Disability Insurance Claim Advice
"Dual Occupations" (Individual disability policies often provide both a total and a partial (residual or proportionate) definition of disability...)
Health Insurnce Underwriter (N.A.H.U.), April 2005
By Art Fries
Individual disability policies often provide both a total and a partial (residual or proportionate) definition of disability. As a result, things can get tricky at claim time. For instance, telling your OB/GYN physician client that he will be considered totally disabled if he can no longer perform surgery or deliver babies, but that he can still work in his office, might not fly as being defined as a total disability if such a scenario developed later.
For Example, the insurance company may interpret the above claim as one in which the insured is merely partially disabled because the insured continues to perform duties in the office and earn money. This is a very complicated area and court decisions have varied by state and local jurisdictions. Variation in policy language as to what constitutes total disability - or what constitutes “substantial and material” – can also affect decisions. A “specialty letter” that explicitly recognizes an insured’s occupation as a narrow specialty (such as an invasive cardiologist), WHEN the policy was purchased – and how the policy was marketed by the broker/agent/insurance company or how the claim was submitted from a paperwork standpoint – can also have an influence on how the insurance company interprets the claim.
One example of the “dual occupation” dilemma would be the case of an orthopedic surgeon whose duties include surgery, emergency surgery, “on calls” and an office practice seeing patients related to orthopedics, but not surgery. Let’s say that, because of past heart attacks, he reduces his hours and stops performing surgery and taking emergency calls. His reduced work schedule consists solely of clinical and non-surgery orthopedics. Should the insurance company consider this a total or a partial disability claim?
The answer is that it could go either way, although there is a good deal of case law that might substantiate total disability. The insurance company will take into consideration how much surgery and on calls the orthopedic surgeon performed prior to the disability (by obtaining medical billing code numbers, etc.) and look at the pre-disability earnings compared to the post-disability earnings in various areas.
To further complicate matters, let’s assume this claimant taught once a week at a local university for a full day and was paid a salary for this efforts. Could this change the way the definition of disability was considered and determined? How old the claimant is and whether the benefit is paid to age 65 or life can also influence the decision.
In the above example, if the orthopedic surgeon was age 58 with a lifetime benefit (if disabled prior to age 60), the insurance company may very well want to “push” the insured into a partial claim in order to only pay benefits to age 65 rather than for life (which could be for another 15-20 years or more).
Those who sell disability insurance must use caution in explaining how they “think” a claim will be paid, and qualify any answer indicating that the decision will ultimately be made by the insurance company, NOT by them.
Art Fries is a longtime NAHU member, as successful DI producer and a professional disability claims consultant. Now living in Newport Beach, CA. He can be reached at 800-567-1911 or visit www.artfries.com.