Frequently Asked Questions About Long Term Disability Insurance Claim Applications, Denials and Appeals
Serious and debilitating illnesses or accidents can come out of nowhere. They can interrupt your home life, and your ability to work and earn an income for several months (or even years). Long Term Disability benefits from an insurance company can pay up to 60% or more of your pre-disability income, so you have financial support to care for your disability and to protect you and your family. Here we attempt to answer some of the more common questions claimants have about Long Term Disability (LTD) coverage.
Long Term Disability Basics
Q: My insurance company seems to be engaging in delay tactics. They keep asking for the same information over and over, they say they are still processing my records, and they still have not made a decision on my claim. Now they tell me they still require additional information. Are they allowed to do this?
What is ERISA?
Long Term Disability Denials and Appeals
Hiring a Lawyer
Purchasing or Maintaining a Disability Policy
ANSWERS TO FAQ
Q. What is Long Term Disability Insurance?
A. Group policies covered by ERISA and private individual disability policies are designed to protect your income in the event that you are unable to work due to sickness, injury or an accident. Usually these policies pay approximately 60% of your earnings. There is also usually built in elimination or waiting period where the benefits are not payable until a certain period after you stop working, usually after you’ve been unable to work for 90 or 180 days.
[Note: a separate insurance policy for Short Term Disability benefits is typically used to pay disability benefits until Long Term Disability benefits kick in.]
The United States Census Bureau has indicated that you have a 1 in 5 chance of becoming disabled before retirement age. In 1997, the Census Bureau issued the results of a study showing that more than a 152,000,000 people between the ages of 21 and 64 (which is a prime working age for most Americans) have some form of disability. As such, this is a particularly area of concern – not only for employees – but also for self-employed men and women who should seriously consider having a long term disability policy.
Q. How do I go about filing a disability claim?
A. If your policy is part of a group plan, you should contact your human resources manager to obtain a copy of your summary plan description and a disability claim application.
If you purchased an individual disability policy, you should contact your broker or insurance agent for an application.
Under either scenario, you can always obtain the necessary paperwork directly from the insurance company.
You will find that the application is very long and has numerous forms that must be filled out. The instructions can often be confusing to someone who is going through this process for the first time. Keep in mind that one wrong answer could mean that your claim will be denied. You should seriously consider seeking assistance from an experienced attorney in applying for your disability benefits.
Q. My insurance company seems to be engaging in delay tactics. They keep asking for the same information over and over, they say they are still processing my records, and they still have not made a decision on my claim. Now they tell me they still require additional information. Why are they doing this, and are they allowed to do this?
A. As for whether they are allowed to engage in delay tactics, the answer is yes. ERISA rules and regulations allow for insurance companies to invoke automatic extensions of time in which to make a decision. All the insurance company has to say is that they don’t yet have all the information they need.
There are several answers to the first part of this question. First, insurance companies do not like to pay out on claims. It hurts their financial bottom line. The more premium money they keep, the better the insurance companies look to their investors. Second, it is a tactic to “starve you out”. They know you are without the disability insurance income, and they know some claimants return to work – any kind of work – to pay the bills. They also know that many workers who become disabled are too sick and tired to put up a fight, and that many claimants will simply give up. Don’t give up. Don’t give them the satisfaction.
Q. Why is it so important to determine whether my LTD coverage is under an individual or group policy?
A. The remedies available to an insured under an individual disability policy are vastly different than those under a group policy. If the insurance coverage is under a group policy provided by the insured’s employer, the policy is likely governed by ERISA. If the policy is governed by ERISA, then certain state laws that offer consumers protection and remedies for relief are “preempted” by ERISA regulations. In short, if the LTD plan is governed by ERISA, the disability insurance company has no exposure to bad faith damages, and thus has no real incentive to pay the claim.
Q: What is ERISA and what does it have to do with my LTD claim?
A: ERISA stands for the Employee Retirement Income Security Act of 1974. It is a set of federal regulations that applies to insurance policies obtained through your employer, union, or employee organization.
Congress originally passed ERISA to protect large pension funds (hence the “Retirement Income” part of the name). As you may recall, several decades ago there was very little protection to employees’ pension funds if the employer went bankrupt or if the employer decided to raid the pension funds. Thus, Congress enacted ERISA to protect employees’ retirement pensions. Unfortunately, the insurance companies have used their power and influence to broadly expand the reach of ERISA to other “fringe benefits” and employee benefits. In 1986, the U.S. Supreme Court decided that ERISA governs employer provided insurance benefits in addition to employer provided pension plans. Now ERISA applies to most all employee benefits, including health, life and disability insurance – and not just pensions.
ERISA “preempts”, or supersedes, state laws that govern employee benefit plans.
If you have a disability claim that is subject to ERISA regulations, you must be sure to take all appropriate actions to timely appeal the denial of your benefits.
ERISA requires that you “exhaust” all “administrative remedies” before you can file a lawsuit. This means you may have to file several appeals directly with the insurance company before you can take your case to court. In most instances, you must file your appeal within 180 days from the date on your denial letter. However, you should read the last few pages of your denial letter from the insurance company. The insurance company typically tells you: (1) the time limit to file your appeal and (2) the address where you should send the appeal.
You do not necessarily require an attorney to appeal your denial of benefits, but it may be to your benefit to retain the assistance of an attorney to help you in your claim with the insurance company.
Q. Is my claim governed by ERISA?
A. If you are covered by a Group Long Term Disability Policy through your employment, your claim is probably governed by ERISA. As stated throughout the remainder of this website, if you did not obtain disability coverage through your employer or employee group, and instead purchased it as an individual policy from an insurance agent or broker, then there is a good possibility that your disability claim will not be covered by ERISA and your legal options and remedies are more favorable.
Moreover, church and governmental (including most City and University) employees are also exempt from ERISA.
If you have church policy, a governmental employee policy, or an individual disability policy purchased directly from an agent or broker then you may not have to appeal the denial before filing a lawsuit. In these instances, you should consult an attorney immediately. You can reach The Ortiz Law Firm at 850-308-7833.
Q. What is ERISA pre-emption?
A. Courts have determined that all State laws affording remedies to insurance claimants (insureds) for the improper denial of employer-provided insurance benefits do not extend beyond the limited remedies afforded by ERISA. State laws, including “common law” and state statutes, are “pre-empted” by ERISA. For example, any right under Florida law to recover “extra-contractual” damages for the bad faith breach of an insurance contract is pre-empted and not available under ERISA regulations.
Q: I filed my individual disability insurance claim and it has been denied. What do I do now?
A: It depends on the language of your disability policy. For that reason alone, you should seek legal advice from an experienced disability insurance attorney. You don’t want to make the mistake of appealing the claim on your own when it may not even be necessary. Some policies require an appeal before litigation and others do not. It is easy for individual policyholders who are not trained to read insurance policies to misread or misunderstand the disability policy. For these reasons, you should seriously consider contacting an experienced attorney before you make a terrible claim or appeal mistake.
Q: How do I appeal a denial benefits on my own?
A: If you insist on appealing on you own without legal representation, you should follow the steps below:
- Reading the entire denial letter carefully from start to finish. Read it again a couple more times. The insurance company is legally obligated to advise you of the specific reasons it is denying your claim. The carrier must reference the specific policy provision on which the denial is based; describe what additional material or information, if any, is necessary to further evaluate and support your claim; and explain what specific steps you must take to appeal.
- Next, you should request your free copy of your claim file from the insurance company. Submit your request in writing immediately after the denial order to allow you sufficient time to review its contents before writing your appeal. This claim file sould include a copy of your entire disability policy.
- You must submit your appeal to the insurance company before the specified deadline. You should do so in writing, not by telephone, preferably by certified mail with delivery confirmation. It is critical that you do not miss your deadline. The time to appeal starts immediately after the insurance company denies your claim.
- Your appeal letter should clearly state that you are appealing the denial of your disability claim. You should specifically state the basis for your appeal and list the additional evidence you are submitting in support of the claim.
- If you received assistance in filing the appeal, be sure to mention this fact in your letter because insurance companies have been known to point to a well-written appeal letter by the claimant as support for upholding their previous denial. If preparing the appeal letter and putting together the enclosures took you a significant amount of time, be sure to mention that fact as well.
- Finally, do not assume that the insurance company obtained all of the medical records and other evidence relevant to your case. Carefully review the list of evidence the insurance company considered in rendering its decision and submit (or resubmit) anything that will help prove your disability. “Packing the record” with such evidence is critical. Don’t forget – in most cases, you cannot submit any additional evidence during the lawsuit, no matter how relevant it is to your case. The only thing the court will review is the information that was in the claim file at the time the insurance company made its decision. The appeals process is the perfect opportunity to add as much information as possible to the claim file. Such evidence may be critical to a lawsuit later down the line. For such reasons, I generally recommend that you do not handle your own appeal on your own. Remember- ERISA laws are unfair and difficult for non-attorneys to comprehend. For assistance with your appeal, call 850-308-7833 as soon as possible.
Q: Do I have a limited amount of time to appeal the denial of my disability benefits?
A: Yes. A disability insurance claim is not like an automobile accident claim, where you may have years after the incident to file a lawsuit. Under ERISA rules and regulations, you only have 180 days from the date on the insurance company’s denial letter to file your appeal. It is critical that you give notice of your appeal before this deadline.
Note: Some long term disability policies provide for a second level appeal, and the deadline is often shorter than 180 days.
Q: Oops. I missed the 180-day appeal deadline. What do I do now?
A: You should not assume all is lost. You should immediately seek legal advice from an attorney like Mr. Ortiz who is experienced in handling ERISA disability cases to determine whether the typical 180 day deadlines apply to your claim. We can be reached at 850-308-7833.
Q: Can I file a lawsuit against the insurance company without first filing an appeal?
A: The answer to this question depends on the type of disability insurance contract that you have.
Most employees have disability insurance coverage through a group plan with a private sector employer. If your employer is large enough, or if you obtained your policy through an employee organization or union, then ERISA rules and regulations come into play. According to ERISA, you must “exhaust” your administrative remedies before you can file a lawsuit. This means you must follow the terms of the insurance policy and go through each step of the appeals process directly with the insurance company. If the insurance policy states that you must file one appeal, then you may only need to file one mandatory appeal. If the insurance policy requires you to file two appeals, then you must go through two appeals before filing a lawsuit. Other insurance policies have one mandatory appeal and one “optional” appeal.
There may be other situations where you do not have to file an appeal at all before filing a lawsuit. Generally, you do not need to appeal if you have an individual policy purchased directly from an insurance agent or broker, or if your policy is sponsored by a government or church employer directly (in other words, if the policy is not through a union or employee organization). In such situations you may be entitled to file a lawsuit after your first denial.
You may have questions as to whether you are required to file an appeal, or whether you should participate in the “optional” appeal process. If you have such questions, you should immediately seek legal advice from an attorney familiar with ERISA disability cases. Please call at (850) 308-7833.
Q: How long do I have to file a lawsuit after the insurance company has advised me that I have “exhausted” my administrative appeals?
A: If there is no mention of a specific time limit to file a legal action (lawsuit) in your LTD policy, then the time limit is the same a breach of contract claim in your state. However, most LTD policies have a specific deadline to file a legal action. This specific language is usually towards the back of an LTD policy. Typical policy deadlines range from 1 to 3 years, but United Parcel Service’s LTD policy deadline is 6 months.
BACK TO TOP
Q: Do I have to file an appeal in every case?
A: As stated in response to the previous question, it all depends on how you obtained the policy. If the policy is through a private employer, employee organization or union, then you may be required to go through the appeal process before going to court. If you have an individual policy, or a policy provided by a government employer or church employer, then you may not be required to file any appeals before resorting to litigation. Because these rules can be very complicated, you should obtain a free consultation from an experienced disability attorney to explain to you your rights. Feel free to call us at (850) 308-7833.
Q: Why is it so important that I appeal?
A: The Employee Retirement Income Security Act of 1974 (“ERISA”) requires you to exhaust your administrative remedies before you can file a lawsuit. The internal appeal process allows the insurance company an opportunity to correct its mistakes and avoid a lawsuit. If you do not give the insurance company the chance to right its own wrongs first, most courts will not allow your lawsuit to proceed.
The internal appeals process is also a very important opportunity for you, the disabled claimant. It gives you a chance to load your claim file with information supporting your disability claim and to correct any misconceptions. It is imperative that you submit everything that may possibly help prove your disability and your credibility. (See “How do I appeal my own denial of disability benefits?” below.)
Q: Why should I bother appealing with the same insurance company that has already denied my claim?
A: Because you are required to exhaust all mandatory internal appeals before filing a lawsuit against the insurance company. If you file a lawsuit without “exhausting” the internal appeals process, your claim will be dismissed. By the time your claim is dismissed in court, your internal appeal deadline with the insurance company might have already expired.
Q: How long does the insurance company have to make a decision on my appeal?
A: The insurance company has 45 days from the date of your appeal to make its decision. This can be extended by an additional 45 days if the insurance company makes requests an extension in writing within the first 45 days.
Q: Should I file a complaint with my State’s Department of Insurance?
A: If your claim is governed by federal ERISA regulations, then your state’s insurance laws are “pre-empted”, which means your State’s Department of Insurance has no jurisdiction. Many insurance companies do include stock language in their denial letters advising the denied claimant that he or she can file a Complaint with his or her State’s Department of Insurance. This is in fact true. However, doing so is generally a waste of time. You will simply receive a response a few months later from the Department of Insurance saying that they lack jurisdiction in the matter. You will be no better off and your appeal deadline will be that much closer, if not already expired.
Hiring an Attorney
Q: Do I need a lawyer in my LTD claim?
A: ERISA is a framework of complex federal laws, regulations and case law that apply to group disability claims. Most attorneys, including those who handle Social Security disability claims, do not have the knowledge or experience to properly handle an ERISA-governed LTD appeal or federal lawsuit. A general practice attorney may miss administrative deadlines or fail to address critical issues in the appeal process. Unrepresented claimants risk making the same mistakes. So my recommendation is yes. You should consult with a lawyer in your LTD claim.
Q: When should I hire a lawyer?
A: The most critical stage in an LTD claim for disability insurance benefits is the appeal stage. Once the internal “administrative” appeals directly with the insurance company have been exhausted and a lawsuit has been filed, no new evidence can be introduced to the court. You do not testify. Your doctors do not testify. You cannot introduce any new written statements to the court after your appeals are completed. There are no trials, hearing or depositions. The Court simply reviews the administrative claim file, and does so with legal obligation to defer to the insurance company’s decision. It is essential that an experienced LTD attorney review the claim file at the appeal stage in order to determine what additional medical and / or vocational proof needs to be added to the administrative file, and to determine what adverse information needs to be rebutted.
Q: Why hire the Ortiz Law Firm?
A: The Ortiz Law Firm is dedicated to compassionate client service and outstanding results. Mr. Ortiz has a decade of experience in representing disability claimants in seeking benefits. The Ortiz Law Firm is not a “mill” firm that will represent just anyone that calls. The Ortiz Law Firm accepts approximately one in ten applicants that requests legal assistance.
Mr. Ortiz has the support of a paralegal and an office manager, working together to deliver the highest level of legal representation.
If you have questions that are not covered in this section of LTD “Frequently Asked Questions”, call us at 850-308-7833.
Q: When is an insurance company considered to have committed a “bad faith” denial of a disability claim?
A: According to Black’s Law Dictionary, the definition of bad faith is: “The opposite of ‘good faith,’ generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive.” In contract law there is the concept of “the covenant of good faith and fair dealing”, which means the insurance company has certain duties in carrying out is obligations according to the insurance policy contract. The following are examples of an insurance company’s bad faith after a policyholder files a claim for disability:
- the insurer is fails to conduct a reasonable and full investigation into the claim;
- the insurance company acts unreasonably in evaluating the claim;
- the insurer unfairly delays the processing of your claim;
- the insurance company wrongfully denies the claim;
- the insurance company unreasonably delays payment of benefits or pays less than the full value of benefits owed under the policy.
If your long term disability claim is governed by ERISA, then you cannot sue for bad faith or punitive damages. This is because ERISA is federal law that pre-empts state law claims such as bad faith and punitive damages. You can only sue for the benefits due.
In ERISA disability litigation, the terminology used is a little different than “bad faith”. Federal courts will review the insurance company’s decision to determine whether the denial was “arbitrary and capricious”.
Without legal guidance from an attorney, claimants may unknowingly hurt their ability to prove the insurance company’s bad faith. For example, the claimant may allow the insurance company multiple opportunities to deny the claim by filing multiple appeals when multiple appeals were not required before making the carrier accountable in a lawsuit. As stated above, whether to appeal is a decision that you should make only after consulting with an experienced disability attorney.
Q: I already have a good health insurance policy. Do I need really need disability insurance?
A: Your health insurance pays for your medical bills, but what about your other monthly expenses in the event that you are unable to work due to a disability? Disability insurance is meant to be a wage replacement in such cases where you cannot work due to a disability. An individual disability policy will typically pay you sixty percent (60%) to seventy percent (70%) of your monthly earnings leading up the the onset of your disability. You can purchase coverage that will cover you so long as you cannot perform the substantial duties of your own individual job, and you can buy coverage that will cover you for two (2) years, five (5) years, or until retirement age (typically age 65).
So the answer is yes. You should buy as much coverage as you can.
Q. What is the difference between individual disability policies and group disability policies?
A. The major difference between individual and group policies is that individual policies are underwritten with respect to the individual purchasing insurance coverage, while group policies are not individually underwritten. Instead, group policies are issued by disability insurance companies based on certain underwriting assumptions related to the general health of a group of people. Individual policies are typically bought and paid for by the insured, separate and apart from an employer. Group coverage, on the other hand, is usually offered by an employer or union, and the premiums are paid (in whole or in part) by the employer. There may be circumstances where an employer will purchase and pay the premiums for an individual policy on behalf of an employee. Conversely, an individual may personally obtain group LTD coverage unrelated to his or her employment by joining a group which has group coverage available for its members.
Q: My employer offers me LTD coverage as a fringe benefit cheaper than I can buy it on my own. Is the group coverage the same as if I bought my own individual disability policy?
A: No. They are not the same. It is almost always better to have an individual policy over a group policy. First of all, the monthly benefits are tax free if you pay the insurance premiums yourself. If the premiums are paid by a business employer, you may have to pay tax on the benefits. Moreover, if the insurance company does not pay a claim, your legal rights are very different with an individual policy than with a group policy. In short, your legal rights are much more favorable with an individual policy than with a group policy. For these reasons, you should purchase an individual policy over a group policy.