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Disability Insurance: Protection if you are Disabled, or a Trap for the Unwary?

Paul Shapiro was a dentist in New York who appeared to have a successful practice, performing some 275 procedures a month. As most dentists, cognizant that if they can no longer perform chair dentistry they will lose most, if not all, of their income, or at the very best be required to hire a dentist who must be paid to perform the chair work, Dr. Shapiro purchased several disability policies so that if he became disabled from performing his own occupation, he would be protected.

Dr. Shapiro assumed that if he became disabled, the policies would kick in and he and his family would be protected. When Dr. Shapiro began to suffer from progressive skeletal illnesses, including osteoarthritis and spondylosis of the elbow, neck and other joints, so that he was unable to perform chair dentistry, he filed a claim for total disability benefits with the insurance carrier.

At that point, the insurance carrier, which had willfully accepted and deposited Dr. Shapiro's substantial premiums for many years, took the position that since Dr. Shapiro's occupation was, in large part, administering his dental practice in addition to performing chair dentistry, he was therefore not totally disabled because he could still perform his duties as office administrator.

The lower court found for Dr. Shapiro without putting him through a trial, and the Federal appellate court likewise affirmed for Dr. Shapiro that in New York the law is clear that where administrative work is incidental to the material and substantial duties as a full-time dentist, the fact that he was still able to perform administrative work did not prevent him from collecting on his disability policy if he was unable to perform chair dentistry.

The Federal appellate court also made it clear that where a dentist, such as Dr. Shapiro, had purchased a policy to protect him against not being able to work in his own occupation, and proved that he was not able to work in his own occupation, he did not need to prove loss of income. In fact, in a case involving an orthopedist, the court found that even if the orthopedist was able to earn more money in a different occupation, he could still be entitled to recover for a disability from his own occupation.

The Shapiro case seems quite clear on its face, that he was entitled to his disability benefits for which he had paid very substantial premiums. Yet the insurance company required him to hire an attorney, go through a lengthy discovery process, and spend years in court before finally paying him. Unfortunately under New York Law, as opposed to laws in other states, there is no provision for a disabled professional, who successfully brings a claim, to recover his attorneys' fee. This means the insurance company does not pay for the dentist having to hire a lawyer and even if the dentists wins the case, he will be out at least a legal fee or a contingency legal fee.

The largest insurance carrier for professionals such as dentists, doctors, and lawyers, is Unum Provident, which has acquired other large disability carriers such as Paul Revere. Unum Provident trades on the New York Stock Exchange and is said to be the largest issuer of disability insurance in the United States.

According to recent publications, Unum Provident's claim practices are the subject of a major investigation by the insurance departments of some forty-five states. Unum Provident has now agreed to change the manner in which it interprets its policies to avoid payment, pursuant to a consent decree in Georgia. In the Georgia case, Unum was also required to pay a fee of $250,000 for its improper claim practices.

For other successful cases involving dentists and disability claims see, Hofer v. Unum and Fields v. Mutual Benefit Life Insurance.

In other states, such as California and Florida, which permit punitive damages, juries have awarded substantial punitive damages against Unum Provident. In the case of Chapman v. Unum, the jury awarded $30 million where an ophthalmological surgeon was disabled from performing surgery because he had hand tremors and Unum Provident refused to pay his benefits.

In Hangarter v. Provident Life and Unum, where a chiropractor, who was totally disabled, was denied benefits, the jury awarded him $5 million in punitive damages.

In McGregor v. Paul Revere (a Unum Provident subsidiary), a court reporter who was unable to use a steno-type machine was denied benefits by Unum on the grounds that she was still able to proofread what other people typed and therefore she was not disabled from being a court reporter. The jury awarded her punitive damages and she was also found to be entitled to recover legal fees under California law. For another successful case involving a disabled court reporter, see, Mastroianni v. Unum.

A dentist who purchases a policy must make certain that the policy is not an accident policy but instead an own occupation disability policy which kicks in and provides coverage if the dentist is disabled for any reason whatsoever.

In Michigan, a dentist who was disabled with carpal tunnel syndrome was found not to be entitled to disability benefits under an accident policy because the disability had not arisen out of a sudden accidental event but rather had gradually developed over time. See, Nehra v. Provident Life and Accident Co. It is therefore critical to know exactly what type of policy is being purchased.

It is also critical that the dentist make certain that the policy he is buying is an individual policy, if he is able to obtain one, rather than as part of the benefits he gets from his job if he works for a corporation. If he obtains a policy through the job, it is basically found to be governed by ERISA, which is the Employees Retirement Income Security Act, a federal law which has been turned on its head.

ERISA was originally enacted to protect employees from having their pension funds dissipated or their benefits diminished. Instead, the courts have now interpreted ERISA to mean that the case must be heard in Federal Court without a jury, and that punitive damages and consequential damages are not permitted as a matter of law.

Practical Tips on How to Proceed

  1. Try to obtain a policy that protects you from being disabled from your own occupation rather than simply a general disability policy because the insurance company will always find some job that you are allegedly able to do and may refuse payment.
  2. If you have obtained your own occupation policy and become disabled, make a claim as soon as reasonably possible, stating in simple terms why you believe you can no longer perform some or all of the duties of your own occupation.
  3. Document medically the reason that you are unable to perform the duties of your own occupation.
  4. Attempt to find a physician to document your claim who will not be afraid to come to court to testify on your behalf if the insurance carrier refuses to make payment.
  5. Offer the insurance company a physical examination or examinations, and make yourself available to be examined by the insurance company doctor(s) so that if they refuse to take advantage of that opportunity, that may be an indication that the insurance carrier is acting in bad faith.
  6. Provide the insurance carrier with whatever documentation they reasonably request to support your claim.
  7. Most policies permit the insurance carrier to obtain copies of all your medical records; provide them with authorizations to do so. The failure to provide them with such authorizations will delay your claim.
  8. Keep a careful record and make copies of whatever documents you send to the insurance carrier so that you are not later met with the excuse Awe never got that. In one actual case, the Hartford Insurance Company's representative denied a claim for long-term disability claiming that certain documents were not in Hartford's file. When it turned out that the documents were in Hartford's short-term disability files, the witness stated under oath that those files were on a different floor and she was not obligated to go search for records on a different floor!
  9. Send your documents to the insurance carrier by certified mail, return receipt requested or some other manner, such as Federal Express, which provides proof that a delivery has been made. One insurance carrier recently denied receiving three certified letters for which the writer had receipts and the matter was turned over to the United States Postal Inspectors.
  10. Give the insurance carrier a reasonable time to settle with you. Most policies require that the insurance carrier be given a reasonable time to review materials after they have received them.
  11. When making a claim to the insurance carrier, try to provide a report from a recognized expert in your field, explaining why you cannot perform the duties ordinarily required in your profession.
  12. Never lie or misrepresent to the insurance carrier since this will be used as an excuse not to pay you benefits and if you go to court, it will affect your credibility before the judge and/or the jury.
  13. Make certain that the amount of disability insurance is consistent with your needs and income since the carrier will accept your premiums but will have a limit on what they will pay if your income is far less than the amount set forth on your application.
  14. Choose a reputable disability carrier and check with your state insurance department as to the amount of claims made against it which have been upheld; this should give you an indication as to whether the company is seeking to protect its insureds or not.
  15. Pray that you will never need to make a claim because you have unfortunately become disabled!

David Jaroslawicz is an attorney, specializing in litigation, admitted to the bars in New York, California and Florida.

The facts are taken from the reported decision in the United States Court of Appeals for the Second Circuit which covers New York, Vermont and Connecticut, entitled, Shapiro v. Berkshire Life Insurance Company, 212 F.3d 212 (2d Cir. 2000). All legal cases can be obtained through the Internet or from the author upon request.

See, Godesky v. First Unum Life Insurance, 239 A.D.2d 547, 658 N.Y.S.2d 970 (2d Dept. 1997).

See, Order of John W. Oxendine, Commissioner of Insurance for the State of Georgia, dated March 19, 2003; In the Matter of UnumLife Insurance Co., et al.

204 U.S. Dist. Lexis 9047 (D. Kansas, 5/18/04)

S.Ct. New York County, 3844/95

Superior Court, Marin County, San Rafael, California

373 F.3d 998 (9th Cir. 2004)

92 Fed. Appx. 412 (9th Cir. 2004)

286 F.Supp.2d 425 (D.N.J. 2003)

454 Mich. 110, 559 N.W.3d 48 (Mich. 1997)

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