Do you have questions about your insurance claim? Check our Frequently Asked Questions first!
Yes. There are several types of policies. And disability policies can vary substantially in their definition of disability, as well as what they require in order for coverage to be provided.
The “Own Occupation” policy.
This type of policy insures you against becoming unable to perform “the substantial and material duties of your own occupation”. This coverage pays a monthly benefit if you can no longer perform the specific tasks of your work (as a contractor, for example, or as a dentist, etc.) Benefits with this type of coverage are paid regardless of whether you are able to perform other types of work.
The loss of income policy.
This coverage pays only for loss of income. In other words, if you switch occupations due to a disability, the policy will provide benefits based on a specific formula relating to reduced income. You will not be paid just because you can no longer perform your occupation, and your benefits will depend on the difference between what you could have earned and what you actually do earn in a new occupation.
Other types of individual disability policies provide coverage only if the insured is disabled from performing any gainful employment. Some states provide, however, that an insured is entitled to benefits if unable to perform his or her occupation or an occupation for which he or she might reasonably be expected to engage, in view of the person’s station and physical and mental capacity.
Disability policies can vary substantially in what they require in order for coverage to be provided.
Each state has a Department of Insurance, which is responsible for regulating insurance companies doing business within its borders. The duties of each state insurance department include:
- Overseeing insurance companies and agents.
- Promulgating and enforcing regulations to which the insurance company must adhere.
- Handling consumer complaints about alleged unfair sales or claims tactics.
What general rules apply to the interpretation of insurance policies? Any ambiguity or uncertainty must be interpreted in favor of the policyholder and against the company:
- Words used in a policy are to be interpreted according to the plain meaning, which a layperson would ordinarily attach to them, not as an attorney or insurance expert might analyze them.
- Coverage provisions will be interpreted broadly. Exclusions and limitations will be narrowly construed.
- Insurance contracts are interpreted so as to accomplish the ‘objectively reasonable expectations of the insured.
- A statute of limitations is the maximum amount of time that you have to file a formal claim, either with your insurance company or, (if the claim has been terminated or denied) in court.
- The statutes of limitation applicable to a particular claim depends on your policy, the theory of your case, and the laws of your state.
- For example, you may claim that the insurance company broke the contract (a contract claim) and/or that the insurance company committed fraud or bad faith (tort claim). Under state law, contract claims and tort claims may have different statutes of limitations.
- In addition to statutes of limitations imposed by state law, some insurance policies contain contractual limitations provisions, which require the policyholder to file a lawsuit within a given period.
- Such provisions inserted by the insurance company can pose a serious problem to the consumer, and therefore some states do not enforce them. This is especially so when the insurance company is negotiating and discussing the claim with the policyholder while the period is running.
- Other states do enforce these provisions. It is very important for you to find out whether or not there is a contractual limitations period set forth in your particular policy.
ERISA is an acronym for the Employee Retirement Security Act of 1974. ERISA severely limits policyholder rights to insurance obtained through most employers.
In such cases, policyholders cannot obtain the protections of the Law of the State because the Federal ERISA Law has been held to replace or preempt all such protections.
If your disability insurance was obtained at work as an employment benefit, your ability to enforce your rights under the insurance laws of your state may be severely limited by ERISA.
This law bars recovery of consequential damages, general damages, or punitive damages. For that reason, policyholders have no leverage to compel an insurance company to do what it is required to do under the policy and under state laws.
The whole subject of “ERISA Preemption” has become very complicated. It is extremely unfair to most non-exempt employees who receive disability insurance through their work.
There are many. But basically, the insurance company is required to conduct a fair, objective and thorough investigation before denying a claim. The insurance company reviewing your claim is also required to:
- Refrain from putting its own financial interests above the financial interests of its policyholders. Avoid misrepresenting the terms and conditions of coverage.
- Pay claims promptly without engaging in unreasonable delay.
- Pay claims fairly without requiring the insured to hire a lawyer in order to collect benefits.
- Interpret any ambiguities in the policy in favor of the policyholder. Insurance companies are required to act reasonably in all dealings with policyholders. In most states, violating this duty constitutes a breach of good faith and fair dealing. In such a case, the insurance company can often be held responsible for any damages that they have caused beyond the contract benefits, themselves.