As an attorney representing physicians and health care professionals with disability insurance claims, I often find what appears to be a trend: many disability insurance companies are taking a more “hard line” approach when it comes to paying out benefits on their disability insurance policies. This position applies to the full gamut of claims that I see in the course of my practice, including claims for drug and alcohol dependency, psychological and psychiatric conditions, cardiac conditions, orthopedic claims as well as other mental/nervous and physiologic conditions. Back in the 1980’s physicians were the favorite “target market” of the numerous insurance companies writing disability insurance. With physicians’ incomes higher than average, insurance companies and agents were happy to write as much coverage as the physicians wanted and could reasonably afford. Policy language was liberalized to cover physicians in their specific specialties, and cost of living riders and residual or partial disability benefits were greatly expanded. Benefits payable beyond age 65, so-called lifetime benefits, were offered for the first time. There was extreme competition between the various insurance companies who wanted increased market share.
In the 1990’s things began to change dramatically. As claims increased, more and more insurance companies lost money on their disability lines. They consolidated through mergers and acquisitions, and today there are just a handful of disability insurance companies left. Also, physicians’ situations have changed due to managed care and lower third-party reimbursements. Consequently, physicians may have more disability insurance, in effect, than they could obtain in today’s marketplace. As a consequence, insurance companies are carefully scrutinizing claims and have developed sophisticated positions in denying or terminating claims.
It is now more important than ever to become familiar with your policy and the issues you may face when filing a claim or being on claim for disability insurance benefits.
Firstly, it is important to note that policies contain a provision called the “Incontestability Clause.” Simply put, this provision allows an insurance company to contest the policy within two years of the effective date. The ability to contest the policy after two years is specific as to the language used in the Incontestability Clause.
The important factor to note here is that, in the event of the onset of disability within two years of the effective date of the policy, the insurance company may contest the claim or policy depending on the circumstances. Usually, the policy cannot be contested after two years, depending on the Incontestability Clause language.
Secondly, an insurance company may deny a claim after considering the terms and conditions of the policy as a whole if there is a pre-existing condition or non-disclosure in the application for the policy.
The third major issue, assuming an “own occupation” policy, is whether or not the physician is capable of performing his or her “own occupation” and as such meets the definition of total disability under the policy. Specifically, as it relates to physicians, one’s own occupation is the specialty that he or she practices, and total disability is defined as the inability to perform either the material and substantial or important duties of that specialty. It is, of course, necessary to understand what is material and substantial or important to one’s specialty.
Although there are many other issues which are also significant and are discussed or argued in the course of a physician’s claim for disability insurance benefits, the three which I have mentioned are usually critical to successfully obtaining benefits. Of course, even if your disability insurance company has accepted your claim and has agreed to pay disability insurance benefits, you must continually establish that you meet the terms and conditions of the contract that entitles you to receive benefits. Therefore, the insurance company may challenge your entitlement to those disability insurance benefits if it concludes you are no longer disabled per the contract.
In addition, I see the same positions repeatedly taken by the insurance companies as a defense against either initial acceptance of the claim or continued payment of benefits. Two of these defenses include the “Legal v. Factual” defense and the “Risk of Relapse” defense. These two legal issues are extremely important to physicians and are often seen in cases involving claims for drug or alcohol dependency.
Simply put, a physician must be factually disabled, meaning disabled as a result of a disabling condition, not as a result of a legal disability such as the loss of one’s license to practice medicine. Many times insurance companies take the position that, once a physician with drug or alcohol dependency is in recovery and has maintained sobriety, that physician is no longer suffering a disabling condition. While I strongly disagree with this position, this issue must be carefully thought out in order to successfully prosecute a claim for benefits.
Hopefully, you will never be disabled. However, statistics indicate that the chances of being disabled for at least 90 days prior to age 65 are three times greater than the chances of dying prior to age 65. As you get older, your chances of becoming disabled increase. The stress and trauma of disability can also create problems in partner or co-shareholder situations. Sometimes a partnership agreement obligates a disabled partner to contribute towards the overhead of a practice even though he or she is not raising revenues.
A physician must often consider these issues in conjunction with the claim itself. It is extremely important to have full knowledge and understanding of your disability contract and of all the related issues in order to protect your rights and entitlements. It is equally important to know the process of a claim and receive guidance in negotiating the potential problems and issues that may occur.
Disability insurance is meant to protect one of your most important assets: your future income in the event you are disabled. Remember that your disability insurance policy is a contract. You are entitled to which you have contracted—no more and no less.