Disability Insurance Claim Advice
Trial Stress Syndrome
Experts at Law, March-April 1990
By Art Fries
I first met John, an active trial attorney approximately six years ago at his office in Los Angeles. John was considered a heavy-duty trial attorney handling complicated major litigation cases. Although only 37 years of age, he was considered quite successful from a financial standpoint and enjoyed a marvelous reputation among his peers. He was known in the trade as a "back to-back" trial attorney.
John was experiencing intermittent moods of depression and anxiety. This "mood swing" seemed to be under relative control due, in part, to occasional medication prescribed by a psychiatrist. In prior years, John would have been considered a "flat out decline." It wasn't very long ago that anybody who was seeing a psychiatrist or psychologist was considered uninsurable from a disability income standpoint. The marketplace loosened up, underwriters became more knowledgeable on the subject and began providing disability coverage for a professional in these circumstances. Often, however, a "mental waiver" was provided which would exclude this type of stress-related claim and/or a premium surcharge applied to the policy. In John's case, the insurance company did not apply any waivers but did apply a 30% premium surcharge. Based upon his history, as well as that of the industry, I considered ourselves quite fortunate. A monthly benefit of $5,000 was provided with a lifetime payout. A "specialty letter" was also secured at no additional cost which considered John's duties as a trial attorney. At about the same time, John's wife (Sue) who was also an attorney, secured $3,000 of monthly personal disability income from me. Within a year, Sue had developed a serious colitis condition which prevented her from performing her material duties as an attorney. Her symptoms involved excessive diarrhea, and intermittent spasms in her colon quite resembling that of 'labor pains". To this very day she is collecting a monthly income (tax-free) from the insurance company.
Approximately three years after John had secured his first disability policy, his income increased to a point where he desired to purchase an additional $5,000 of monthly benefit bringing his total to $10,000 per month. At that point, however, his stress factor increased to a point (more pronounced visits to his psychiatrist) that the insurance company declined to issue any additional coverage. However, John was fortunate enough to have included an insurability option in his policy whereby the insurance company was obligated to issue an additional $3,000 of monthly benefit regardless of his medical history or pre-existing conditions. An amendment was issued to his existing policy bringing the total monthly disability benefit to $8,000. Two years later John called me on the phone and said he thought he might be putting in a disability income claim. His usual "take-charge" optimistic attitude seemed to have changed dramatically to one who was unsure of himself and, infact, quite depressed. ln essence . . . he just "wasn't with it." At this point in his life, John was taking medication on a daily basis for depression control. Although this enabled him to get out of bed in the morning, he wasn't able to function at much else from a work standpoint and his typical workday seemed to consist of him merely shuffling papers. I advised the insurance company, and the insurance company proceeded to pay him a monthly benefit of $8,000 tax free. Upon questioning John further as to the specifics of his problem, I learned that he had not been in court in almost two years and had not been going out of the office on depositions either. Intermittently, his duties involved flying to another state and, because of the anxiety attacks he was faced with, he was no longer able to fly on a commercial airplane. The same type of anxiety attacks prevented him from going into trial. John thought his disability began several years earlier. Under the terms of the insurance contract, the insurance company was obligated and, in fact, did make payments to him retroactively from the time he was not able to perform the material duties of his occupation (that of a trial attorney). Additional checks were sent to John for the prior two years and the insurance company honored their obligation. John recently went to an in-patient mental facility as a way of providing more in-depth counseling; however, that was somewhat short-lived based upon his obsession that he might never get out. Although he still takes medication to control his depression, he is not able to function in the real working world of an attorney and continues to collect money from the insurance company. How long this will continue is anybody's guess. I can tell you that this attorney preferred to be working rather than collecting money from an insurance company! The strain that has been caused to John's family is, of course, considerable and talk of divorce is becoming a reality. As a result of the above described claim, insurance companies are becoming much more selective in the underwriting process and are declining more and more cases. Extremely broad wording and competitive pricing reflected a marketplace in favor of the buyer for a considerable number of years. The tail is now whipping around and the red ink is starting to flow. Contractual wording is becoming more restrictive and rates are starting to increase. Some insurance carriers that had thought they could make money from cash flow, writing disability income insurance, are starting to get out of the market. The handful of major league companies writing individual disability coverage are making adjustments but will continue to provide a market on a long-term basis. An attomey selecting an insurance carrier should consider the insurance company's long-term commitment to the disability income marketplace and not select a company that is merely copying the contracts of one of the major league players.
Based upon the numerous changes that are occurring in disability income programs, it is important that you sit down with an insurance person having expertise in these areas for a proper analysis of your exposure. Do it now . . . before you "burn out"!