Disability and ERISA Claims

Private Group Disability Policies - ERISA Claims Settlement of ERISA Claims Long Term Disability vs. Short Term Disability Policy Definitions Private Non ERISA Disability Insurance Plans Temporary (Short-Term) Disability Insurance Social Security Disability Plans

The most valuable economic asset owned by most people is their earning power. Becoming disabled by an accident or illness is one of the most serious hazards that most people face because it threatens the foundation on which their financial stability depends. Unfortunately, when someone becomes disabled they usually have significant medical or surgical expenses that must be paid at the same time that income has been cut off.

The Federal government (as well as some local governments) provides some government assistance in the event you become disabled. New York and New Jersey provide temporary assistance lasting up to 6 months after becoming disabled. The Federal government through the Social Security program will provide benefits for disabilities that last more than one year.

In addition to the government plans that are available, you may have in place a private plan that may provide short or long- term coverage. The private plans will be discussed first since they are the most misunderstood by the general public.

For more information on disability and ERISA claims, Click here to read an excerpt on disability and ERISA claims from the 10 Commandments for Buying Insurance, and Insider's Guide to Auto, Home and Life by Arthur V. Lynch and James S. Lynch or visit our library to download a complimentary copy of the book.

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Private Group Disability Policies - ERISA Claims

An individual usually has a group disability policy, if they received the disability policy as an employee benefit from an employer or purchased the policy from a trade association that offers the discounted disability income policy to its members. These policies are designed to limit coverage and the amount of benefits payable. This is done by limiting definitions of disability, offsets against benefits, and significant limitations and exclusions in the policy. Group coverage is inherently inferior to an individual disability policy. Group policies are much more profitable to the insurance company. They are easier to administrate as compared to an individual disability insurance policy.

In most cases, group insurance policies are set up by use of the Federal statute Employee Retirement Income and Security Act of 1974. (ERISA). If your company group disability policy was set up using this statute, your rights to contest any denial by the plan administrator or insurance company are severely limited.

Important restrictions concerning ERISA plans

1. All of your paperwork and submissions must be made to the plan administrator before they issue the final denial;

2. There are significant time restrictions to file appeals within the plan;

3. You must follow the requirements of the plan before you have any rights to contest the denial in court;

4. Although you have the right to contest your denial in Federal Court, in most cases, the Federal Court Judge will only review the administrative record. The administrative record is the claim file and all of the submissions that are made to the plan administrator before the final denial.

5. It may be difficult to win on appeal as the standard of review by the Federal Court on appeal is very limited.

Therefore, if you have not fully documented your disability to the plan administrator or insurance company that is administering your group health insurance plan prior to their denial, any appeal will be extremely difficult.

The insurance company has far more experience than an individual in handling these types of claims. The insurance carriers have been known not to treat claimants fairly. This is evidenced by the recent class action settlements made by Unum and some of the other major carriers. The Unum multi-state settlement reached in November of 2004 required UnumProvident and its subsidiaries: (1) to reassess approximately 200,000 claims that previously had been denied; (2) to completely restructure their claim handling procedures to ensure objectivity and fairness; and (3) to pay a $15 million fine.

If your claim is denied and you file an appeal, it is not the appellate judge's job to determine if you are disabled. The burden would be on you to prove to the judge that there was no reasonable way that the insurance company could have found that you are not disabled. In order to decide this issue, the appellate judge will only review the administrative record (essentially the claim file). The standard that the judge will follow is whether the denial that was issued by the plan administrator of the group health insurance plan was based upon what is called "substantial evidence." Substantial evidence has been defined by a court as "more than a scintilla and less than a preponderance."

Taken literally, the "deck is stacked against you" in terms of a review by the Federal Court if you are denied your claim by group disability plan formed under the ERISA statute.

In reviewing an ERISA plan disability denial, the Federal Court will give the same weight to your treating doctor's medical reports as it will give to the physician who is paid by the insurance company to assess your condition. Although this does not seem fair, it is another one of the hurdles that must be overcome in prosecuting an ERISA claim.

Duane worked for AB Insurance Co. as an insurance adjuster. Every year, his employer provided a checklist for the benefits for the year which included choices to be made relative to the deductible that he chose for Health Insurance as well as the disability insurance policy. The plan was an ERISA plan. Duane wanted to save as much money as he could, therefore, he chose the minimum options on the Health Insurance and the disability policy. Duane was 40 years old when he began to notice that his hearing was starting to fail. He had difficulty hearing people on the phone and it gradually got worse and worse. This was difficult because in his current job as an adjuster, he spent most of his time on the phone. He had tried to work for as long as he could.

All of his co-workers knew of his condition and did everything they could to help him. They would take messages for him and he would respond by e-mail when possible. He did not miss any time from work as a result of the hearing loss. He realized that he was becoming more and more of a burden to his co-workers. He finally decided to leave work, and go out on disability.

The week before, he decided to leave, he had worked a full schedule. He always had.

Duane knew the person from human resources would help him file the claim. He immediately went to see her and she gave him the forms to fill out for the disability insurance claim. He filled out the form as best as he could and returned the form to the human resources department of his company. He felt the HR department would take care of him, the head of the department knew him personally. She also knew about his serious medical condition.

The HR department submitted the form, however, to his shock, the claim was denied because the insurance said they needed more medical information. Duane gathered an additional medical report from his treating doctor and submitted it to the insurance company. To his surprise, the insurance company again denied his claim and said its decision was final.

Duane decided to seek the services of an attorney. The attorney reviewed the claim and advised Duane that since his disability was an ERISA based policy, he could submit no more medical reports and any appeal would have to be based on what was already submitted to the insurance company . Duane's doctor had not understand the material duties of Duane's job as an adjuster and did not specify in his report why the hearing loss prevented Duane from performing his occupation. The lawyer explained that this medical report was not sufficient to establish disability from his occupation and that a Federal Judge would likely find that, based on the evidence submitted, the insurance company's denial was reasonable. He told Duane that his case was sure loser and that his time to submit the proper documentation had already run out. Duane received no disability benefits, even though he was truly disabled.

The appeal that you would file in Federal Court will be based upon the denial by of coverage by the insurance company. After review of that denial and the administrative record, in most cases, the Court will:

1. Remand (send) the case back to the insurance carrier for further review; or

2. Order that benefits be reinstated up through the date of the court case; or

3. Uphold the decision to deny benefits made by the plan administrator.

Importantly, assume you win your appeal and you start to get benefits. The insurance company can still issue a denial later on, after a physical examination by one its doctors, even though you won in court.
 

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Settlement of ERISA cases

In some cases it may be beneficial to consider a buyout or settlement of the claim. Any settlement of the claim should address the present value of the proposed offer as well as any collateral effect that the settlement may have on the receipt of a future medical benefits. Any social security setoffs must be considered in evaluating whether an offer made by a disability insurance carrier should be accepted. Some of the other factors that should be considered are your age, health, life expectancy, mortality, morbidity and the present value calculation using the appropriate discount rate of your future payments.
 

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Long Term Disability vs. Short Term Disability

Your insurance policy will likely have different definitions for long term and short term disability. Generally, short term disability is a less stringent definition. Obviously, long term disability denials create the greatest hardship the denied insured. In both situations, with an ERISA policy, the claim must be properly documented while the claim is being presented to the insurance company or plan administrator.

In a long term disability claim, proof of disability by the use of a vocational expert may be instrumental in getting your claim approved. A vocational expert will review your job and the limitations expressed by your physician and discuss in a report reasons why you cannot perform your occupation (or if required, any occupation).

Disability evaluation is generally a two-step determination:

1. Does the patient suffer an impairment of some function?, if so,

2. What effect does that impairment have on the patient's ability to perform the necessary tasks of life?

It is extremely important that the level of work that you performed be compared to the disability or impairment that you have to show that you are unable to perform the material tasks of your job.

To be eligible for disability benefits you generally must show the nature of your disability, the extent of your disability, your inability to engage in former occupation, your physical limitations on your ability to work, and the types of employment, if any, that you are able to perform. If you have the benefit of a vocational expert, someone trained in determining whether you are employable, this expert may be able to shed more light on the matter to assess your physical limitations on your ability to work and the type of employment if any that you are able to perform.

It is imperative that you tell your doctor what information must be provided for your disability claim. Physicians are trained to treat and diagnose medical conditions. They are not trained in the art of filling out a disability forms. You or your attorney may have to pay the doctor to prepare the necessary documents that appropriately set forth your medical condition and assess how it has affected your ability to work.

Many valid claims have been lost based upon the treating physician using the wrong term. For instance, if you are permanently disabled and your doctor reports that the length of disability is uncertain, you are likely to lose your long term disability claim. Your doctor must be aware as to how certain disability terms are applied relative to your insurance contract. Again, this is another reason that an attorney should be consulted before the claim is even filed The attorney can provide the definitions as well as their meaning in the local jurisdiction.

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Policy Definitions

Your ability to collect on your policy may depend on how the terms are defined. Long term disability may be defined as occupational or general (non-occupational). Every policy is different. There are several definitions that may be implicated. Two of the most important common definitions are explained below.

An occupational policy is one that insures against loss resulting from the inability to engage in a particular occupation, usually the one in which the insured is engaged at the time that the policy is taken out.

A non occupational or general disability policy, only covers disability from all paid occupation or work.

Many polices are occupational for short term disabilities and provide a more restrictive (harder to prove) definition of general disability for long-term or permanent disabilities.

Under New Jersey law, to be totally disabled a person does not have to be bedridden, incapacitated, paralyzed, or completely unable to function. If the insured is unable to perform the material duties pertaining to his occupation due to disability; the mere fact that the insured can engage in inconsequential or trifling work that yields little compensation will not disqualify the insured.

The question will then become what are the material duties pertaining to a person's occupation. Remember that your occupation does not mean your job. Medical proof will be required to show that you are unable and why you are unable to perform those material duties. Additionally, details concerning your educational background and every job or business that you have done in the past may be important in assessing what types of jobs within your occupation that you are qualified for.

The laws of each state are different and every case must be assessed on its facts. The definition of total disability will depend on whether the court of your state follows:

1. Liberal view, which means that you have to be disabled from your own occupation;

2. Intermediate view, which means that you are disabled from your occupation or any other in reasonably fitted or qualified, (New Jersey);

3. Strict view, which would be defined as being a disabled from any occupation.

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Private Non ERISA Disability Insurance Plans

Individual plans have significant benefits over ERISA plans. When you purchase a disability insurance policy from an insurance broker you enter into a contract with the insurance company. If the insurance company denies your claim for benefits, your claim is governed by contract law and the case may be brought in the state where you reside. The definitions of disability will be the same, however, the "deck is not stacked against you" in the review process as it can be in the ERISA plans noted above.

You will have the right (in most cases) to have the case resolved by a jury of your peers and will have the right to bring witnesses to court which could include medical witnesses to support your claim against the insurance company. Significantly, your time to appeal any determination is governed by the statute of limitations. In both New York and New Jersey, the statute of limitations for a contract claim is six years from the date of the breach of the contract. This gives you much more time to seek the services of an attorney as compared to an ERISA plan disability claim. At any rate, you should consider consulting with an attorney early in the process.

In most cases the issue to be determined is whether you meet the definition of disability defined by your insurance policy. It is extremely important to know that the definition that is in the insurance policy is not likely to be taken literally by the court. The courts in both New York and New Jersey have interpreted these clauses more liberally than their meaning. This means that although you have been denied by your insurance company based upon a policy definition, their denial may not have been proper.

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Temporary (Short-term) Disability Insurance

This is sometimes referred to as cash sickness benefits. It provides workers with partial compensation for loss of wages caused by a temporary non-occupational disability. Stated another way, if you cannot work and the reason that you can't work is unrelated to an injury or illness that you got on the job, you may have certain rights to obtain temporary disability insurance administered by the states. (If it is work related, you have a Workers Compensation Claim).

If you reside in New York or New Jersey you are fortunate in that you reside in one of the five states that have state mandated plans that provide for temporary disability insurance.

In New York, disability benefits are administered by the New York State Workers Compensation Fund, Disability Benefits Bureau. You may obtain further information about the New York plan at their website, www.nysif.com. The disability benefits law provides weekly cash benefits to replace in part, wages lost due to injury or illness that do not arise out of the course of employment. Unlike Workers Compensation, medical care is the responsibility of the claimant.

In New York, an employee is entitled to receive the following statutory benefits:

50% of the average weekly wage based on eight weeks of employment not counting the week in which the disability began to a maximum of $170 per week. Benefits are paid for a maximum of 26 weeks.

For employed workers, the first seven days of disability are waiting period for which no benefits are paid benefits began on the eighth consecutive disability day.

A claim must be filed within 30 days after disability.

The New Jersey state disability program is administered by the Department of Labor and Workforce Development. More information about the New Jersey plan can be found at their web site at www.state.nj.us.

The New Jersey plan benefits are more generous than the plan administered by the State of New York:

Each claimant is paid two-thirds (2/3) of his/her average weekly wage up to the maximum amount payable set for that calendar year. The maximum weekly benefit rate is $502 for disabilities beginning on or after January 1, 2007.

For employed workers, the first seven days of disability are waiting period for which no benefits are paid benefits began on the eighth consecutive disability day.

A claim must be filed within 30 days after disability.

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Social Security Disability Benefits

The social security administration has in place a system whereby you're entitled to benefits if you can show that you have a disability severe enough to keep you from working in any regular paying job for at least 12 months.

The test for eligibility is not whether you have been able to find a job recently, it is whether you were physically and emotionally capable of doing a job that is generally available in the national economy. You must have a doctor state that you're disabled and it must be supported by clinical and or laboratory findings.

You should consider applying for social security disability as soon as you and your doctors agree that your disability is going to last a full year. Applying early is important because it takes many months for the claims to get processed.

In general, if you are denied by so security disability, you have 60 days to appeal.

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