A few years ago someone close to me became disabled. She had purchased a long-term disability (LTD) policy with CNA insurance and felt fortunate to have the policy.
She was brought up with a strong work ethic, this, coupled with the fact that she immensely enjoyed her job, only increased the emotional pain of not working. Regardless of how much she wanted to return to work, the physical pain was too great to overcome. Eventually her injury required surgery which, unfortunately, only made matters worse.
For the first 3 months of her disability, she had short term disability insurance through her employer’s insurance. For the balance of the first year, CNA’s LTD policy co-paid with the State of California’s Disability Insurance (SDI) benefits. At the end of the year, when California’s State Disability Insurance was about to run out, she received a letter from CNA saying that they were denying her any future payments because they felt she should be better. It was odd that they said that because all 6 of her medical doctors said she was 100% disabled. Even odder still is that she was never examined by any represenative of CNA insurance.
She was not getting any better and, if anything, her situation was deteriorating under the stress of not knowing how she was going to be able to pay the rent and day-to-day bills. Fortunately, her car was paid for. Unfortunately, like so many others faced with medical expenses she was using credit cards to live and eventually was forced into bankruptcy.
Like so many disabled individuals who find it difficult to muster the energy to fight a deep pocket insurance company, she needed help in working through the insurance company’s labyrinth of mythical proportions.
I tried to find an attorney who would be able to help her. Phone call after phone call to attorneys who handle insurance claims were met with the same response after telling them of my friend’s denial by the LTD insurance company—laughter. After a half-dozen phone calls, I found an attorney who didn’t laugh after explaining to him about her situation. I asked him why no one seemed interested in a case that was obviously a miscarriage of her legal rights.
He explained that chances are her LTD policy fell under the Employee Retirement Income Security Act (ERISA) and there wasn’t much that could be done. The only chance she would ever have of collecting any money was if the claim did not fall under ERISA guidelines and could be heard in California State Court. Even then, he was not in the position of mounting that kind of lawsuit against a deep pocket insurance company.
That happened several years ago. I was finally able to locate a law firm familiar with ERISA and after reviewing her case was willing to take on CNA. At first, after wading through the contracts, it seemed clear that her claim against CNA insurance actually did not fall under ERISA guidelines and that the case could and should be heard in a California state court. Unfortunately, the plaintiff’s lawyer’s were out maneuvered by CNA’s attorneys. Apparently, somewhere along the line, CNA provided new material that made references to ERISA. Though not the orignial contract which she possessed (which indicated that she, not the company, had purchased the LTD insurance from CNA) , the new material made references to ERISA.
This new material, and a case elevated to the 9th Circuit Court that was ‘similar’ to my friend’s and which had just been denied the right to litigate in State Court, meant to her attornies, that the chances of recovery were slim to none. The law firm had forewarned her that they would not be able to handle the case if it was deemed to fall within ERISA’s guidelines because it would then fall under Federal Court which made no provisions for attorney’s fees.
Fortunately, after being turned down the first time (common practice) and obtaining a social security attorney, SSDI approved her claim for 100% disability. After filing for bankruptcy, and moving to a lower income area she was then able to keep from having to live in her car.
As Ray Bourhis says in his book, Insult to Injury, the last thing you want to think about is your long-term disability insurance. That is until you are permanently disabled, then it is the only thing you can think about.
The book tells the story of Dr. Joan Hangarter’s legal nightmare dealing with UnumProvident. Unlike my friend’s LTD, her policy was not subject to ERISA guidelines.
UnumProvident initially paid on Dr. Hangarter’s LTD claim, but after 2 years sent her a denial letter informing her that in the insurance company’s eyes she was better and was able to return to work. It didn’t matter that Dr. Hangarter was forced to sell her chiropractic office, that she would have to lose her car and be forced into bankruptcy. It didn’t matter that she no longer could perform the one thing that she loved 2nd only to her children–that is ability to help people heal as a chiropractor.
Penniless, on welfare, and with little hope, Dr. Hangarter sought out legal help. She was fortunate to find Ray Bourhis and partners. Through Bourhis’ often sardonic wit he provides a real life example of how a non-ERISA LTD insurance claim is denied and why the insurance company is seldom forced to pay. Those who have policies that fall under ERISA have little hope of ever seeing a dime of benefits from their policy once it has been denied. It will not matter if they are parapalegic, suffering from Parkinson’s disease, even unable to walk across the room without assistance.
The reason you do not often hear about the problems with LTD claims being denied is that the insurance companies know that someone disabled, penniless and on welfare, is rarely going to pose a problem either legally or through bad press. Those that do make noise are sometimes offered a settlement. The policy might be worth over $500,000 over time, but the claimant is offered $50,000 and told to sign the agreement and not to discuss their settlement with anyone. They are told if they do not accept the $50,000 they risk getting nothing because, even if they do prevail in court, it will be appealed and they promise it will be a long time before they will see any money.
For those few lucky souls who do take their LTD insurance company to court on a bad-faith claim and prevail, they are often told to sign a non-disclosure form or the insurance company will appeal the case. Most people sign—and that is why you do not hear about these cases.
The insurance companies refute much of what is documented in Bourhis’ book. The claim they make most often is that they pay out billions in disability claims. For the most part they do, but those payouts are mainly for short-term disability; like broken arms and legs. What they refuse to share publicly is the percentage of long-term disability claims that they deny. Although it cannot be documented, it appears that if your income is around $50,000 or above you are likely to be targeted for denial of a LTD claim. It is estimated that denying just 10% of those claims amounts to billions over a decade.
If you have a LTD policy you really need to read this book. If you have recently become disabled and are counting on a LTD policy you would be a fool not to read this book immediately.