Beware of Disability Insurance Policy Traps When Applying for Disability Benefits

As noted in the prior post, “How Do I Apply For Disability Benefits?“, you need to familiarize yourself with your employer’s disability plan document and the SPD of the plan. The following definitions are very important, and if you are not careful when making your disability insurance claim, you could shoot yourself in the foot (no pun intended).  Of course, if you have any questions, you should consult with a disability benefits attorney.

Definition of “Disability” – To be eligible for benefits, you must be totally disabled within the meaning of the definition in the plan. Common definitions are: “Own Occupation,” “Any Occupation by Reason of Education,” “Training and Experience,” and perhaps some combination definition. The definition is extremely important in determining the value of the benefit award.

• “Own Occupation” Definition – This, from an employee perspective, is the best definition. Under this definition an employee is deemed “totally disabled” if he or she is unable to perform the material duties of his or her “own” or “regular” occupation. This means his or her occupation as performed in his or her local economy, it does not mean your his or her job at his or her company. Thus, it must be shown that your symptoms prevent you from performing your occupation as it would be commonly performed at not only your employer, but at any other similar employer.
• “Any Occupation by Education, Training and Experience” Definition – under this definition an employee is deemed “totally disabled” if he or she is unable to perform the material duties of any occupation to which he or she is qualified by reason of education, training or experience. To satisfy this definition, the employee has to show not only that he or she cannot do his or her regular job, but that he or she cannot do any other job to which he or she is qualified. This threshold is harder to satisfy than the “Own Occupation” definition because the employee must show that it cannot perform any other jobs for which he or she is qualified before the employee is deemed disabled.
• Combination Definition – Generally, most disability insurance policies today use a combination “hybrid” definition that changes after two years. For instance, during the first two years following disability, the employee will be considered totally disabled if he or she is unable to perform the material duties of his or her “own” or “regular” occupation. Following this two year period, the definition of disability usually changes to to a definition of that of “Any Occupation by Education, Training and Experience” (which means the employee’s claim will be re-reviewed by the insurance company after 2 years, and the employee will be required to submit proof to overcome the new threshold in order to continue receiving benefits).

Time limits set forth in the disability plans must be strictly followed. Check your disability benefit policy and SPD carefully to see when a “Notice of Claim” and a “Proof of Claim” must be submitted. There are also time limits within which an internal appeal has to be submitted in the event disability benefits are denied (generally, most plans permit only 180 days to submit an appeal, so if you receive a denial of benefits, you must act quickly). Lastly, your disability benefit plan will more than likely set forth a time limit as to when a lawsuit must be filed.

Elimination Periods. Generally, your long term disability plans sets forth an elimination period (the waiting period before an employee is eligible for benefits under the plan). For the most part, an elimination period is either 90 or 180 days, which means that if an employee becomes disabled on March 1, he or she would become eligible for disability benefits only 90 (or 180, as the case may be) days later, provided he or she remains disabled. Note, that in most cases, if the employee recovers benefits due to his or her disability during the elimination period, the employee will not be eligible for any benefits under the long term disability insurance plan.

Offset Provisions. Most disability plans provide for offsets for certain “other income,” Which means that any awarded monthly benefit will be reduced by the employee’s other income (such as social security disability income benefits, workers compensation benefits, retirement benefits, money received from a third-party lawsuit, benefits paid under a personal insurance policy, and income earned while disabled from your job). Many disability insurance insurers require a disabled employee to apply for these other benefits.

Mental and Nervous Limitations. Many disability plans impose a 2-year limitation on benefits for mental and nervous disorder disability (which means that the benefits end after 2 years even if you remain totally disabled). It is in the disability insurer’s interest to characterize your otherwise physical disability as a mental and nervous disability (for instance, an insurer will try to characterize the symptoms of Chronic Fatigue Syndrome (a physical disability) as the symptoms of depression (a mental disability). You and your disability benefits lawyer should beware of this trap. If you are physically disabled and are also depressed as a result of being disabled, you need to make sure your doctor clearly indicates so in his diagnosis and any letters that you are depressed secondarily and as a result of your physical disability. The insurer will likely impose the 2-year limitation on your benefits if your depression is listed merely as a second reason for your disability, instead of as a result of your disability.

Partial Disability. Even if you are only only partially disabled, your disability plan may provide benefits. In most cases, a plan might consider you partially disabled if you can do your job on a part-time basis or if you can work at a full-time job (other than your own) at less pay (benefits are calculated on a formula, but always less than if you were totally disabled).

If you are uncertain how to go about filing for disability benefits are believe you were wrongly denied benefits, you need to act swiftly as that time is of the essence.  You should contact a disability benefits attorney if you have any questions.  It is prudent to consult a lawyer as early as possible. Disability benefit application forms are drafted in favor and for the benefit of the insurance company, not the employee applicant. These forms often contain landmines for unwary. Employee’s answers that are not carefully crafted, can ruin the entire disability benefit claim. Professional help is highly recommended.

Tags: Disability Benefits