So You Thought You Had Disability Insurance

By: Ray Bourhis & Alice J. Wolfson,
Bourhis & Wolfson*
San Francisco, CA

Millions of disability insurance policies were sold to psychiatrists, surgeons, and other medical professionals during the 1980s and 1990s. At that time, interest rates were high, and insurance companies were guaranteed high returns on the billions of premium dollars these contracts generated. Now that interest rates have plummeted, some insurers are looking for what one company's former medical director characterized as "any pretext or excuse for denying a claim or cutting someone off." Disabled insureds and their patients need to learn what to expect and how to protect themselves against such practices.

Definition of "Total Disability"

Most "own-occupation" policies define total disability as the inability to perform the material and substantial duties of the insured's regular occupation at the time disability began. In most states, this definition is met when an insured becomes unable to perform his or her material and substantial duties "in the usual and customary fashion and with reasonable continuity." An insured's ability to perform some of her prior occupational tasks does not necessarily disqualify her from receiving total disability benefits.

Insurance Company Tactics

Definition of "Occupation"

Insurers may try to redefine a claimant's occupation to deny coverage. A favorite insurer tactic is to assert that an insured had more than one occupation and that while disabled from one, he can still perform the material and substantial duties of another.

In one case, Berkshire Life claimed that a professional musician who referred occasional overflow work to colleagues was not a musician but a musician/booking agent. Therefore, reasoned Berkshire, its insured - although disabled from playing her instrument - was not disabled from her occupation because she could still work as a booking agent.

In another case, Paul Revere denied total disability benefits to a court reporter with permanent injuries to her hands and wrists. Although the insured could no longer take transcription in Court, the insurer reasoned that she was not totally disabled as a court reporter because she could still perform one of her prior duties, namely proofreading or "scoping." Similarly, UnumProvident has argued that a chiropractor who could no longer perform the forceful manipulations her job required was not totally disabled because she could still do the bookkeeping for her practice.

Contesting The Treating Doctors

Another common insurer tactic is to contest treating physicians' opinions. Insurers will send an insured's medical records to one of their in-house consultants or to an outside "independent" medical examiner. These doctors will often create reasons for disagreeing with the treating doctors. They will contest the medical findings, characterize the diagnosis as based on subjective considerations, or otherwise disagree with the conclusions of those treating the claimant. The claim is then denied or terminated and the file closed.

Functional Capacity Issues

Another tactic is to send the insured to a functional capacity evaluation, a procedure where the claimant is observed performing tasks claimed to mimic the duties required in the insured's own occupation. If the claimant can either perform the tasks for an hour or two, or is viewed by the examiner as intentionally under-performing them, the company then uses the results to cut off the claimant's benefits.

These are just some of the tactics one can expect once one files a disability claim. Others include asserting that there was a "material omission or misrepresentation" made by the insured on the application; claiming that a word or phrase in the policy means something other than what it says; sending private investigators to interview former spouses; and videotaping the insured.

There are currently thousands of cases pending against Berkshire Life, Paul Revere, UnumProvident, and other disability insurers. These cases - typically filed by court reporters, medical doctors, and other professionals - usually charge that a company is engaging in fraudulent, unfair, deceptive, and bad faith practices in order to boost its bottom line. Confidential industry documents and deposition testimony strongly support these allegations. Nevertheless, the bad conduct continues. Immunity from prosecution under certain federal laws (such as ERISA), lax enforcement by insurance regulators, indemnity agreements between corporate CEOs and their companies, and the absence of significant financial disincentives operate to encourage rather than to deter such conduct.

The bottom line is that if you, or a patient, have an own-occupation disability claim, you need to be careful and prepared to protect yourself. If you have additional questions you can go to www.bourhis-wolfson.com or www.InsuranceConsumers.com for assistance, or call 1-800-264-2082.

*Bourhis & Wolfson is a national law firm specializing in disability bad faith insurance matters. Our office has obtained federal court injunctions, unanimous jury verdicts, punitive damage awards, seven figure settlements, and appellate decisions. In additional, our work has been featured on 60 Minutes, Dateline, the Wall Street Journal, and hundreds of newspapers across the Country.