
    of the underlying degenerative disc disease. 
    If you’re facing such a dispute with your disability income insurance
    company, our attorneys can review the relevant policy provisions, medical
    facts, and applicable insurance law to advocate for the full duration of
    benefits to which you are entitled.
  • Multiple and/or Hybrid Occupations:  Whether a claimant is disabled for purposes
    of an individual disability income insurance policy vs. an employer-provided
    group long term disability plan will usually start with a similar
    question:  is the claimant able to perform
    the substantial and material duties of his/her occupation?  This question may be more easily defined for
    an employee in a large company, who usually has a discrete occupational title
    with an associated set of clearly defined duties.  The question can become far more complicated
    in the context of a business owner, independent contractor, or freelancer – the
    sorts of persons who are likely to have purchased an individual disability
    income policy.  For example, a
    self-employed chiropractor may spend 95% of the time treating patients, and 5%
    of the time handling administrative tasks associated with running the
    business.  However, if the business
    expands (by hiring additional chiropractors, or opening additional offices),
    this percentage may change.  Moreover,
    the chiropractor may earn more money from the business, as a whole, than from
    the particular treatments he or she performs. 
    A self employed physician may spend the majority of time treating
    patients in an office-based practice, but also have a part-time paid teaching
    position at a local medical school, provide medical expert testimony as a
    retained consultant, have a paid part-time position with a local hospital (such
    as weekend staffing for an emergency room). 
    What happens when the chiropractor or doctor is suddenly disabled from
    treating patients, but can nonetheless continue the other “side” work?  Typically, such a healthcare provider
    believes the disability income policy should provide benefits because of the
    inability to carry on the central, defining feature of their chosen profession:  patient care. 
    The disability insurance company, however, may seek to reduce or deny
    benefits by characterizing the chiropractor’s occupation as “business owner,”
    or the physician’s occupation as “paid consultant.”  If your disability income insurance company
    has improperly defined your occupation, our attorneys can review the relevant
    policy provisions, occupational duties, earning streams, and applicable
    insurance law to advocate for the full amount of benefits to which you are
  • Documenting Loss of Earnings Due to Disability:  Loss of earnings can be directly or
    indirectly relevant to a claimant’s entitlement to disability insurance
    benefits.  The applicable definition of
    disability may require an actual loss of earnings, making this a direct element
    of the claim.  However, even if a
    disability income insurance policy does not include loss of earnings as a
    requisite element for receiving disability benefits, it may be viewed as an
    indirect surrogate indicator of the nature and severity of a disability.  If a claimant is disabled from performing
    occupational duties, then earnings should suffer and, indeed, if the disability
    precludes more occupational duties, then the loss of earnings should be greater.  For the typical employee covered by a group
    long term disability plan, this straightforward relationship between disability
    and loss of earnings exactly as expected. 
    The company employee either works and receives the usual wage, or ceases
    active work and suffers a total loss of earned income (although other income
    may be received, such as vacation, sick pay, disability benefits, and the
    like).  If the employee is accommodated
    with a half-time schedule, wages will usually be proportionately cut in half.  For the typical self-employed owner of a
    disability income insurance policy, however, the relationship between
    disability and loss of earnings may be far more complicated.  For example, an individual with a progressive
    medical condition (such as multiple sclerosis, chronic obstructive pulmonary
    disease, etc.) may avoid a complete cessation of work by gradually decreasing
    duties that have become difficult or impossible, shifting to and increasing
    responsibilities that can be performed, and/or hiring replacement staff to pick
    up the duties that can no longer be performed. 
    Although earnings may fall, the implementation of occupational changes
    may counteract the negative financial impact of the disability, such that
    earnings decrease only gradually, remain steady or even increase.  External factors, such as the general
    economy, business and tax accounting practices, and/or changes in demand for
    particular products or services, can independently influence earnings, further
    masking the effect of a disability.  In
    such circumstances where loss of earnings is unclear or there has been no
    actual loss of earnings, the individual disability income insurance
    policyholder may find significant insurance company resistance to approval of a
    disability claim.  The insurer may wish
    to review tax returns, time records, billing invoices, and other such materials
    to corroborate how and why earnings have changed, and whether and to what
    degree the policyholder’s occupational duties have been modified.  Our attorneys can assist in this process, by
    identifying, assembling and submitting relevant supplementary claim
    documentation and ensuring that your disability income insurance company
    properly evaluates your claim.
  • Late Notice and “Planned Retirement” Issues:  For the same reasons outlined in the
    preceding section, late notice and planned retirement issues frequently arise
    in disability income insurance claims.  A
    self-employed proprietor or business owner may struggle on for months or years
    with a disabling illness, shuffling responsibilities, reducing the workload or
    hours, reorganizing the business, hiring additional staff, and making other
    adaptive changes to keep the business operational and profitable.  If the disabling illness is slowly
    progressive, the business owner may implement these changes in a gradual and incremental
    fashion, without much thought until the realization dawns that he or she is
    simply no longer performing their job. 
    Promising treatments or disease remissions may lead the business owner
    to hope that full recovery (and full resumption of work responsibilities) may
    be possible if the business can be kept afloat through the rough patches.  In other cases, the disabled business owner
    may recognize the downward trajectory in work functionality, but seek to wind
    down or transfer operations in an orderly fashion.  A self-employed physician, chiropractor,
    podiatrist, lawyer, accountant, or other service provider may feel an
    ethical/professional obligation to ensure that patient or client “care” is
    carried on in a seamless and uninterrupted fashion.  If a business is to be sold, the proprietor
    may seek to maximize the value by keeping the business (and its goodwill) as
    fully intact as possible until a sale can be consummated.  Motivated by such considerations, as well as
    the desire to allay concerns or to maintain personal privacy, the disabled
    proprietor may avoid disclosure of the disability and euphemistically
    characterize withdrawal from the business as an early retirement.   All these actions can be counter-productive
    to a disability claim.  If the disabled
    proprietor waits to file a claim for months or years while the disability
    waxes/wanes, occupational duties are modified, or the business is prepared for
    sale or dissolution, an insurance company may deny the claim because it was
    given late notice.  This becomes
    increasingly probable if the proprietor seeks a significant period of
    retroactive benefits. Proposing a date closer to the disability claim filing,
    on the other hand, may give rise to challenges by the insurer that there has
    been no recent change in medical circumstances to justify the claim and/or that
    the claimant’s disability should be measured not by his/her historical
    occupation, but only by the remnant occupation still being performed at the
    time the claim was filed.  If the
    disability income insurance claimant has sugarcoated the disability by
    referring to it friends, family, clientele or the public as an “early
    retirement,” the insurer may seize on this to argue that the claimant is
    exaggerating symptoms and milking the disability coverage in order to subsidize
    an “elective” lifestyle change.  If your
    insurer is challenging your disability income insurance claim because of
    lateness or because it believes the claim is a disguised elective early retirement
    or lifestyle change, our experienced disability attorneys will ensure that your
    rights are fully vindicated. 
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