Disability Insurance Benefits . . . Just When You Thought You Were Safe (A True Story) 1

Dr. Schmukoluvitz (“Dr. S.”) was an orthopedic surgeon practicing in South Miami.  In 1989, Dr. S purchased a Pays A Lot Disability Insurance Policy which provided lifetime disability benefits should he ever become Totally Disabled as defined by the policy.  Dr. S had a thriving surgical practice when, in 1993, he was involved in a skiing accident, suffering a significant injury to his low back.  Dr. S filed a disability claim, and after several insurance company IME’s agreed Dr. S could no longer perform surgery, Pays A Lot began paying benefits.  Under the terms of Pays A Lot’s policy, Pays A Lot was required to determine Dr. S’s disability on a monthly basis.  That is, 12 times a year, the insurance company was required to evaluate Dr. S’s claim and makes a decision whether he was or was not disabled and was therefore entitled to benefits.

From 1993 through 2010 (17 years), Pays A Lot continued to pay Dr. S monthly disability payments.  In other words, they determined over 204 times that Dr. was disabled and entitled to benefits.  In fact, in 2010, Pays A Lot (by then they had merged with Never Pay Insurance), transferred Dr. S’s claim to the Extended Duration Unit (“EDU”).  The EDU is a department that administers long-term disability claims where the insured is expected to remain disabled for an “extended” period of time.  In early 2012, Never Pay offered to “buy out” Dr. S’s policy rather than continue to pay him for life.  Dr. S declined.

In 2012 (by this time Dr. S. had not stepped foot in an operating room for 19 years), Dr. S received a letter from Never Pay that his claim had been transferred out of the EDU and that he had been assigned a new claim examiner.  The new examiner indicated she was reviewing Dr. S’s file “in order to determine his continued entitlement to disability benefits”.  Four months later, and despite having determined Dr. S to have been Totally Disabled for 19 years, Never Pay discontinued Dr. S’s benefits finding he was now able to return to his prior occupation as an orthopedic surgeon.

Dr. S. found an attorney and filed suit.  During deposition, Dr. S learned that one month before his file was transferred out of the EDU, Never Pay had created a new department known as the “Verification Team”. To those of us that represent insureds in wrongful denial claims, this department is also known as “The Hit Squad”.  The Verification Team was a new department, specifically created to cull through Never Pay’s long-term disability files and “verify” that long term disabled insureds remained disabled.  In other words, the Verification Team’s very existence was dependent upon finding insureds that were not disabled, otherwise, why pay for a verification team?

Dr. S had not changed his lifestyle, he was not caught mountain climbing, performing surgery, or water skiing behind a million dollar yacht.  The only change between the time Never Pay determined Dr. S was disabled and the time it determined he was not, was the opinion of a new orthopedic IME that was willing to contradict four prior IME’s and state that Dr. S was now able to perform surgery.

The contractual language in individual disability policies is clear.  The insurance company has the right and obligation to review the insured’s condition each and every month to determine the insured’s entitlement to disability benefits.  This provision acts as a double-edged sword.  The downside is obvious.  The insurance company has the power to discontinue benefits at any time, based upon its own unilateral determination the insured is no longer disabled. It makes no difference if the insured has been disabled one month, 12 months, or 12 years. On the other hand, Florida courts addressing this issue have held that once an insurance company determines an insured to be disabled, the insurance company bears the burden of proof to show a change in the insured’s condition proving that he/she is no longer Disabled.  In other words, an insured who has been determined to be disabled by the insurance carrier, walks into a courtroom with a presumption that he is disabled, and the insurance company must prove otherwise.  Unfortunately, of course, this is of little solace to the insured who has had his/her disability benefits discontinued, has not been paid for a long period of time, and has been forced to live off savings while his/her disability case makes its way through the courts.

The moral of the story for insureds that are either on disability or are concerned they may become disabled, is to handle your financial expenditures and lifestyle conservatively.  Do your best to live well within, and potentially even below your means while you are receiving disability benefits.  While you may ultimately prevail in a lawsuit determining your entitlement to benefits, you want to make certain you are financially able to take on the fight and live comfortably in the meantime.  In short, with disability insurance policies, just when you thought you were safe … you’re not!


[1] The names and dates have been changed to protect the innocent.

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