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Orthopedic Surgeon John Duda filed a claim for disability benefits with The Standard for his long-term disability (“LTD”) benefits and Lincoln for his individual disability benefits due to a wrist injury. Both Standard and Lincoln determined Dr. Duda did not qualify for disability benefits under each of his policies. However, each company cited different reasons for their decisions. Following the denial of disability benefits by each company, Dr. Duda sued each Standard, under federal ERISA law, and Lincoln, under Pennsylvania breach of contract and bad faith law, for disability benefits. The United States District for the Eastern District of Pennsylvania sided with Standard and Lincoln. The Third Circuit, on appeal, agreed.

In this case, Dr. Duda was an orthopedic surgeon who co-owned a medical practice with one additional orthopedic surgeon. In his practice, Dr. Duda performed surgeries and office visits. Dr. Duda also solely and independently owned a separate business to conduct independent medical evaluations (“IMEs”) and provide expert medical testimony.

For Dr. Duda’s LTD policy from Standard, disability is the inability “to perform with reasonable continuity the Material Duties of his Own Occupation (total disability) or he was unable to earn his Own Occupation Income Level (partial disability)” (Internal quotations omitted). In order to prove disability, Dr. Duda was required to provide Standard with Proof of Loss, defined in the policy as “satisfactory written proof that you are Disabled and entitled to [long-term disability] Benefits.” Standard determined Dr. Duda did not provide the company with appropriate proof of loss. This determination was based upon the “records” Dr. Duda did provide. Dr. Duda provided Standard with a letter from his co-owner partner stating he had been treating Dr. Duda on a periodic basis but had not kept records because the treatment was a professional courtesy. Dr. Duda also told Standard he had been self-treating and not kept any records. Standard denied Dr. Duda’s claim for benefits and the Third Circuit noted, “That the absence of satisfactory medical documentation that Duda was continuously disabled during the so-called “Benefit Waiting Period” was a sufficiently reasonable basis for Standard to deny both total and partial disability benefits.”

Here, it is important for all potential disability claimants to recognize the need to provide proof of loss. All individual and long-term disability policies contain some version of a proof of loss provision. The easiest way to provide proof of loss to a disability carrier is by providing your medical records, which show generally: (1) you are seeing the right doctor for your disabling condition, (2) you have a diagnosed medical condition, and (3) you are unable to perform all or some of your occupation or another occupation because of that diagnosed medical condition. Had Dr. Duda actually gone to office visits, with his business partner (or preferably an unaffiliated doctor), where his condition and the ways it was affecting his performance at work was documented, it would have been much harder for Standard to challenge his claim for disability benefits.

For his individual disability claims with Lincoln, Dr. Duda originally submitted his claim as a partial disability claim. Lincoln however, reviewed his claim for both total and partial disability. Lincoln determined Dr. Duda was not totally disabled but more information was needed to make a determination on partial disability. Dr. Duda appealed the total disability determination and informed Lincoln he would not provide the additional requested information as he chose to focus on the total disability claim. When Lincoln affirmed the denial of total disability benefits, Dr. Duda filed suit against the company.

The District Court examined Dr. Duda’s responsibilities in his practice, specifically looking at his billing codes to determine Lincoln was correct in denying Dr. Duda’s claim for total disability benefits. The court found, “because Duda’s inability to perform open surgeries did not preclude him from performing some of the main duties of his occupation at the time of his total disability claims, Lincoln did not breach the policies by denying those claims.” The Third Circuit agreed with the District Court in this analysis.

In review of Dr. Duda’s claim for partial disability benefits, the court examined his income. Here Dr. Duda “must be earning at least 20% less than his or her monthly earned income base” to qualify for partial disability benefits. The policy also explains monthly earned income is “the amount of income, net of reasonable and necessary business expenses, earned in a calendar month by the insured from his or her regular occupation.” While there are some arguments made regarding Dr. Duda’s own understanding of the policies and relevant Pennsylvania case law, the important take away from this case is understanding how regular or own occupation is generally defined in a disability policy.

Many individuals in buying “own occupation” disability insurance coverage believe it protects them from the occupation they hold when they purchase the insurance or the specialty of medicine or law they practice. “Own Occupation” is generally defined in a disability policy as the work an individual is performing when they become disabled. In Dr. Duda’s case, he held multiple occupations, with many responsibilities for each. He was an orthopedic surgeon who performed open surgery, non-open surgery, patient consultations, and non-surgical office based procedures. Dr. Duda also conducted independent medical evaluations and provided expert medical testimony in a separate business. Dr. Duda argued his occupation was an orthopedic surgeon and his duties where those customary to the performance of surgery. The court explained Dr. Duda’s regular occupation was the tasks he actually performed before his disability and not the tasks generally required of an individual in his profession. Therefore, Dr. Duda was not entitled to benefits as he did not meet the monthly earned income base requirement.

It is important to read and understand all of the policy provisions when buying a disability policy or considering filing a claim with your disability insurance company. If you have any questions or need any assistance, contact our office and we can assist you with a policy review.