Q. Do I have to appeal the denial of my LTD benefits before I can file a lawsuit?
A. Generally, if you have an individual policy purchased through an agent or broker, or if your policy was provided to you by a government employer directly (that is, not through a union or employee organization), then you do not need to appeal. You may file a lawsuit after your first denial.
If your policy is through a private employer, employee organization or union, the Employee Retirement Income Security Act of 1974 (“ERISA”) requires you to exhaust your administrative remedies before you can file a lawsuit. This means that you have to follow the insurance company’s internal appeals process, which serves two purposes: it gives you an opportunity to provide additional information to establish that you are disabled. If the insurance company finds that additional information convincing, it may overturn its own denial. The internal appeal process also allows the insurance company an opportunity to correct its mistake and avoid a lawsuit.
Under ERISA, you will have 180 days from the date your claim was denied to file an appeal. If the plan documents call for two mandatory appeals, you will have to complete two levels of internal appeals before you can sue. You do not need an attorney to appeal your initial denial of benefits, but you may benefit from the assistance of one in dealing with the insurance company.
Q. What is ERISA and how does it affect my LTD benefits?
A. If you obtained your insurance coverage from your employer, union, or employee organization, a claim against your insurance company is most likely subject to a federal law called the Employee Retirement Income Security Act of 1974, more commonly known by the acronym of “ERISA.”
If you did not obtain your disability policy through your employer or employee group, but rather purchased it as an individual policy from an agent or broker, then chances are your claim will not be governed by ERISA and you will have greater consumer remedies.
Congress originally enacted ERISA to protect workers’ pension benefits, and to standardize the administration of “employee benefits plans.” Most employer-sponsored life, health and disability insurance plans are considered “employee benefit plans” under ERISA. Unfortunately, certain aspects of ERISA have been used by insurers and the federal courts to severely limit the rights of people just like you. ERISA operates to preempt or supersede state laws that “relate to” employee benefit plans.
If your disability claim is governed by ERISA, you must timely appeal the denial of your benefits. ERISA requires that you exhaust all administrative remedies (or appeals) before you can file a lawsuit. The deadline for filing your appeal is 180 days from the date of denial, but please check the last page of your denial letter from the insurance company: often the exact deadline and the address to which you should send your letter of appeal will be stated there. You do not need an attorney to appeal your initial denial of benefits, but you may benefit from the assistance of one in dealing with the insurance company.
If you have an individual disability policy purchased from an agent or broker then, generally, you do not have to appeal the denial before filing a lawsuit. You should consult an attorney immediately.
Q. Can I sue my insurance company for punitive damages under ERISA?
A. If your policy falls under the ERISA statute, you cannot sue for punitive damages or bad faith. At best, you can obtain the benefits owed to you in the first place, plus interest. In certain situations, courts may also award attorney fees.
Q. I have missed an 180-day appeal deadline. Does this mean I can’t sue the insurance company?
A. Not necessarily. You should immediately consult an attorney experienced in handling LTD cases to determine whether the ERISA deadlines apply to you.
Q. What are “offsets”?
A. Generally, LTD policies will pay either: (a) a set amount of benefits per month, or (b) a percentage of your pre-disability earnings on a monthly basis—often between 50% to 80% of your earnings.
Most policies that pay a percentage of your pre-disability earnings will subtract or “offset” from your benefits any amount you receive from other sources of disability income, such as State Disability Insurance (available in California and several other states), Social Security Disability Insurance, Public Employee Retirement System Benefits, Workers’ Compensation, awards from related lawsuits, and other employer-sponsored disability benefits. This is because, in theory, the policy is only insuring that you will receive the specified percentage of your pre-disability income. Nevertheless, most policies also include a minimum benefit amount payable to you each month, no matter how much you are receiving from all your other sources of disability income.
Insurance companies aggressively follow-up on your other possible sources of disability income so that they can reduce their payments to you.
If your insurance company is reducing your benefits because of “offsets,” you should check the policy to see if this is allowed and confirm the amount being subtracted is accurate. We would be happy to review your LTD policy and answer any questions you may have about offsets.
Q. What’s the difference between “own occupation” and “any occupation” when defining disability?
A. An “own occupation” provision means that your policy will provide benefits in the event that you are no longer able to perform the material and substantial duties of your own occupation at the onset of your claim.
Most employee-benefit related policies will only provide “own occupation” coverage for a limited period of time, usually 24 months, meaning that after that period expires, you must be disabled from performing the material and substantial duties of “any occupation” for which you are reasonably qualified by your training, education and experience, in order to continue to be entitled to benefits.
Q. My doctors’ reports state I am disabled. Why have my Long Term Disability benefits been denied?
A. The insurance company evaluates your eligibility for benefits based on the definition of “disabled” under your policy. In most LTD policies, “disabled” is defined as having an illness or an injury that prevents you from performing the material and substantial duties of your regular occupation on a full-time basis with reasonable continuity.
If your policy defines disability in this way, your doctor should review your job requirements and report that you cannot perform your regular occupation because of your disabling condition.
Many policies have a change the definition of ”disabled” after a certain amount of time (usually 24 months), such that “disabled” is defined as having an illness or an injury that prevents you from performing the material and substantial duties of any occupation for which you are reasonably qualified by your training, education and experience. On the other hand, some policies state that if you can perform any work on a part-time basis, you are no longer considered “disabled” under the policy. Still other policies state you will only be entitled to disability benefits if you have been declared disabled by the Social Security Administration. Thus, depending on how restrictively your LTD policy defines disability, your doctor’s report alone may not suffice.
Furthermore, your insurance company does not have to accept your doctor’s conclusion that you are unable to work. Sometimes insurance companies demand “objective medical evidence” of your condition or other information to support your doctor’s conclusion that you are disabled. You should obtain a copy of your LTD policy and review the definition of disability, preferably with the assistance of an attorney.
Benefits may also be denied due to coverage issues, including problems that may arise during enrollment, or an insurer’s claim that you had a pre-existing condition which you failed to disclose prior to enrollment. In these situations, you definitely should consult an attorneys with experience in this area of law.
We would be happy to review your LTD policy and answer any questions you may have about obtaining benefits.
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