6 COMMON SITUATIONS WHERE GROUP OR INDIVIDUAL DISABILITY INSURANCE COVERAGE IS DENIED
Denials of insurance benefits can take many forms.
The following is a list of some of the most common reasons for insurance companies to deny long term disability benefits:
1. NO PROOF OF DISABILITY
This occurs when a claim for benefits is made and the insurer rejects the claim at the outset on the basis that the insurer does not find the evidence of disability persuasive. THIS DOES NOT MEAN THAT YOU ARE NOT VALIDLY DISABLED.
A denial of benefits on first application may mean that the insurer requires further and more specific information. A diagnosis does not, in and of itself, guarantee benefits. If you have been denied benefits at the outset of your application, the onus is on you to provide further personal and medical information. That information should be as specific as possible and detail the physical or cognitive restrictions that prevent you from performing the daily duties of your occupation.
2. CHANGES IN MEDICAL OR FUNCTIONAL STATUS
If a claim is accepted and then a change in medical status occurs, this may result in a review of your circumstances by the insurer and lead to a denial.
The change in medical status may be as a result of surgery, a treatment program, a change in diagnosis, the conclusion of a rehabilitation or educational program, an “in-home” assessment, video surveillance, or an independent medical examination paid for by the insurer, such as an FCE (Functional Capacity Evaluation) or TSA (Transferable Skills Analysis). This type of denial is generally in writing and will identify those facts or opinions on which the insurer relies to assert that your status has changed and that you no longer meet the definition of disability in the policy.
A change of medical status denial is often extremely difficult to appeal and it may involve significant expenditure, particularly if you disagree with what the insurance company’s paid medical professionals are saying about you. The obligation to pay for medical opinion, records or investigations rests with you. An experienced legal counsel with the appropriate resources can “level the playing field” and ensure that the insurance company’s medical opinions and investigations are tested against both legal and medical standards.
3. DENIAL OF SHORT TERM DISABILITY BENEFITS
Particularly in the case of larger organizations, there may be different types of coverage for “short term” or time-limited wage replacement coverage and “long term coverage”, which generally extends to age 65. Short term coverage is generally limited to three months to one year.
Short term and long term coverages are normally “coordinated”. In many contracts this means a claimant must exhaust short term benefits before being eligible for long term benefits. In other words, if your short term benefits claim is denied, you are precluded from applying for long term benefits.
If your short term benefits have been discontinued or explicitly denied and you believe you continue to be disabled from working, you should immediately contact your HR department and the insurance company and advise them in writing that you wish to apply for long term disability benefits. If your requests are denied or significantly delayed, experienced legal counsel can advise you about what you need to do to access the long term benefits for which you have paid either directly through premiums deducted from your paycheque, or indirectly through your employment. If you have been told that you cannot apply for long term disability benefits because of a denial of short term benefits, remember that contractual time limits may still apply.
The sooner you find out about your legal options, the better position you will be in to see these options work in your favour.
4. CHANGE OF DEFINITION
Virtually all group policies of wage replacement coverage and most individually purchased policies contain two distinct definitions of what the insurer considers as “total disability”.
The first definition is known as “own occupation” coverage and generally is limited to 24 months of benefits (sometimes only one year). During this time frame benefits are payable if your medical condition prevents you from performing the essential duties of your “own” occupation; that is, your job description at the time disability arose. Some contracts contain a more onerous or higher threshold description of a disability than others, requiring the claimant to be disabled from each and every duty of his or her own occupation or a stated percentage of the duties of employment, usually in the range of 60-70%.
After the own occupation coverage, the policy definition changes significantly and provides the insurer with a far broader rationale to deny benefits.
5. DENIAL BY OPERATION OF AN EXCLUSION CLAUSE
Contracts of insurance coverage are famous (some would say infamous) for what is commonly known as the “small print”. These are the often hard to read, densely worded sections of coverage that contractually permit an insurer to deny a claim for a diverse number of reasons or preconditions of coverage. In the case of group and individual disability contracts these exclusion clauses usually fall within one of the following categories:
- Pre-existing Condition
A denial because of a pre-existing condition is based on the occurrence of symptoms and/or medical treatment which occur during a specified time frame  before or after the “effective date of coverage” for a contract of insurance. The effective date of coverage is generally the first of the month on which you or your employer begin paying premiums.
 The time frame can be as long as five years or more prior to coverage, but in the case of wage replacement coverage, is usually in the range of 90 days. A similar time frame usually applies after the effective date of coverage
6. DENIAL FOR FAILURE TO BE UNDER THE REGULAR AND APPROPRIATE CARE OF A PHYSICIAN
Most disability policies contain a provision requiring you to be under the “regular” (or “continuous”) and “appropriate” care of a physician. A denial based on your failure to comply with this requirement can be frustrating given that these terms are often ill-defined, confusing and open to interpretation depending on where this term actually appears in your contract.
If this term appears as part of the definition of what it means to be totally disabled under your contract, then this can have potentially unexpected results. For example, if you are unable to work because of a psychiatric illness that has not responded to treatment and you, logically, are no longer in treatment, your insurer, while agreeing that you are incapable of work, can decide to stop paying your benefit due to your failure to be under the regular and appropriate care of a physician. This means that even if you follow your doctor’s advice and stop attending ineffective treatment, your insurer may stop paying your benefits and point out that under the wording of your contract, you are not “disabled” because you are not under the regular and appropriate care of a physician. This can be particularly difficult and unfair to people who are disabled due to drug or alcohol dependency as denial and relapse are hallmarks of these illnesses.