Gainful Occupation.

Some policies add another requirement for the insured to qualify for total disability. That is that the insured must not be involved in any "gainful occupation." Although "gainful" is not defined anywhere in the policy, the insurer uses this prong to kick the insured out of the "total disability" prong and into what it calls the "residual disability" portion of the policy. Here, the insurer will argue that if the insured can do one or more of "the important duties" of his occupation, he is partially, not totally disabled and any benefits paid will be pursuant to a complex formula predicated on the insured's pre and post disability earnings. What the insurer will not tell you is that, in fact, nothing in the policy prevents an insured who is totally disabled from his "own" occupation from collecting his benefits under the residual portion for a month he may be working, and under the "total" section when he is not. In other words, the insured can go back and forth!

Even where the total disability definition does not contain a "gainful occupation" prong, beware of any policy with a residual clause. Despite the fact that this benefit was sold as an "extra" benefit for which the insured usually paid an additional premium, insurer's are now claiming that the only way an insured can be totally disabled under a policy with residual provisions, is to be unable to do all of the substantial and material duties of his occupation.

Take, for example, the case of an orthopedic surgeon. Back in the 80's he bought a policy to insure himself if he became disabled as an orthopedic surgeon. He received a "speciality" letter confirming his expectation of coverage which even told him that if he was disabled as an orthopedic surgeon he could work in another field of medicine and still qualify for benefits. Now, due to severe diabetes and its complications, he is totally disabled as a surgeon. His hands and feet are numb, he has had over 100 laser treatments to his eyes and he has fifty percent kidney function. Nevertheless, based on the residual benefits clause, the insurance company is claiming that he is partially, not totally, disabled because he can still do some of the incidental work he could do before.

In other words, the supposedly extra benefit is being used to apply a far more stringent definition of total disability than is condoned by California law. See, Erreca, Moore and Austero, supra. Be prepared to strenuously litigate this issue.