Watch The Fine Print

Being good can be very, very bad for disability income insurance claimants in many ways, all locked away in the fine print of the policy. See Mr. Nice Guy.

A recent New York case added a new pitfall for claimants who try working at a lesser job even when they are physically or mentally not up to it. Insurance companies ambush unsuspecting “Good Joes” waiting for them to fall into the trap of trying to continue to work even if they can’t hack it because of their disability.

The issue in McCauley v. First Unum Life Ins. Co., 551 F.3rd 126 (2nd Cir., 2008) , did not involve the warning we issued in Mr. Nice Guy. McCauley dealt with the insurance company tactic of wrongfully withholding benefits and thereby forcing a disabled person to do anything in order to live, and then claiming that the new work cut off the insured’s right to claim the disability under the terms of the policy.

The First Unum policy in this case contained a provision that if the insured was employed for more than 6 months while earning more than 80% of predisability income, the insured would not be entitled to benefits.

After Unum wrongfully denied him benefits, the insured, desperately needing money to live, worked for 8 months at a salary exceeding the 80% limit. He worked at a company which was sympathetic to his disabling condition and employed him anyway, recognizing the limitations of his disability. But, even with this compassionate help and despite his pressing financial needs, the claimant could not continue because his condition was too debilitating.

Even though the policy was governed by the ERISA statute, First Unum jumped on the issue of claimant’s employment for 8 months, citing the policy language, even though First Unum’s wrongful denial of benefits put the claimant in a position where he needed money to live so desperately, that he was forced to try to work, no matter how trying or demeaning it was to work in his condition.

But, the court, in its wisdom, applied the ERISA doctrine of unconscionability, declaring that to wrongfully deny ERISA benefits and force a disabled claimant to try to earn income at peril to his health, and then to claim this employment destroys the claimant’s right to benefits, is unconscionable and First Unum’s denial of benefits would not stand.

It is heartening when a court recognizes that the reality of just trying to go on living trumps the cold, hard, sometimes unrealistic and impractical, language insurance companies use in their policies.