You are a physician who has been suffering from a medical condition, for which you have asked your Disability Insurance Company to pay you benefits, under your Disability Insurance Policy.
You have contacted your Company, you have provided it with all the pertinent information that it requested in a timely fashion; you have done “everything by the book”. You may have met with its Field Representative, or even been evaluated by one or more of your Company’s chosen Independent Medical Examination doctors. But, notwithstanding your compliance, the Company has methodically asked for endless amounts of additional information, or “dragged its heels” considering your claim. After months of requests for payment of your benefits, in your greatest time of need, the day finally comes when you receive your back-benefits check. But, to your surprise, it comes with a peculiar twist – Your benefits are being paid with “Reservation of Rights”. And, you ask yourself – what is this?; what does this mean?
The short and simple answer is that the Company has not accepted liability for your claim, and it is not acknowledging responsibility to pay you under your policy for the claim that you have filed. Rather, it is paying you money for some “other” reason, often with the right to recapture the benefits should the Company ultimately fail to accept liability for your claim.
“Reservation of Rights”, your Company would argue, allows it to satisfy pertinent insurance regulations, its own contractual obligations, avoid actionable Bad Faith, and not accept liability for your claim, simultaneously. It effectively allows the Company to attempt to “buy” more time, in order to further investigate and access your claim, with the intention to avoid the negative legal consequences, had it continued to do so without paying you benefits. However, in some claims, payment in this way can be a very useful and positive tool in order to assure receipt of badly needed benefits when the Company requires extended time to appropriately assess and consider complex or difficult claims.
But, it can really be a “claim purgatory” – Neither accepting nor rejecting your claim, theoretically without any legal consequences, in return for “lending” you a little money, while specifically retaining the “right of return” of any money it has paid you, when it so chooses to call in your “loan”. Of course, claims manuals or other legal guidelines may “restrict” the time frame for use of this “tactic”. But, if your Company employs this strategy, it may define its own responsive duration rules along the way. For, you see, “the term of art” is all really a fiction created by your Company.
We have seen, in our practice, especially as the economy has gone South, that the Companies have reacted to the new economic paradigm in their assessment and payment of claims. And, that’s usually not in a “charitable” way toward their policy holders: you the disabled physician.
As the Companies have reacted to the economic realities by scrutinizing claims more carefully, with an even higher level of vigilance, they have continued to perfect the techniques and tools which they have employed, in order to either avoid payment of claims, or to reduce the amounts of benefits that they pay. “Reservation of Rights” is not a new technique, but it is being “effectively” used by your Company as part of this global strategy.
But, even if you are being paid, and your Company has accepted liability for your claim, don’t think that you are “out of the woods” yet. For, the “vampire” may rear its ugly head at anytime during the claims process. Let me explain to you, the disabled physician, how the “vampire” potentially strikes. Your Company, after having accepted liability on your claim, and having paid you benefits, possibly for years, without warning, changes its position by denying or questioning liability for any further payment on your claim. However, it chooses to “tactfully” continue paying your claim, potentially hundreds of thousands of dollars of benefits, with “Reservation of Rights”. Then, it files a Federal Court action against you seeking termination of your claim, as of the date it began payment with “Reservation of Rights”, and in addition, seeking restitution or return of the hundreds of thousands of dollars it paid you in that regard. You would have effectively become a Defendant in a huge Federal Court case, requiring legal representation, potentially owing hundreds of thousands of dollars, and faced with the possibility of losing any future benefits on your claim. You would have become the victim of a calculated vulnerability, smitten by a strategy that only Bela Lugosi would love.
So what is the “moral” of this “story”? You must understand your contract, and what you need to prove in order to obligate your Company to pay you benefits. You must cooperate with your Company in providing it with the pertinent information which it has requested. You must satisfy your contractual obligations. But, you must always accept the harsh reality that even if your Company has accepted liability for your claim, and paid you benefits, there is no guarantee that it will continue to do so. Never allow yourself to be lulled into a “false sense of security” during any step of the claims process. The more vulnerable you allow yourself to become, the greater the risk of your claim being challenged or terminated. Don’t let your Company sink its teeth into your benefits and use “Reservation of Rights” in the “wrong” way.
“Reservation Of Rights” In Disability Insurance Claims: Right Or Wrong? was published in Physicians News Digest in June 2011. The law offices of Mark F. Seltzer & Associates dedicates its practice to representing physicians, health care practitioners, and professionals in all aspects of disability insurance claims and cases, and professional licensure matters. The firm is located at 1515 Market Street, Suite 1100, Philadelphia, Pennsylvania, 19102. Mr. Seltzer can be reached at #215-735-4222 or 888-699-4222. Please access our website at www.seltzerlegal.com