Disability insurance is typically available as an employee benefit under a group plan. However, there are individuals who purchased an individual disability insurance plan on their own. Your legal rights in a long term disability (LTD) claim are different in an individual disability insurance claim than they would be in a group disability insurance claim.
Individual Disability Insurance
As the name suggests, individual disability insurance is sold directly to the individual; it is not provided as group insurance through one’s employment. Individual Disability Insurance is an insurance policy that you purchase outside of your employer directly from an insurance agent or broker. Again, this is completely different coverage than one may receive as a group benefit from an employer (even if you pay for all of the premium through the employer).
Individual Disability Insurance (“IDI”) policies are issued insurance companies that specialize in disability claims, such as Paul Revere, MassMutual, CIGNA, Lincoln Financial or MetLife.
Types of Individual Disability Insurance
The types of individual disability insurance may include:
- disability income insurance, which provides a monthly income benefit in the event of the policyholder’s inability to work, and the work is typically defined under the policy as the claimant’s “own occupation”;
- business overhead insurance, which provides reimbursement for the policyholder’s ongoing business expenses in the event the policyholder suffers a disability; and
- credit disability insurance, in which the insurance company agrees to make the policyholder’s mortgage or car payments in the event of a disability.
Benefits of an IDI Policy Compared to a Group Policy
Many people prefer to purchase group coverage because Individual Disability Insurance policies are much more expensive to buy than the Group LTD policies that employers may offer. However, the coverage provided by individual policies tends to be much better than the coverage under group policies, and the protections afforded if the insurance company denies an application are much better with Individual Disability plans than with Group LTD plans.
If you file for long-term disability benefits under an individual disability policy, the claim and internal administrative appeal process are similar to the claim and review process for a group policy. However, IDI policies are still advantageous to group policies for many reasons. One of the most important advantages is the way in which the term “Total Disability” or “Totally Disabled” is defined.
Most individual disability policies pay benefits in the event the insured is unable to perform his or her “own occupation” for the entire life of the contract.
Other advantages include the following:
- IDI policies usually do not have offsets for “other income”, such as income from Social Security Disability benefits (offset clauses reduce the monthly cash benefit amount an LTD insurer owes when the insured receives income from other specified sources);
- IDI policies are governed by state contract law, whereas most Group LTD policies are governed by federal ERISA regulations;
- IDI policies provide “own occupation” coverage throughout the entire benefit period, whereas most group policies only provide “own occupation” coverage for the first two years of the benefit period;
- Most IDI policies do not distinguish between physical disabilities and mental disabilities, whereas most group plans only provide two years of LTD coverage for most mental health claims;
- Many IDI contracts are non-cancellable and guaranteed renewable, which means that the insurance company may not prevent the insured from renewing the contract at the end of the term even if the insured develops a non-disabling medical condition that the insurance company believes may someday become disabling. And,
- In general, IDI policies tend to have far fewer limitations on benefits than Group LTD policies.
Most Important Difference from Group Plans: State v Federal Law
When an insurance company denies or terminates an Individual Disability Insurance claim, the insurer is subject to state law, and can be sued for breach of contract and bad faith. (See the next section for additional information on “bad faith”.). The playing field is also more fair to the disabled worker under state law because the claimant has a right to testify and present evidence to have a jury decide whether he or she is disabled, as disability is defined in the disability insurance policy. In particularly egregious situations, the insurance company may be liable for punitive damages and/or the attorney fees of the claimant. Group disability claims are governed by ERISA, the federal law that governs all employer-supplied disability insurance. ERISA does not allow for many of the aforementioned advantages and remedies available under state law. In an ERISA claim, the claimant cannot bring a “bad faith” claim and the right to a jury trial is taken away. (See the next section for additional information on “bad faith”.). Moreover, the claimant cannot testify or introduce any new evidence at a bench trial before a federal judge. In an ERISA claim, the claimant is only able to collect the disability benefits owed and may try to recover damages to cover attorney’s fees, interests and court-related costs.
In short, the Federal laws that govern ERISA group claims are far more favorable to the insurance company.
Denied Individual Disability Claims and Bad Faith
Unfair or unreasonable denials of claims under individual disability policies subject the insurance company not only to liability for the amount of the unpaid benefits and interest, but also to bad faith damages. These damages may include consequential damages (damages caused to the policyholder as a consequence of the claim being denied), emotional distress, loss of economic opportunities, damage to credit, attorneys’ fees and punitive damages.
Bad faith conduct may consist of:
- Denying your claim or terminating your benefits on the purported ground that you are not disabled by refusing to give appropriate credit the opinion of your doctor, and/or basing the denial on the opinions of a doctor hired by the insurance company.
- Denying your claim or terminating your benefits, or threatening to do so, on the basis of surreptitious surveillance that evidences you doing activities unrelated to your work.
- “Burying” you in unnecessary and voluminous paperwork, and ultimately terminating your benefits (or threatening to do so) when you are unable to complete the paperwork to the insurer’s satisfaction.
- Retroactively cancelling your policy (or rescinding the policy) by claiming that you misrepresented facts about your health or employment history on your application for LTD insurance coverage.
Differences in Damages Between Group and Individual Claims
In an IDI claim, you are obviously entitled to make a claim for the benefits that have not been paid. You may also make a claim for attorneys’ fees and “bad faith” damages.
You may also be eligible to collect consequential and punitive damages in an individual policy claim. For example, these damages would compensate you for the loss of your home if your disability prevented you from working, your home was foreclosed upon, and your benefits were wrongfully denied.
Under ERISA, the only remedies available to you are (1) the ability to collect the past-due disability benefits you are owed and (2) money to cover attorney’s fees, interests and court-related costs.
Understanding Why Your Claim Was Denied
Claims are often denied as the result of incomplete paperwork. Even if there is paperwork, medical documentation that simply states you have a disabling condition may not be enough. The documentation should explain what disabilities you have and how they prevent you from working. Failure to provide adequate medical documentation that meets the insurance company’s needs is a common reason for denial.
If you are like most disability insurance claimants, you may have been unpleasantly surprised by the claim denial. You paid the premiums for your policy as agreed. Thus you expected to receive your benefits as agreed. Unfortunately, with more than a decade of experience in handling disability claims, Mr. Ortiz is never surprised by denied individual disability claims.
The reality is that insurance companies are big businesses. They got big by collecting more in premiums than they pay out in claims. The less they pay out to policyholders, the more they keep for themselves. Insurance companies are not looking for reasons to approve claims. They instead look for every opportunity to deny perfectly legitimate claims, coming up with new tactics on an almost daily basis. The fact that we spend every day handling claim denials across the country means that we can spot new tactics and immediately come up with ways of trying to overcoming them.
About the Ortiz Law Firm
At the Ortiz Law Firm we handle claims under private disability income insurance. If you have disability insurance with Unum, Prudential, Met Life, Cigna, Hartford, Aetna, Guardian, Massachusetts Mutual, Principal Life, Lincoln National, Reliance Standard, Life Insurance Company of North America, or any other disability insurance company, are disabled and entitled to benefits, and your benefits have been wrongfully denied or terminated, please contact us for a free consultation.
The Ortiz Law Firm can assist you in getting the compensation that you are entitled to receive under your individual disability insurance policy. We are primarily involved in the appeal process and in filing a lawsuit against the insurance company.
In non-ERISA litigation claims, we will work to help you receive all the disability benefits you are entitled to receive, which may include a lump-sum settlement, your past-due monthly payments from your insurance company, and any other additional compensation that may make you whole.
If your insurance company mishandled your non-ERISA long-term disability claim, or wrongfully denied or terminated it, the Ortiz Law Firm can help you seek additional damages through a bad faith insurance claim. Your individual disability insurance is supposed to provide you and your family monthly benefits if you are disabled. If you need legal assistance from an experienced disability attorney in enforcing your rights, Mr. Ortiz will work to help you receive the benefits and damages you need and deserve.
About Mr. Ortiz
Attorney Nick A. Ortiz has years of experience in handling Individual Disability Insurance claims, appeals and lawsuits. Mr. Ortiz represents individual disability insurance claimants in Pensacola and throughout the state of Florida. As stated above, if you purchased an individual disability insurance policy, your claim will be governed by Florida state law, and you have many more options than those filing for group plan benefits under ERISA. Mr. Ortiz is licensed to practice in all state and federal courts in the state of Florida, and he has experience in suing disability insurance companies to obtain the benefits his clients deserve. Mr. Ortiz will help guide you throughout the appeal process, from the application through the appeal stage, and will file a lawsuit in court, if necessary. Mr. Ortiz will work to have you put back on claim, where you receive your past-due benefits and ongoing monthly payments, or help you receive a lump-sum settlement from the insurance company.
Mr. Ortiz does offer free initial consultations to those whose benefits have been denied or terminated. Contact us by phone or online by using the form on our Contact page for a free case evaluation.