Long Term Disability Claims

By Jamie Hall, Esq. Law Office of Jamie R. Hall

At some point every attorney receives a client inquiry regarding a long term disability claim, regardless of whether the attorney offers representation in this field. These claims often occur in concert with other legal issues, including personal injury, bankruptcy, and divorce. What follows is a primer, basic information for reference when receiving an initial client call regarding his or her long term disability claim.

What is a long term disability claim?

A long term disability (LTD) claim is a private claim for wage replacement benefits as a result of a disabling condition. LTD coverage is obtained through an insurance company, and is normally offered by one’s employer. These claims are separate and distinct from Social Security disability claims, with different requirements, benefits, and processes. LTD claims are governed by the relevant insurance policy, as well as by federal law under ERISA.

ERISA is the Employee Retirement Income Security Act, which sets forth the rules of the game in these claims, largely to the benefit of the insurer and to the detriment of the individual claimant. A small number of LTD claims travel outside of ERISA.

How is disability defined?

Although policies can vary, insurers usually consider whether claimants can perform their pre-disability work on a full time basis. This includes both the physical capacity to perform (including the requisite standing, handling, lifting and carrying), and the cognitive or behavioral capacity to perform (including to maintain focus and attention through the course of an eight-hour workday).

In many policies, the definition of disability changes after approximately 24 months, shifting from considering claimants’ own occupations to considering any occupation. After this shift, insurers will consider whether claimants can do any work that pays approximately 80 percent or more of their pre-disability income. Many claims are challenged by the insurer at this transition point, especially where the claimant’s past work was in a lower paying position with less income protection, or where the past work was unusually physical (such as many nursing positions).

What is the decision-making process?

Generally, there are up to three stages to the decisionmaking process. An initial application is made to the insurer. If this is denied, the claimant is provided one or two in-house appeals, also decided by the insurer. Only once these in-house appeals are denied and exhausted can the claimant proceed to federal court.

Perhaps the most important limitation to these claims under ERISA is that, with very limited exceptions, the federal court’s review is restricted to the record as it existed at the time of the insurer’s final decision. Although a claimant may supplement their record at will during the initial applications and in-house appeals, the record essentially closes when the final appeal to the insurer is denied.

Claimants often assume that they do not need counsel until they have exhausted their in-house appeals.

Unfortunately, a claimant who fails to seek representation before they have exhausted their in-house appeals will have significant difficulty obtaining representation (and even more difficulty prevailing before the federal court). In such a scenario, counsel’s arguments will be bound by the limited support of the factual record developed by the pro se claimant, and contested by a factual record artfully developed by the insurer.

Once in federal court, the claimant is not only limited to the record as it existed at the time of the insurer’s final decision, but is also tasked with a challenging standard of review. In the vast majority of claims, the court will not perform a de novo review of the claimant’s disability allegations, but instead will review for an abuse of discretion. As such, claimants are well advised to take measures to obtain approval without resorting to the federal courts whenever possible.

What is at issue?

This varies by the policy, but usually includes wage replacement payments of between 50 and 66 percent of pre-disability income. Importantly, this coverage will be offset, or reduced, by an award of Social Security Disability benefits for both the claimant and his or her minor children. The vast majority of polices continue to cover loss of earnings through retirement age, but a small proportion of blue collar polices are exhausted after six months to two years of coverage.

In many circumstances, an employer will continue, extend access to health insurance to former employees for at least the start of an approved long term disability claim.

What are typical challenges in these claims?

Pro Se Appeals: Upon issuance of a denial, insurers will often include a sheet of lined paper and offer for the claimant to simply write their appeal. These appeals, which equate to a claimant statement without objective support, rarely have any impact other than to exhaust one of the two in-house appeals permitted under the policy.

Timeline for Appeal: Generally only 180 days are permitted to appeal a denial. This is a small window to obtain and review the insurer’s substantial claim file, update the medical record, obtain medical and vocational statements of support, and generally perfect the appeal.

Pre-Existing Conditions: For newer employees, a preexisting condition may be excluded from consideration in the disability claim. Issues from new conditions would still be considered by the insurer, however.

M&N Limit: Claims based upon non-organic behavioral or psychological conditions, which cannot be proven through objective testing, are normally limited to 24 months of coverage. This would apply to anxiety, depression, or bipolar conditions. Insurers may attempt to wrongfully place disability from TBI, multiple sclerosis, or other organic neurological complaints into this category to limit the duration of coverage.

Settlement Offers: These should be approached cautiously by claimants who are in payment status, as the offers often greatly favor the insurer. Nevertheless, consideration may be appropriate in some circumstances, such if a person may return to work or has a significant risk of mortality. In these circumstances, counsel may be able to obtain a limited increase in the amount proposed.

Covid-19 Claims: These claims are challenging, but are gaining traction as we learn more about the performance issues suffered by long haulers.

Isn’t this just like a Social Security Disability claim?

No. Although there is some crossover in the underlying theories, LTD claims require a more sophisticated analysis and knowledge of the unique rules posed by ERISA. Insurers have more and higher quality tools at their disposal to develop a negative record. LTD claims are often more valuable than SSDI claims, and are ‘one-shot’ opportunities: unlike SSDI, there is no ‘second claim’ if LTD appeals are denied and exhausted. LTD claims also allow more in-depth analysis of vocational data, and reward a strong understanding of the underlying medical issues.

What about my office’s coverage?

Considering the above, I suggest that you also assess your current coverage. Important information to understand includes your policy’s wage replacement amount, any offsets against this amount due to SSDI approval, allowances for part time work, the policy’s own occupation period, and the duration of coverage.

Jamie Hall is a long term disability and Social Security Disability lawyer. Jamie’s office is located in Kennett Square, and he can be reached at 610-570-5253 or jhall@jrhlegal.com