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.