Don't "Turn Over" Your Coverage Rights

If you want a prime example of why we hammer at you to read your policy before you accept it, take a look at Nunn, et al. v. Massachusetts Casualty Insurance Company, 2014 WL 684980 (2nd Cir. 2014). Although the plaintiffs, both NBA basketball referees, didn’t read their policies, the court gave them a shot at prevailing because they didn’t get the coverage they were clearly led to believe they were getting.

This opportunity was given them because of the peculiar circumstances under which they had bought their policies. The ordinary insurance policy sales pitch is nothing like the one in this case. Without this peculiar situation, Mr. Nunn and Mr. Vaden would have been out of luck.

The usual insurance policy sale is a confidential matter with the salesman and the prospect dealing one on one. There are typically no witnesses to the sales pitch. In Nunn, the salesman made his pitch at a union meeting of NBA many basketball referees at which he clearly stated several times that the supplemental policy he was selling changed the “own occupation” limit on benefits from “10 years” to “age 65”. This meant that so long as the policyholder was unable to perform the duties of an NBA referee (commonly called “own occupation” coverage) within the time frame, benefits would continue..

The actual policy delivered to the insureds clearly stated that after 60 months of “own occupation” benefits payments, benefits would continue only if the insured were unable to perform the material duties of any gainful occupation for which he is suited (commonly called “any occupation” coverage). Since both plaintiffs were then employed, the insurance company refused further benefits.

It took an experienced disability insurance attorney to even recognize that the almost infallible rule about the policy language being the law of the case had a chink in its armor.

Because of the irrefutable statements of the salesperson (a lot of people heard him) that benefit payments would continue until age 65, the Court held that under Pennsylvania law, Nunn and Vader had “reasonable expectations” that payments would continue and ordered further proceedings.

Would the salesperson’s pitch have been irrefutable if the pitch had been made one on one? If there was the slightest doubt raised about this issue, Nunn and Vader wouldn’t have stood a chance.  The policy language would be the law of the case and the plaintiffs would have been tossed out of court.   

Protect yourself. Read and understand your policy before you buy it. 

Don’t give your insurance company a chance to “bad-bounce” your benefits.

Apples and Vitamin A In ERISA

As we have said many times before, ERISA is a technical piece of legislation, but sometimes just plain common sense saves the day. Such was the case with Marc Kutten who disputed with his insurer whether he was entitled to LTD benefits of $1000 per month or $6000 per month. Such a difference is no small potatoes to a man who can no longer work. Kutten v. Sun Life Assur. Co. of Canada, 2013 WL 2457182 (E. D. Mo.).

Mr. Kutten had been taking an over the counter Vitamin A supplement for many years, recommended for retinitis pigmentosa (not prescribed), by his doctor. Under the terms of his employer’s new policy, he would be entitled to $1000 monthly if he was found to have a pre-existing condition rather the $6000 monthly if there was no preexisting condition.

Sun Life reduced his LTD claim on the ground that taking the Vitamin A supplement constituted “medical treatment” received during the 3 months prior to the effective date of his employer’s new policy and therefore he was only entitled to receive the $1000 benefit under his employer’s old policy.

Even though the Court gave deference to Sun Life, see Firestone v. Bruch, 489 U.S. 101 (1989), it found the insurer’s “medical treatment” denial unreasonable. The policy defined “medical treatment” and “prescribed drugs” as separate and distinct bases upon which to find a pre-existing condition which would invalidate the new policy. The Court found that taking a vitamin supplement could not be considered a “medical treatment”.

At best, it could be a basis for a “prescribed drugs or medicines” denial of a claim as a preexisting condition as defined in the policy.

But, even if Sun Life had actually denied the claim on that basis the Court’s common sense analogy prevented a denial:

“…Prescribed drugs or medicines generally require that a person have interacted with a medical professional, at least when the initial prescription is given. Vitamin supplements, however, require no such medical intervention. A doctor recommending a person take Vitamin A for retinitis pigmentosa is more akin to a doctor suggesting to someone with digestive issues eat apples because they are high in fiber than it is like receiving a prescribed drug…”

The Court ordered judgment for Mr. Kutten so he will receive his $6000 month.

As an aside on this ruling we commend Judge Katherine Perry’s courage in following ERISA precedent by strictly adhering to policy language as called for in the recent case of U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013).

It is obvious from the facts of the case that Mr. Kutten did indeed have a preexisting condition, retinitis pigmentosa. But the facts in Kutten were clearly not covered by the definition of “preexisting condition” in the policy. So, enforcing the language of the policy as written, the Court found for claimant.

Bravo, Judge Perry.



Ambiguity Favors ERISA Claimants

If you ever want to read a case that illustrates the difficulty of working in the ERISA and insurance claims field, take a look at Johnson v. American United, 2013 WL 2284875 C.A. 4 (N.C.) 2013 .

The question involved whether the insurer was required to pay the life insurance benefits under an accidental death and dismemberment clause in a life insurance policy covering Mr. Johnson, the deceased. The issue was whether the deceased with a blood alcohol level of 0.289 (legal limit in North Carolina was 0.08) had died in an “accident”, which would trigger payment of the life insurance benefits.

The insurance company took the position that Mr. Johnson should have foreseen that drinking excessive amounts of alcohol may result in death or bodily harm, therefore his death was not caused by an accident. No place in the policy did the language specifically address drunk driving except in a seat belt bonus clause, which added a bonus to the benefit if the policyholder was wearing a seat belt when a fatal accident occurred. In that policy clause payment of the seat belt bonus was specifically denied when the driver was legally intoxicated under state law.

No such exclusion was delineated in the main AD&D policy language, so the Court was left to interpret the policy without policy language to guide it, forcing the Court into the jungle of conflicting “accidental death” decisions and nitpicking legal language which causes an ordinary reader’s eyes to cross.

The upshot was that the Court determined that the policy contained no clear language covering the issue of what an “accident” is. Therefore, the Court had to invoke a rule of interpretation which is one of the very few which favors claimants: If the policy language is ambiguous on any point, the language should be construed strictly in favor of the insured.

The Court went on to conduct a very searching review of the difficulty involved when a policy fails to define what an “accident” is. It is hard to believe, but there are loads of cases in which courts agonize over the meaning of the word. Generally, if the policy language does not clearly exclude payment to a drunk driver, most courts will construe the language against the insurance company which wrote the policy.

This, of course, will send insurers and their attorneys back to the drawing board so as to modify “accident” language for life insurance policies with AD&D clauses. Most clauses will make sure to exclude drunk driving from being considered an “accident”.

The one lesson claimants should take away from this case is that ambiguous language does not favor the insurance company, it favors the claimant. If policy language leaves room for argument on an issue, don’t take the company’s word for it. Insurers are in the business of denying claims.

If you believe you have a claim, you should make it your business to get an unbiased knowledgeable opinion on how valid it is. That’s the only way you can be sure your claim isn’t covered.





Disability Insurance Discouragement

Some short term disability insurance carriers seem to have become enamored of a new excuse for stopping disability benefits:

                                       “You were fired so you lose your benefits.”

We had just completed the task of convincing a carrier that their policy gave it no authority to stop benefits because a covered employee was terminated, when we took on another case on behalf of another policyholder against another carrier on the same issue.

Is this the new ploy companies are adopting to discourage disability income claims?

This tactic is patently ridiculous. If this insurance company interpretation of policy language is accepted, what protection would a policy offer?

* You become employed and as part of your employment, you are made a beneficiary of your employer’s ERISA benefits plan.
* You become disabled and can’t work.
* You start receiving short term disability benefits.
* You are terminated by your employer.
* The insurance company stops paying benefits because your employment was terminated.

It would be almost comical if it were not so serious for the disabled employee and his or her family. Most likely they are without income and have few resources to meet their daily living expenses except for the benefits they are receiving. On top of that the breadwinner is injured or ill, making the future uncertain. It is at that point the insurance company piles on by making the ludicrous claim that because the employee was fired while receiving benefits, the employee is no longer covered and benefits are halted.

What a Catch-22 for an employee!

* An employer pays a premium based upon the insurer’s benefits experience with the employer.
* An employee gets sick and can’t work.
* Insurer starts to pay disability benefits.
* Employer, worried about premiums going up, fires employee.
* Insurer says employee no longer works at employer and is no longer eligible for benefits.
This tactic would surprise someone who doesn’t deal with disability insurance carriers all of the time. But, we who deal with them daily, hardly react because we see insurers weaseling on claims all of the time. If there is a chance the company might discourage the claimant, it tries to do so.

Misinterpreting the language of policies is a major weapon in the disability income benefits denial arsenal. Others are:

* Losing claim paperwork.
* Dubious medical reports from highly paid doctors who don’t even examine the claimant they are reporting on.
* Following the claimant with video cameras.
* Overlooking facts supporting the claim.

The list could go on and on. Suffice it to say that a person with an ERISA claim should protect against these disability insurance ploys by talking with an attorney who knows them and deals with them all of the time.
Don’t give up because the insurance company makes it tough for you.
Making it tough is their first line of defense. They will try it every time.












Read It So You Won't Weep

In the business of blogging, we learn to be packrats, hiding away bits of information upon which to base future writings. Many times we forget what we have and are pleasantly surprised when we happen on a tidbit which strikes our fancy.

Contemplating the difficulty of explaining the intricacies of disability insurance law, even to specially educated people such as insurance agents and financial planners, we happened upon “The Illusion of Coverage:”, a comprehensive review of the difficulties of insurance law published by The Access Project in 2007.

What we were looking to do was to point out that in today’s world, even when you are in the insurance business, you do not necessarily have your finger on each of the myriad nuances of the various types of insurance coverage because there are so many risks covered in so many ways at so many levels of cost, it seems one would need an encyclopedia just to keep up.

What got us on this topic was a discussion with a financial planner about a particular client and the need for “own occupation” disability coverage because of the nature of the client’s profession and income level. The planner was quick to say that the client had
“own occupation” coverage in his disability income policy.

But, when we asked him, “What kind?” he was at a loss for words.

We then proceeded to list for him the possible limitations and conditions which insurance companies try to place on these policies, such as:

* Limiting the “own occupation” payments to 2 years.
* Precluding the insured from working in any other field as a condition for benefits.
* Capping the amount of benefits to a specific sum over the life of the policy.
* Defining the occupation so as to cover a broad spectrum of employment.

The problem here may be that “own occupation” is frequently used by insurance agents and brokers to describe coverage which is really “modified own occupation”, without understanding or explaining the difference to the policyholder.

The planner and his client may believe that when the insurance agent says the policy has “own occupation” coverage, that such coverage is truly “own occupation” in the classic sense, i.e., if the client can no longer perform the occupation of brain surgery, the insurer will pay the benefit even though the client may be able to do some other type of medical work. Only when the claim is made does the reality of the distinction become clear. By then it is too late.

What the public (and many times their advisers) are not aware of is that insurance, particularly disability income (and long term care) is not nearly one size fits all. Subtle language differences can be critical at the time of claim, but are frequently overlooked or ignored at the time of the policy sale.

So, if one is negotiating such a policy for him or herself, or for a client, to accept a statement that a policy has “own occupation” coverage without plowing through the language of the policy so as to know exactly what one is actually getting, is doing a disservice to yourself and your client.

As with everything else, you get what you pay for. If you want a gold-plated policy which gives exactly the benefit you want for as long as you want, then the premium is going to be high, and if you are willing and able to pay for it – good for you.
If you are not willing or able to pay the required premium, then you have to settle for less protection.

But the important part of this transaction is that both the client and the financial planner know and discuss the details of the policy and make knowing choices based upon a full understanding of the options.

Accepting a generic label for an insurance clause without fully analyzing the actual language leads to a rude awakening if policy payoff time ever comes.

You may miss the true import of a policy clause when you are buying it. But, you can bet your bottom dollar the insurance company won’t miss it when it comes time to pay your claim.