Glossary of Key Disability Insurance Terms
While long term disability income insurance policies differ in many respects, there are certain terms and conditions that are typically present in most policies. The specific language may vary from policy to policy, but you should know about the following underlying concepts that are frequently the central issues in disability income insurance claims litigation. When there are reasonable ways to interpret policy terms in a dispute, the courts will favor an interpretation that supports coverage under the policy rather than an interpretation that would support denial of coverage.
Under most long term disability income insurance policies, disability is initially determined on the basis of your own occupation. This means that you cannot do the usual work you were doing before your sickness or injury. The downside is that this lasts only a short period -- 1, 2 or 5 years. After that, your policy may switch to a more restrictive definition (“any occupation”), one in which will have to show that you cannot hold down any job for which the insurance company thinks you may be suited. Many policies today define (internally, not in the policy) one’s own occupation as that which is generally performed in the national economy as opposed to your particular job. Not surprisingly, you should be aware that insurance companies may use overly generalized or inaccurate job descriptions in evaluating the physical and mental demands of your particular occupation. An attorney can help you determine whether the insurance company is being fair with you in the way it is applying the definition to your claim.
This means that after a lapse of time, you don’t receive monthly benefits unless you prove that you cannot hold down any job, not just your own. This is subjective since it is based on your “education, training and experience.” In making this determination, the insurance company may have you go through a “vocational analysis” to determine transferable skills that you could use in a different occupation. For example, if you have been a professional radio talk show host for many years and you contract throat cancer making it impossible to do your show but, many years earlier you were licensed as a CPA, the insurance company may try to say you are qualified to be a CPA and are, therefore, no longer eligible for disability benefits.
This may be a good time to obtain the advice of a lawyer knowledgeable in long term disability insurance and ERISA matters. This will not only better ensure that you are creating a good record (in the event of litigation down the road), but it also encourages the insurance company to follow proper procedures and make the right decision. If you are disabled and earn little or no income, loss of the long term income replacement provided by your disability income insurance policy could be financially devastating.
“Education, training and experience”
Most policies and the common law of most states specify that in determining whether you are disabled from “any occupation” the insurance company must take into consideration your “education, training and experience.” If the continuation of your benefit is denied on the basis that you could reasonably engage in an alternative occupation, you (and your attorney) should evaluate whether the designated occupation is truly comparable to the job you were doing before the illness or injury in view of your station in life. In making this analysis, there are at least two criteria to consider:
- Comparable earnings. The insurance company may identify an alternative occupation that pays substantially less than your former occupation. If so, you may have grounds for asserting that the identified alternative occupation is not suitable in view of your education, training and experience. For example, if you were a plastic surgeon earning $400,000 per year and became physically unable to do that job because of the loss of use of your non-writing hand, but you had artistic ability and the use of your writing hand, it would be unreasonable for the insurance company to say you are no longer disabled because you could use your good hand to become a commercial artist, earning $65,000 per year.
- Age limitations. If you are over 50 years of age, the issue becomes whether you can physically and mentally perform the identified alternative job. This is a fact based analysis and can be accomplished by conducting a local market review. If this applies to you, seek a consultation with an attorney.
You must disclose any past medical history. Specifically, under most long term disability policies if, during a specified period of time (often 3 months) immediately prior to coverage, you received medical treatment or consultation or took prescribed drugs or medicines either for or related to your claimed disability that begins within a specified period of time (often 12 months) after your effective date of coverage, the disability will be excluded from coverage. Sometimes, policies go even further and exclude coverage under this provision even though you did not seek consultation or obtain treatment for the condition causing the disability, but just experienced symptoms that would have caused “a reasonable person to have sought medical advice or treatment.” Here again, if you are faced with this kind of claim denial, an attorney may be able to help you.
Another surprise for many is a provision limiting coverage (often 2 years) for any disability benefits due to a sickness or injury which is based on “self-reported symptoms.” These disabilities are those that are not verifiable by objective medical testing (such as x-rays, MRIs, blood tests, etc.). Examples include headaches, pain, fatigue, stiffness, soreness, ringing in the ears, dizziness, numbness and loss of energy. If you are confronted with this issue, your first responsibility is to make certain there is no medically accepted objective method of verifying your condition. You should also be aware that courts in some states have found that the disabling conditions of Fibromyalgia and Chronic Fatigue Syndrome may not be subject to this provision. Here again, you may want to give this some thought and contact an attorney for his or her advice.
“Mental and nervous condition”
In the same way, long term disability insurance policies often limit coverage for any disability caused by or related to a mental or nervous disorder. What is critically important in the decision–making process is “what is properly deemed to be a mental or nervous disorder” and whether the mental or nervous disorder meets the definition of disability in the contract. Of course, what these terms mean is subject to widely different opinions and interpretations.
- “Properly deemed” If the policy language is restricted in scope, such as “disability due solely to a mental and nervous disorder”, then the limitation can be invoked only when your disabling condition is due solely to the mental or nervous condition. For example, if you are a concert violinist with arthritis in your hands that has made it impossible for you to perform and you also are suffering from extreme performance anxiety, the insurer cannot limit your coverage because of the performance anxiety.
If, however, the policy states that the limitation will be applied if the condition is “caused by or resulting from” or “caused or contributed to by” the mental or nervous condition, then the insurer may attempt to apply the limitation in cases where there may be other more predominant causes of the disability. In the example above, the insurance company may attempt to limit your coverage by saying that the performance anxiety is contributing to the inability to perform.
There is much room for interpretation, judgment and disagreement in applying the latter type of definition. For this reason, you would be wise to consult a bad faith insurance attorney for advice if you are faced with this issue.
- Definition If the policy limits coverage for disabilities resulting from mental or nervous disorders, it should also contain an appropriate definition of the term “mental and nervous disorder” as the insurer intends to apply it. A proper definition should indicate whether one is to look at the cause of the disability, the symptoms, the form of treatment or some or all of these factors combined. Here, again, an attorney with experience in disability insurance claims and ERISA is invaluable if you disagree with the insurance company on the application of its definition (or lack thereof) of mental and nervous disorder.