What are private disability insurance benefits?
Short-Term and Long-Term Disability Insurance, commonly called STD or LTD insurance, is a private insurance plan that pays your missing wages when illness or sickness takes you out of work. You do not need an on-the-job injury, like with workers’ compensation, to claim private insurance benefits.
STD or LTD insurance differs from the most common disability insurance: social security disability (SSD) insurance. SSD insurance is a federal insurance plan each American worker can qualify for by paying taxes. To verify your social security projected benefits, simply log into www.ssa.gov
On the other hand, people must pay for private STD or LTD insurance or get it as an employee benefit, it is not covered by payroll taxes. STD insurance typically covers the first 6 months of disability, replacing about 2/3rds of lost wages. STD insurance benefits help you recover or decide if you must pursue government SSD benefits.
After STD benefits expire, LTD insurance is another private insurance plan paid by you or your employer that kicks in, typically after six months of disability.
Why would I want a private disability insurance plan?
Private insurance benefits aim to give the disabled more immediate relief. If you suffer an injury or illness that keeps you off work, STD benefits should arrive shortly after you apply.
Contrast this process with government or SSD benefits: you must be disabled for 6 months to qualify. Also, government reviews of SSD applications are often delayed plus they must determine you cannot work at any gainful employment before you get benefits.
Private plans aim to provide benefits quickly, and often apply for a time even if you could work another job. If you have an issue with your private plan, you can sue in court for a breach of contract. SSD appeals are only handled at special administrative hearings, which have been backlogged.
Also, private insurance plans will cover you if you cannot work at your current job. Remember, SSD only covers you after six months if you cannot work in any job. This can make a huge difference.
How does a private disability insurance plan work?
There are many different private insurance companies with different plans, but a typical claim requires providing the insurance company with doctors’ reports detailing your disability. The insurance company must then approve or deny. They also may ask for more information or ask you to see a doctor. Their doctor may evaluate you by asking you for a functional capacity examination.
With both STD and LTD coverage, the plans work better than government insurance because for the first two years after disability, most private plans pay you if you cannot work at your “own occupation.” This is different from SSD benefits which do not approve your disability claim unless you are out of work for over six months and if you cannot work any job.
Why would I get denied private disability insurance benefits?
As discussed, for the first two years after your disability, you are disabled under most LTD plans if you cannot do your “own occupation,” or the job you held when you became disabled. After that period, the insurance company will now only deem you disabled if you cannot do “any occupation” which “you are or can become qualified to perform by education, training, or experience,” like under SSD benefits.
Some people face denial when they reach two-years post-disability. For example, if you injured your back and cannot do manual labor, you are disabled under your “own occupation.” But the insurance company might later decide you are qualified for another job. That means you no longer qualify as disabled under the policy if a set amount of time has passed.
These limitations are not in each plan. There is a LTD policy for doctors that deems them disabled if they cannot work in their medical specialty due to disability. This type of policy is far more helpful if you get disabled, but also more expensive.
How do I avoid getting my private disability benefits denied?
If your benefits were denied because, for example, you went back to work full-time, that is an expected denial. Most people want to return to work, and only pursue benefits if they are truly disabled. But you may face a tough choice about returning to work if you fear losing disability benefits. Many disability plans include language that lets you try to go back to work, without punishment if you fail, to encourage such a return to work. Review your plan for specific details so you do not lose benefits for returning to work.
Sometimes people get denied for not providing sufficient medical records, or after the insurance company doctor’s examination. You must provide the insurance company with your medical records and meet with their doctor, when asked, to qualify for benefits.
Sometimes people get denied if your doctor grows disinterested in continually filling out requests for information from an insurance company. I doubt people attend medical school with a burning desire to complete insurance forms. It may be hard to get a treating physician interested in reviewing the opinion of a doctor the insurance company hired, and so you might get denied since the insurance company relies on their own doctor’s report.
How could a lawyer help me with private disability benefits denial?
If your private disability benefits get denied, you should seek a lawyer who has successfully handled such cases. For example, you might just need to send in additional clarifying paperwork, like additional medical records explaining your disability. Other times, the denial may be more complex. The insurance company could have a fundamental misunderstanding about your job or your disability.
In my experience, the more nuanced your job qualifications or the nature of your disability, the more you may fear denial. Many lawyers will handle your case on a contingency fee basis, meaning you don’t have to pay unless they secure you benefits after getting the denial reversed.
One reason to talk to a lawyer before you get denied benefits is that these sorts of lawsuits do not focus on whether you are, in fact, disabled. You must provide proof of disability, under the definition of your policy, to the insurance company before you go to court.
“ERISA” stands for the Employee Retirement Income Security Act of 1974. An ERISA case or disability benefits denial appeal will focus on the administrative record. This means the case is about how well you presented your case during the appeal of benefits denial. When you go to Court, the issue is not if you can now prove you are disabled, it is whether you earlier proved your disability.
Seeing a lawyer after your administrative appeal can be risky since if you failed to make certain objections or arguments, it may be too late. This means if you wait too long after denial, your case might end before you reach out to a lawyer.
Many people do not understand the reasons why they are denied benefits under the private disability contract. It helps to have an experienced lawyer to help you understand the process. Even if you consider handling your own appeal, talk to a lawyer first. Many lawyers give a free initial consultation so you can decide how a lawyer can help you before you proceed.
What is the process of a lawsuit challenging a private disability benefits denial?
In an ERISA benefits denial case, the court will act more as an appellate tribunal than the trial court you may know. There will be no jury and no testimony in these cases, so there are no witnesses either. The court will evaluate the reasonableness of the insurance company’s administrative decision by reviewing the disability file or administrative record, as well as hearing legal arguments. Do not forget, insurance companies have experienced and talented lawyers to represent them in these suits.
When you file a disability benefit appeal lawsuit, the court may determine if the insurance company acted wrong (or a de novo review). The insurance company’s lawyers may argue the decision should be reviewed for what is called an ‘abuse of discretion.’ The ‘abuse of discretion’ standard means that the insurance company wins unless the insured can prove, based purely on the administrative record, that the insurance company was not merely wrong, but that the denial decision was “arbitrary and capricious.” This is a much higher standard than in many other cases. Again, this is all decided by a judge, not a jury.
A lawyer can help you argue that the court should review your case under a more favorable standard. But even if the court ultimately uses the “arbitrary and capricious” standard, you are better equipped to show how the insurance company acted in such a manner, citing the facts of your specific case, if you retained skilled legal counsel who understands your case.
Authored by Aaron Clemens, Esq.