The Legal Disability Defense in Disability Insurance Claims

Aug 1, 2008 - Publications by

M.D. News, August 2008 

In July of this year Clifford D. Swift, Esquire joined our firm as a Senior Associate. Prior to joining Mark F. Seltzer & Associates, Cliff was a prosecuting attorney for the Commonwealth of Pennsylvania, Department of State, representing the Commonwealth, and its citizens, in professional licensure matters before several State Boards, including the State Board of Medicine. We are pleased to have Cliff with our firm and his knowledge and skill in state regulatory matters. Oftentimes, inherent in any state licensure matter, is a physician’s “fitness to practice” issue. However, other issues provoke the prosecution of licensure action as a consequence of a violation of a statute or the law. While Cliff has now embraced our firm’s disability insurance practice, I thought his hiring was a good opportunity to write about a related potential defense, which is available to your disability insurance carrier, should the facts be present which allow the Company to argue its application.

As I have set forth in the series of five articles, which I have previously written for MD News and published earlier this year, in order to obligate your disability insurance company to pay you benefits, you must establish that you are suffering a medical condition which has caused you to become disabled under the terms and conditions of your policy. In other words, you must be “factually disabled”. Conversely, “legal disability” means the loss of entitlement to practice your specialty or medicine altogether as a result of an intentional act. The most common legal disabilities are loss of license and/or commission of a crime.

The “legal disability” defense was initially developed years ago as a consequence to a criminal conviction, with an applicable policy that was totally different from today’s policies held by most physicians. In 1928, the Court held, in the case of Nashville Trust Company v. The Prudential Insurance Company of America, that a railroad worker convicted of a heinous crime and imprisoned a result, was not disabled under the terms of his group disability insurance policy, notwithstanding his inability to work on the railroad, because he was able to work in the prison factory.

More recently, in the case of Goomar v. Centenial Life Insurance Company, decided in 1996, Dr. Goomar, practiced medicine until his license was revoked in 1987 as a result of accusations of sexually molesting some female patients. Apparently, the molestation ended in 1984, but Dr. Goomar continued to practice without any such accusations between 1984 and 1987. Subsequent to his license revocation, Dr. Goomar received psychiatric care and ultimately filed a claim for disability insurance benefits as a result of his psychiatric conditions. However, the Court held that Dr. Goomar was not entitled to benefits because he was “legally disabled” instead of “factually disabled”. In other words, the Court said that it was the criminal accusations and subsequent licensure action which caused Dr. Goomar’s inability to practice as opposed to his medical condition.

Ultimately, over the years, since its inception, the disability insurance companies have attempted to expand the “reach” of the legal disability defense to encompass virtually any potential circumstance that does or may prevent a physician from practicing, other than a factually disabling medical condition. If you are anticipating filing a claim, or you are currently on the claim, the companies will look to medical malpractice insurance issues, non-compete clauses or restrictive covenants in partnership and shareholder agreements, privileges issues, and the like, in addition to licensure or criminal issues, as a basis to refute your claim as a result of the legal disability defense. The bottom line is you will need to look at all these issues globally, in addition to the medical conditions for which you claim benefits, in order to properly and effectively prosecute your claim.

The Law Offices of Mark F. Seltzer & Associates dedicates its practice to representing Physicians, Healthcare Practitioners, and Professionals in all aspects of disability insurance claims and cases and licensure matters. The firm is located at 1515 Market Street, Suite 1100, Philadelphia, Pennsylvania 19102, and can be contacted at (888) 699-4222 or at